Whole sale and Retail– Which Business Model is Right for You?

1/ Understanding Whole sale and Retail

A wholesaler sells goods to stores, hypermarkets,
distribution chains, supermarkets, local retail stores, etc. that sell these.
products to the end customers. Hence, these entities fall under the case of B2B.
companies, i.e., business-to-business types. On the other hand, the retailers
directly deal with the end customers through their counters. The hypermarkets,
stores, supermarkets, etc. fall under this category as the products they sell.
directly to the customers. The comparison does not stop at this point for whole sale and retail businesses as they
are the integral part of the supply chain that propel the product movement in
the market.

2/ Wholesale Business Model

By definition, the wholesale involves the buying of
large quantities of selected products from the manufacturers at discounted
rates and reselling them at the reasonable prices to other businesses,
including the local retail stores that deal with customers directly. Though the
wholesalers are able to sell other businesses at the discounted rates, they
still reap large gain from their transaction with their clients as get huge.
discount from the product manufacturers which offsets the loss they have.
encountered on the discounted sales to other businesses. Some simple
mathematics goes into the calculation of profits by the businesses when a
comparison is done between whole sale and retail approaches in the e-commerce market. For example, let us see how the whole sale and retail businesses earn their profits. A wholesaler buying 1000 pairs of socks at a rate of $2 per pair from distributor can resell the very same products in small quantities to retail stores and other
end-customer businesses at three times its original purchase rate, $6, per pair
after removing the delivery and storage costs to garner significant profits
from the transaction. In some cases, the manufacturers themselves become the
wholesalers and sell their finished products directly to retailers. In these
cases, the retail entities may be able to get better profitability from their
transactions with their customers.

3/ Retail Business Model

By definition the retail outlets sell products
directly to the end-customer. Ideally, a retailer would buy goods in bulk from
wholesaler, manufacturer,
or distributor at some discounted rate decided. They would resell the goods
procured individually at a higher price to enable them to make higher profit
from their transactions with their customers. In a nut shell, the retailers get
their benefit with their interaction with their customers at the local level,
signaling the final point of contact in the supply chain of products through
the market emanating from the manufacturer that pass through whole sale and retail as the
intermediaries.

For instance, let us see the profits earned by the
wholesalers and retailers for the purpose of clarity, a retailer buying 1000
pairs of socks at a rate of $6 per pair may choose to sell to his customers at
$12 per pair, allowing him to make some profit after making some price
adjustments due to local logistic and storage expenditure.

Since the retailers from the other end of the supply
chain directly interact with the customers, they have the responsibility to
sufficiently project the products in their custody to woo the customers they
handle. There
is a special case of direct-to-consumer approach adopted by the brands to reach
the customers directly. In this case, the brand handles the entire process of
manufacturing products, marketing them, and selling them directly to the
end-user without employing any intermediary, such as a whole sale and retail businesses.       

4/ Factors to Consider in Choosing a Business Model

After having gone through the definitions of
business models, it is time to choose one among them, which is going to be a
difficult task. In this session, we will help the reader to have a closer look
at the benefits he can enjoy and the challenges he may need to face in whole sale and retail business models.

5/ Wholesale vs. Retail – Making the Right Choice for Your Venture

After having gone through the article titled whole sale and retail, are you in a
position to decide which way to go to start your venture? Each approach has got
its own gains and pitfalls that one need to bear in mind. If you have
sufficient money and resources, wholesale would be the obvious choice. If you
are resource- and mobility-constrained, and want to put a tab on the investment
amount, the retail business would be the most-obvious choice to make.

It is possible to take the positives from the whole sale and retail business models
and construct a model that works for you. That is the best way to grow the
audience base as you can distribute the products from your own retail stores to
local and small shops nearby and make a network to retain the customer base. Naturally, this approach will translate to increased
sales and revenue for your business, and help generate enough backup revenue to
insulate yourself during the lean times.

It is better to take the better of two business
approaches – whole sale and retail – to
reap the benefit in the ever increasing competition in e-commerce landscape. It
not only helps the businessman to create a backup source of revenue but also
keep the tab on the price to retain the loyal customers. In the event of one of
the retail store partners gulling out of an agreement, your business will still
be able to generate sufficient cash flow from your retail business to tide you
over until you acquire a new distribution partner and keep the
business moving forward with adequate supply of goods. The middle-path approach
of combining whole sale and retail
approaches will let you distribute your own products to other local markets
with whom you have made tie-ups at the cost you decide.