What is a Wholesaler?

What is a wholesaler?

A wholesaler is a primarily B2B company that purchases goods in bulk from manufacturers and sells them on to retailers. The retailers in turn then sell these goods to the consumer, building an additional profit margin into the retail price to cover both the wholesale cost of the goods and the various operating expenses that make up their Cost of Goods Sold (COGS). Although most wholesalers sell to other businesses (predominantly retailers), there are some who also sell their goods directly to consumers.

Because wholesalers have relatively tiny profit margins compared to retailers, they typically sell goods in very large volumes, with retailers purchasing hundreds or even thousands of units when they order. Margins may vary significantly depending on the type of products being sold, which is why some wholesalers specialise in a particular product or range.

Wholesaler examples

There are dozens of Australian wholesalers operating at the time of writing. Some of these are physical ‘cash and carry’ wholesalers where retailers go to collect goods in bulk much like supermarket shoppers. Some are online wholesalers, delivering goods to retailers who purchase them over the internet. Some wholesalers sell exclusively to retailers, while others open their doors to the public.

Wholesalers in context

Now we know what a wholesale business does. But where does it fit in the context of a business supply chain?

For most consumer goods, the supply chain starts with suppliers of raw materials. These are sourced by manufacturers of finished goods who manufacture products to sell in bulk to wholesalers.

Retailers then purchase the goods from the wholesalers and then sell them on to the end-users.

While simple in principle, there are lots of opportunities for bottlenecks, delays and other inefficiencies, which is why many businesses use supply chain management solutions to ensure a smoother and more cost-effective supply chain.

Frequently asked questions about wholesalers

Can manufacturers also be wholesalers?

Sometimes manufacturers may sell their own products to retailers or even directly to the consumer. This is most commonly seen in the manufacture of high-value, low-volume goods or made-to-order products. However, selling goods requires a substantial investment in infrastructure, as well as a greater degree of risk, which is why many manufacturers sell goods in large volumes to wholesalers.

What are the profit margins on wholesale products?

Wholesalers typically have less of a profit margin when selling to retailers. While the percentage range will vary depending on the product, wholesalers usually make between 15% and 30% in profit, while retailers may typically make between 20% and 50% profit on the wholesale price when selling goods to consumers.

What is wholesale banking?

Wholesale banking refers to banks that act as the equivalent of wholesalers to the financial services industry. They sell financial products and services to institutional or corporate clients like pension funds or property developers who deal in much larger sums than individual consumers. In this way, they are different to consumer-facing retail banks.

Alternatively, a wholesaler can be a type of salesperson employed by a company that creates and manages mutual funds. These people, also known as mutual fund representatives, sell these products to resellers who in turn make them available to individual investors.