A wholesaler is a company or individual which buys products in large quantities from a manufacturer then sells them to retailers such as shops or other businesses. They make their money by buying in bulk at a much lower wholesale price, then adding on profit before selling the products on.
What is wholesaling?
Wholesale companies are primarily B2B businesses that purchase goods in bulk from manufacturers and sell them on to retailers. The retailers in turn then sell these goods to the consumer, building in 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 wholesale businesses 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 wholesale trade businesses specialise in a particular product or range.
According to Statista, the UK’s wholesale trade sector was expected to reach £854.9 billion in 2022, growing by 9% in 2021. In fact, wholesale trade organisations have reported the highest cumulative profits of any business sector in the UK.
Wholesaler vs. distributor
There are many similarities between the two but they also have distinct functions.
Distributors are more closely aligned with manufacturers - they work with them to increase visibility of their products. They then find a wholesale business who will resell the products to retailers or they will sometimes sell directly to retailers themselves.
More often than not it’s the responsibility of the distributor to store the manufacturer’s products alleviating them of the burden of storage. A distributor may also be involved with customer services, honouring warranties as well as sales and marketing activities on behalf of the manufacturer.
A wholesale company however, buys many items in bulk and sells them to other businesses. They might purchase goods directly from manufacturers or they might use several distributors. Manufacturers might typically enter into a contract with a distributor to get their products to market. There aren’t usually contractual arrangements between those in the wholesale trade and the producer as this enables them to buy competing products from different manufacturers.
Etymology of wholesale
The word wholesale is a mix of two words - whole and sale. Sale was originally sala and refers to the sale of goods, while whole meant selling or buying something in its entirety. The word was thought to have emerged in the 16th and 17th centuries when it became more commonplace to bring large quantities of goods from distant lands to merchants in the UK who would then resell the products to individuals or small businesses.
There are dozens of UK wholesale suppliers operating at the time of writing. Some of these are physical “cash and carry” wholesale outlets where retailers go to collect goods in bulk much like supermarket shoppers. Some operate an online wholesale trade, delivering goods to retailers who purchase them over the internet. Some wholesalers sell exclusively to retailers, while others open their doors to the public.
Booker is the largest and arguably most ubiquitous UK wholesale marketplace, reporting a turnover of £8.7 billion in 2022, up 12% on the previous year, according to Grocery Gazette.
Other notable UK wholesalers include:
- Connect Group
- Bidfood UK
- AF Blakemore & Son
- Menzies Distribution
- James Hall & Co
- Dhamecha Foods
- Matthew Clark Bibendum
- Kitwave Wholesale Group
Many of these have also adapted to become online wholesalers too.
Wholesalers in context
Now we know what a wholesale business does. But where do wholesale suppliers 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 wholesale firms.
Retailers then purchase the goods from these middle-men and then sell them on to the end-user.
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.
The benefits of using wholesalers
Going direct to the manufacturer will yield the best price but often manufacturers won’t deal directly with smaller businesses or the public in which case buying from the wholesale trade is the next best thing. It can offer you several advantages whether you’re buying from them or selling to them:
Lower prices - If you buy products for your business wholesale you’ll get lower prices than you would buying it retail. For example, a baker buying larger bags of flour from Booker rather than small, more expensive bags from a supermarket.
Increased sales - It can be a costly business selling and marketing products directly. By going to the wholesale trade sector they essentially cover the cost of customer acquisition. You don’t need to hire an expensive army of salespeople because the wholesale supplier will deal with that for you.
Simplifies business - You can work with one or two wholesale outlets and distribute your products far more simply than if you were to work with hundreds of retailers directly.
Better storage capabilities - The wholesaler will have a huge warehousing capacity meaning you as the retailer or manufacturer don’t need to store your products - they’ll do it for you.
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.
Exploring 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 will 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.
Understanding 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 like Barclays, Santander or HSBC.
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.
What is a wholesaler and a retailer?
Wholesale involves selling products in bulk to other businesses such as retailers, physical stores and online merchants. Retailers sell directly to the end user or consumer.