The growing business world today is increasingly complex and diverse. To better understand the general aspects of retail and product distribution, it is important to differentiate between wholesale and retail. But what is the difference between retail and wholesale?
Retail marketing refers to selling small products to end customers, while wholesale marketing refers to selling large products to other retailers.
Definition of retail and wholesale trade
Retail trade and wholesale trade are complementary activities in the supply and distribution chain, which cater to the needs of the market.
Retail marketing targets end customers directly and offers small products in retail stores, while wholesale marketing is usually focused on selling products to other customers.
In retail marketing, products and services are sold to the public. There is a wide variety of retailers here, from department stores and car dealers to small independent shops. Wholesale trade, on the other hand, essentially acts as an intermediary between product manufacturers and the market itself.
For example, a clothing retailer sells sweaters directly to consumers. On the other hand, a merchant is a person who sells clothes to merchants.
The differences between these two business branches depend on significant differences in pricing strategies, target customers, and product presentation.
Stores like Costco are an exception and evidence of the continued growth of consumer-oriented commerce. This type of business stands out for its business model that focuses on wholesale sales directly to consumers, without intermediaries. Unlike traditional retailers, these companies offer products to their members at discounted prices, thus attracting customers who want to save money on large purchases. It's not a wholesale business because they're not a broker, but it's not a retail business either!
Difference between retail and wholesale
The difference between retail marketing and wholesale marketing is based on the main aspects of the marketing process:
• Number of products sold
• Pricing
• Target customers
• Profit margin
• Marketing
• Distribution model
1. Number of products sold
First, the main difference between these two types of businesses is the amount of products sold.
In fact, in wholesale trade, products are often sold in bulk, on pallets or in bulk. It is meant to be sold to retailers or used to make other products.
However, in retail sales, products are sold in small quantities, usually one piece at a time. Therefore, these products will be like the personal consumption of the end consumer and will be more pure.
2. Price
Second, there are significant cost differences between the two business units. As the sizes vary, so do the prices.
For wholesale, the prices are lower than retail prices. Retailers sell in bulk, so they get better deals. The more you sell, the cheaper the unit!
In retail sales, unit costs are higher to compensate for additional costs associated with selling to customers. Of course, other functions in the company related to marketing and distribution are required, such as marketing, advertising and customer service.
3. Target customers
Another important difference: is the target customers. As mentioned before, the players who aim for retail and wholesale trade are far from equal!
Generally, wholesalers are businesses, such as retailers and distributors who sell wholesale for resale purposes. Therefore, the product is sold to manufacturers, restaurants or other businesses before being used for commercial purposes.
In retail sales, products are sold to end consumers for personal use. In this case, transactions become more powerful: therefore, consumers look for good shopping experiences, products that match their needs and interactions that appeal to their emotions. Therefore, good customer service is critical to a retailer's success.
4. Product margin
There is also a big difference in profit margin between wholesale and retail. As a key indicator of a company's profitability, it measures a business's ability to generate profits. It is calculated as the difference between the selling price of a product and the total cost of production or purchase.
Profit margins are higher in retail. Because of the added value that retailers provide during product promotions and sales, the prices they charge to consumers are higher than the prices originally paid to suppliers.
Consequently, wholesaler profit margins are lower due to larger sales volumes. Wholesalers must sell more products than retailers to make a profit.
5. Marketing
Marketing activities and business goals are influenced by the type of business.
Wholesale marketing focuses on building relationships with business customers to promote to other businesses. In this type of business, marketing communications focus on the reliability of the product and its economic benefits.
On the other hand, marketing campaigns focus on promoting products to end customers. Therefore, this type of marketing focuses on emotions, shopping experiences, promotions and customisation to meet the individual needs of customers. There are more ways to promote retail than wholesale!
6. Distribution model
Finally, the last major difference between wholesale and retail is the product distribution model.
Because retail products are aimed at end consumers, they are distributed through physical stores or e-commerce platforms. There are many distribution channels for this type of business. When it comes to wholesale, there are fewer options.
Typically, products are distributed through specialised distribution channels, such as warehouses and distribution centres. It is distributed to the business world in abundance. However, an increasing number of professional-only online platforms can facilitate transactions between businesses.
EPOS Direct offers cutting-edge Electronic Point of Sale (EPOS) systems designed to streamline operations and boost efficiency for businesses of all sizes, from small retail stores to large-scale wholesale operations. By investing in an EPOS Direct POS solution, you can streamline your operations, improve efficiency, and enhance your overall business performance.
