Has it ever happened to you that you entered a shop attracted by low prices, you filled the shopping cart and when you paid you were told that you had to fulfil a condition in order to buy? These places are known as wholesale. But, What is wholesale?
If you finally want to know everything that has to do with wholesaling, is the differences with the retailer, advantages, disadvantages and why they are important, then we will explain.
What is wholesale
Let’s start by defining what is meant by wholesale. Or what is wholesale. It is an activity that intervenes between the distribution chain and the marketing of goods.
In other words, we can understand wholesale as that which deals with the sale of large quantities of products to trading organisations.
And this is one of the conditions. A wholesale company can only sell to companies or traders because the prices they set are much cheaper than what they reach the customer. Why is it like that? Because it tries to buy products at a cheaper price and then make a profit out of it.
Therefore, they are a link between manufacturers and retailers, acting as supplier-distributors.
This is the reason why many establishments of this kind put the mark of a wholesaler on their doors. On the one hand, so that traders know they can buy the products cheaper; and certainly for private individuals to refrain from entering, as they are not sold.
To give you an idea, a wholesale can be a fish market where a sea bass costs between 6 and 8 euros in the supermarket, in this wholesale it could cost between 2 and 4 euros. The rest are the benefits that the advertiser (shop owner) would take.
There are many examples of wholesale, from clothing shops, food, appliances, technology, etc. but all are based on buying a large number of products (that is, it is not worth buying just one thing).
Differences between wholesale and retail
Once you are clear on what wholesale is, we believe there won’t be much of a problem knowing what makes it different from retail.
But for you to know the keys, you need to consider the following:
A wholesale company buys products from manufacturers and other wholesalers, in turn selling them to others. However, the retailer is targeting the end consumer. They will not resell the product with other shops, but with the customers who will use them.
There are big differences in quantities. In wholesale, large quantities are bought and sold, while in retail, small quantities prevail.
In short, each of these shops has different goals, and although they both sell the same products, they actually serve different end customers.
Advantages and disadvantages
Wholesale can be seen as a good thing or a not so good thing. But there is no doubt that it has its advantages and also its disadvantages.
Among the good things of wholesale we have:
They purchase goods at prices far below market prices. Since they make a substantial purchase to supply their customers (that is other wholesalers and retailers), the profit they make is very substantial. Sometimes these prices are even lower than buying directly from the factories.
They can supply a large number of products, Even when factories are struggling, wholesalers can do so, especially since most have large warehouses where they store their purchases.
Everything good has bad things, and in wholesale it should not be less. In this case we are talking about:
Expensive goods. Wholesale is another step between manufacturers and traders, which means that you buy at a higher price than the factory price and sell at a higher price to make a profit. In other words, everyone raises prices to make a profit, which has a negative impact on the final customer who has to bear these high prices.
There is a lower profitability of production. This is because, knowing that the products will pass through other hands who will in turn sell them, they end up having to lose profits in order for their products to arrive. Instead of benefiting the producing people and companies, we are hurting them.
There is no strong decision-making power. In reality, the wholesale managers have control because the high volume of products they buy means they can put more pressure on the companies to bring it out at a much lower price, and that increases the pressure the factories, but also on the others who have to sell it at an even higher price.
Types of wholesale
Within wholesaling we can distinguish two types:
Wholesalers, which are companies dedicated to reselling products. To do this, they have a variety of services and products in addition to inventory management.
Intermediaries. They are specialists in certain products and areas, so they only specialise in one sector or type of product, and although they aim to resell, what really benefits them is the commission they receive for placing their stock the market.
Why should wholesale companies exist?
Despite the fact that wholesaling can be seen as something negative, especially by companies that lose benefits by having another “link” in the sales chain, the truth is that they are highly recommended.
On the one hand, because you move a large amount of products, which activates the country’s economy; and on the other hand, because reduce the risks of storing and maintaining these products. Since they are the ones who buy, even if it is with little profit, the products benefit from not being unemployed (and having to accept losses).
Is it clearer to you what wholesale is?