Wholesale is a term many use in the business world, but what is it, can you use it in retail, and if so, how can you use it to your advantage? Here, at Displaysense, we will walk you through everything wholesale, so keep reading to find out how you can use it within your business.
What is wholesale?
Wholesaling is when a business buys goods in bulk from a supplier, warehouse or manufacturer and sells them to retailers. As the wholesaler buys products in large quantities, the goods are often discounted; the wholesaler then sells these units for a higher price to retailers or stockists, who will then sell them to consumers. Wholesalers are a link in the supply chain from raw product to consumer. The typical journey of wholesale items is wholesale - retailer - customer.
What are the benefits of wholesale?
There are many benefits of using wholesale distributors for your retail business. Some of these benefits include:
When you purchase products from a wholesale distributor, you buy in larger quantities, which means you can usually get a lower unit price for the stock you purchase. This ensures that you keep costs low and that your profit margins will be higher when you sell to consumers. You will also be paying less for shipping and handling costs that you could incur when purchasing stock or goods in lower quantities.
Higher amounts of stock
You will have more stock when you buy in bulk from a wholesaler. This eliminates any issues you could encounter with best-selling items, as you know you won’t run out of goods quickly.
Encourage exclusivity + build relationships
Once you have created a good relationship with a wholesaler, you can negotiate a deal to ensure that they only supply specific lines to you. This allows you to have specific products exclusively, which could help bring in business and reduce competitors.
Differences between wholesale and retail
The customers: One of the biggest differences between wholesale and retail is the person who purchases the goods. In retail, the purchaser is the direct consumer, known as business-to-customer or B2C. In wholesale, the customer is other businesses, known as B2B.
The customer experience: Whilst building relationships with wholesale customers is important, it is not valued as highly as it is within B2C transactions. Retailers are more likely to prioritise the customer experience and enhance their in-store and online experience for customers. The experience of purchasing their goods does not directly impact wholesalers; therefore, businesses generally don't focus their time, efforts or money on improving it.
Competitors: For wholesalers, the market is not as competitive as retailers. For specific products or lines of products, hundreds of retailers may supply products to customers. Whereas, for wholesalers, there will only be a handful of competitors who can deliver on the supply.
Expenses: Since retailers must sell products to consumers, they incur more costs. This can come in the form of advertising, merchandising and display equipment to entice customers and online marketing spend. Whereas, wholesalers don’t need to capture their customers in the same way.
Pricing: Typically, the price of wholesale goods is lower per unit than for retailers. Since wholesalers sell in large quantities, they can charge less for individual units than a retailer would feasibly manage to sell – meaning that pricing for retailers can be higher.
Interaction with customers and product knowledge: Wholesalers don’t need to know about the products they sell, whereas retailers will often be asked questions about products by customers. Retailers need to understand the key selling points of their products and deliver this to customers in a resourceful way – which wholesalers don't need to do.
Wholesale versus retail pricing
As previously mentioned, pricing for wholesalers and retailers differ. Retailers have to factor in a range of costs into their pricing model, and if you are wondering how to price a product for retail, we have a retail costing guide for you to follow.
Some of the pricing factors that retailers need to consider are:
- Shipping costs
- Unit cost
- Marketing cost
- Profitability over time
- Product demand
- Customer retention
Pricing factors for wholesalers:
- Shipping costs
- Product demand
- Retailer’s profitability
- Scarcity of products
Who can buy from a wholesaler?
Whilst there are no specific requirements to buy from a wholesaler, they are typically suited towards businesses and retailers. It is a common misconception that you must have a business to purchase from a wholesaler. While some may ask for business information – it is not necessarily a requirement to purchase from a wholesaler.
Some micro businesses don’t buy from wholesalers due to minimum unit values as they can’t hold the stock on their premises or because of the price. If you are a micro business looking to save space, check out the storage and shelving options available to ensure you maximise your space effectively.
How to find a wholesale supplier
Depending on the nature of your business and the items you sell, there are many avenues to explore when sourcing a wholesale supplier.
Find a local wholesale supplier:
You will reduce shipping costs when sourcing a local supplier. Using your local network can help you create local business connections that will be useful in the future.
You could also find a wholesale supplier at a trade show. Typically, there are two types of trade shows; vertical and horizontal. A vertical trade show showcases goods or services relevant to a particular industry. A horizontal trade show is where wholesalers bring a range of different products they offer, and these are more suited to retailers who don’t understand what they want to sell yet or are searching for a product. You can find trade shows and wholesaler events at Exhibitions.
The internet is full of wholesalers you can use to your advantage. Some of these include The Wholesaler, one of the leading UK wholesalers, and AliExpress, which offers retailers a wide range of items.
Retail display and merchandising products at Displaysense
Now that you know what a wholesaler is, the differences between wholesale and retail and where to find a wholesaler – put it into practice! At Displaysense, we offer a wide range of display and merchandising equipment to help retailers entice customers to purchase and transform your retail store's look, efficiency and experience.