Wholesale and retail: know the differences before investing

Wholesale and retail are two types of product trade, the main difference between them being the target audience for which each type of market is intended.

These are the business formats most chosen by entrepreneurs who want to work with sales, either at physical points or even over the internet.

It is worth remembering that entrepreneurs do not have to choose one or the other. After all, it is possible to work with retail and wholesale at the same time.

What is attacked?

Wholesale trade is characterized by the sale of products on a large scale . That is, your goal is to resell products in large quantities. That’s why your target audience is not the end consumer, but other companies or resellers. That is, in general, wholesale sales are intended for legal entities .

As it works with a high volume of purchase and sale of the mix of products , wholesalers work with lower prices. After all, they market the goods directly from the factories. Just to exemplify, wholesale prices can be up to 50% lower than retail.

What is retail?

Retail trade , on the other hand, is a method of selling products on a small scale . Therefore, both your purchase and sale volumes are smaller than wholesale. The retailer’s target audience is the end consumer, that is, individuals .

By selling products in smaller quantities, the price of each item ends up being higher than wholesale. The calculation of the value of each unit is based on the average offered by the local market.

Stores, bookstores, pharmacies and supermarkets are part of the retail sector, for example.

Example of wholesale and retail

Just to illustrate, just think about the process of buying and selling chocolate bars. The wholesaler does business directly at the factory, purchasing a large quantity of bars for a more affordable price, justified by the high volume.

The wholesaler, therefore, sells these bars to other companies: markets, bakeries, etc. This sale also happens in greater quantities, because these markets need a moderate amount of stock.

The end consumer, who wants to buy just one chocolate bar, for example, buys it from the grocery store at the price charged, based on the average price of that bar in that region.

Thus, the end consumer, who only wants one chocolate bar, turns to retail, as wholesalers would only have the chance to purchase a closed package with 500 chocolate bars at once. The price per unit is cheaper, but the bars are not sold individually.

What is the difference between retail and wholesale?

Thus, we can conclude that the main difference between wholesale and retail is that, in retail, products can only be purchased in small quantities for daily, weekly or monthly consumption.

Wholesalers have a large inventory, making several units available for each customer . To do this, the wholesaler buys products directly from manufacturers and resells them to retailers.

The origins of the wholesale sector

Wholesale trade emerged amid the growth and specialization of commerce itself. Until the end of the Middle Ages, in Europe, whoever produced the products was also the trader of their production, as the production itself was not that large or diverse without being able to negotiate with the final consumer.

However, with the advent of large navigations, a large variety and quantity of salable products reached the market, originating in several other countries. This is how the figure of the product distributor emerged, responsible for the goods that were imported.

The origins of the retail sector

Retail trade, on the other hand, began even before Christ, between 9,000 and 6,000 BC. Its beginnings were marked by barter systems, that is, exchanges of animals such as camels, sheep and cows. In 3000 BC, negotiations began to involve money-like items.

In Ancient Greece, traders exchanged items in an urban space called the Agora. In China, the exchange of products was counted using the abacus.

Different forms of wholesale and retail trade

With the evolution of technology, as well as the growth of commerce itself, these modalities began to have even broader characteristics, which can confuse the entrepreneur who wants to decide between one business and another.

Therefore, we have put together some practical retail and wholesale activities that take place nowadays beyond the traditional, as well as their fundamentals. Are they:

Retail in e-commerce
Hybrid retail
Wholesale
Wholesale in e-commerce

Retail in e-commerce

As we said, virtual stores also fall into the retail category, and the numbers only tend to grow, especially with the advents related to the coronavirus pandemic, which placed the country under quarantine and social distancing regimes.

With the trend of new consumption patterns, it is possible to conclude that online sales represent a very strong strategic structure for the retail entrepreneur . While in physical retail it is necessary to choose an ideal point of sale, the digital environment requires that the entrepreneur is always connected.

He can choose to work with his own digital store, or via marketplace (which act as large virtual malls that connect retailers to the final consumer). Or, the entrepreneur can even choose both formats. Why not?

Hybrid retail

In addition to physical and virtual store sales, it is also possible to plan for omnichannel retail , in which the retailer works with fully integrated physical and virtual points. This would mean, for example, that the consumer can buy an item through the website, but pick it up in store, and vice versa.

Thus, the information is all assimilated, focusing on the customer’s greatest convenience and purchasing preference.

Wholesale

The entrepreneur who is researching retail may have already seen or heard this popular expression somewhere. The term refers to the mix of wholesale and retail, which results in a business model that serves both the end consumer and small retailers .

Thus, the wholesale store is the place that sells products in large and small quantities. The more you buy, the less you pay. Likewise, the smaller the quantity of products purchased, the higher the price.

The main characteristics of the cash-and-carry are a more rustic structure. In markets, for example, the buildings are shaped like large warehouses or warehouses, offering ample space for the circulation of customers and machines.

This way, expenses that would bring greater comfort to the end customer can be cut, as it is as if they were purchasing as a legal entity. Instead of gondolas, pallet trucks are used, which simplifies storage and facilitates the movement of forklifts .

However, they are not stores easily found in large centers and have a reduced number of employees, as customer service is not provided in the same way as in regular stores. In this case, they use the concept of self-service wholesale, also known as cash and carry .

The target audience for cash and carry are precisely people who are looking for the best value for money in their purchases . After all, purchases in this type of store tend to be faster. Therefore, the business tends to attract large families, who buy in large quantities and share the amount paid.

Wholesale in e-commerce

Anyone who believes that virtual stores are exclusive channels for retailers is mistaken. Just like them, wholesalers can also sell their products online . The premise is the same: the legal entity enters the website or app and places the order, which must follow the minimum purchase quantities stipulated by the wholesaler.

It is a good option to guarantee diversity for retailers, who can purchase products from wholesalers and manufacturers in other cities or states, for example. And this diversity of products can represent a great distinction between local competition.