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Wondering whether to go wholesale or retail? Both are two popular ways to sell, but they each cater to different customer needs and business goals. Whether you’re just starting out or expanding, understanding the differences can help you decide which path to take for your business – or if you’re ready to do both.
Key differences explained
When it comes to retail vs wholesale, the main difference is who you’re selling to and how you do it. Wholesalers are business-to-business (B2B), focusing on bulk sales to other businesses. Retailers, on the other hand, are business-to-consumer (B2C) – selling directly to the end customer, typically at a higher price per item.
This difference shapes everything from pricing strategies to marketing approaches. Let’s go into more detail with some of these below.
Audience and sales volume
Wholesalers have a particular kind of audience – other businesses. Their typical customers might be retail stores, restaurants or other manufacturers. Since their customers are looking to buy in bulk, wholesalers sell large quantities, making fewer but larger transactions.
Retailers, however, are all about the individual shopper. From those browsing a boutique in person to those scrolling online, retail caters to the needs and desires of everyday consumers. Because of this, retailers usually see more frequent transactions but in smaller quantities.
The difference in audience also influences how each business operates. Wholesalers build relationships with a smaller, stable group of clients, while retailers are constantly finding ways to attract a rotating cast of new and returning customers.
Pricing and markups
The way wholesale and retail handle pricing reflects the different roles they play in the market. Wholesalers usually offer bulk discounts, essentially rewarding businesses for buying in large quantities. The margins might be thinner per item, but those high-volume sales add up.
In contrast, retailers charge higher prices for individual items. This is where the concept of markup comes into play. A retailer might buy a product from a wholesaler for $10 and sell it to a customer for $20. The markup covers operating costs and turns a profit, making retail a higher-margin business on a per-item basis. Retail prices are also flexible, allowing for adjustments based on demand, seasonality or trends.
Marketing and branding focus
Wholesalers and retailers also approach marketing from completely different angles. Wholesalers focus on building trust and long-term relationships with other businesses. Think trade shows, professional networks and industry-specific outreach.
Meanwhile, retailers need to capture the hearts of everyday shoppers. Their marketing is about brand-building and customer engagement. Whether through social media, loyalty programs, promotions or user-friendly websites, their goal is to make shopping as enjoyable as possible and encourage repeat customers.
Pros and cons of wholesale
Wholesale offers several advantages and considerations to keep in mind:
Pros:
- You get to enjoy high-volume sales, which can provide a sense of stability.
- A smaller, steady client base means you spend less time chasing new leads.
- Demand tends to be predictable, making it easier to manage inventory.
Cons:
- Lower profit margins per item can make it slower to grow quickly.
- You’re reliant on B2B relationships, which can take time to establish and maintain.
- Warehousing and other high operational costs are an important aspect to plan for.
Pros and cons of retail
Retail also comes with opportunities for growth, with some things to consider:
Pros:
- Higher profit margins per item mean more flexibility in pricing.
- Having a direct relationship with your customers helps build loyalty and gather valuable feedback.
- Pricing can be adjusted more easily to reflect demand or trends.
Cons:
- Managing inventory for a wide range of products can be challenging.
- Attracting customers often requires effective marketing efforts.
- Competition is strong, especially in the eCommerce space.
Types of wholesalers
There are a few different types of wholesalers, each playing a unique role in getting products from point A to point B.
Distributors act as a go-between for manufacturers and retailers, handling logistics, storage and often marketing to get products into stores. Merchant wholesalers buy goods in bulk, and then store and sell them to other businesses, usually in large quantities. Agents, on the other hand, don’t handle the products themselves but connect buyers to sellers, earning a commission on sales.
For example: A distributor buys wine directly from a vineyard, stores it, and sells it to bottle shops and other retailers. A merchant wholesaler buys wine in bulk from multiple vineyards, stores it in their warehouse, and sells it in large quantities to businesses like retailers and restaurants. An agent helps arrange a sale between the vineyard and buyers, and earns a cut for their role in the deal.
Types of retailers
Retail businesses come in different shapes and sizes, too. Traditional brick-and-mortar stores offer the in-person shopping experience, with customers enjoying the immediate satisfaction of finding what they’re looking for. Then, there are online retailers, which have grown in popularity thanks to the rise of the internet and changing consumer habits. These provide convenience and variety, letting customers shop anytime, anywhere.
The rise of eCommerce has also made way for the direct-to-consumer (DTC) model, where brands or providers sell directly to customers and skip the middleman. This can be seen in everything from fashion brands selling online, to subscription services that send curated boxes of goodies right to your doorstep each month.
This year, over 17 million Australians shopped online monthly – nearly double the number from 2020. It’s no surprise, then, that many retailers have adapted by embracing a hybrid model. Selling online while maintaining a physical store lets you cater to both shopping preferences: people who like to shop from the comfort of their homes and those who still love the personal, tactile experience of in-store shopping.
Should you choose wholesale, retail or both?
Deciding between wholesale and retail depends on your goals, resources and the market you want to serve. Thinking about your target audience: are you aiming to build steady B2B relationships or connect directly with individual customers? Assess your operational capacity also – can your business handle the demands of both wholesale and retail, or would focusing on one make more sense? Finally, consider profit margins: wholesale often means lower margins but higher volumes, while retail typically brings higher margins with more effort in marketing and customer engagement.
Or why not do both? By offering wholesale and retail, you can reach both businesses and individual customers, giving you more ways to make sales. This hybrid approach also helps provide a buffer – if one side of your business slows down, the other can help balance it out. For everything to run smoothly, though, you’ll need a reliable system in place to manage pricing, stock levels and customer relationships across your wholesale and retail operations.
What do you need to know about multichannel retailing?
If you’re considering both wholesale and retail, a multichannel retailing strategy is worth exploring – selling your products through multiple channels.
Picture a plant shop that sells potted indoor plants, planters and gardening accessories. They’ve got a lush, plant-filled shopfront. But that’s not all – their website lets shoppers order plants for delivery to their door. Over on Instagram, they drop rare, exclusive plants, with shoppable posts. And on the wholesale side, they’re supplying plants to garden centres and offices, bringing a bit (or a lot!) of green to both homes and businesses.
Each of these channels taps into a different customer base, giving your products more exposure and more opportunities to grow your sales.
The beauty of multichannel retailing is that it lets you meet customers where they like to shop. But to make it work, everything needs to be in sync. That means maintaining consistent pricing across platforms, tracking stock levels and adjusting your approach for different audiences. For instance, retail shoppers are drawn to seasonal deals, while B2B buyers appreciate bulk discounts. Inventory management software helps you manage it all and stay organised, so you can focus on delivering a great experience for your customers, wherever they are.
Fulfilment solutions for wholesale and retail
Whether you’re selling one or selling one hundred, there’s a fulfilment solution to suit how you do business.
For wholesalers, warehousing or fulfilment centres are ideal for managing bulk inventory. These centres not only store your products but can also pick, pack and ship them directly to your customers, saving you time and effort. Or you might choose dropshipping to keep costs down, with products shipped directly from the supplier to the customer, removing the need for storage.
For retail businesses, managing smaller, more frequent orders is easier with tools like point-of-sale (POS) systems and real-time inventory tracking. Square lets you streamline both wholesale and retail fulfilment all under one system, keeping everything organised, efficient and moving along smoothly, no matter the size of your operation.
Wholesale vs retail FAQ
Can a wholesaler sell directly to consumers?
While wholesalers usually focus on selling to businesses, offering products directly to consumers is definitely also an option. In industries like food, fashion or electronics, you could host a warehouse sale or special event that brings your products straight to the public. It’s a great way for you to connect with a whole new audience and expand your reach.
What is the typical markup in retail compared to wholesale?
Markups in retail vary by industry, but they’re generally much higher than in wholesale. Retail markups can range from 20% to 50% or more, while wholesalers often operate with slimmer margins.
Can a retailer also offer wholesale?
Absolutely. Many businesses successfully operate in both spaces. For example, a coffee roastery can supply beans to cafes wholesale while also running an online store for retail customers. With the right setup, you manage wholesale and retail seamlessly and grow both sides of your business.
