WHOLESALE and RETAIL

SALE MANAGEMENT
MGT 217

MANOLO “DING” BATO MERCADO, MBA

 What is the difference between
Wholesale vs. Retail Sale?
When we talk about wholesaling vs retailing, we can easily
differentiate between the two in terms of who is on the
receiving end. In wholesaling, a company buys goods in bulk
from a manufacturer to resell them further, whereas, in
retailing, an end customer purchases the products.
Both wholesaling and retailing play a significant role in a
supply chain. It’s all connected. First, a company
manufactures an item; sells it in bulk to a wholesaler, who
then sells it to a retailer. The retailer further sells it to the end
customers.
The biggest difference between wholesale vs.
retail is in the type of buyer. While retail involves
selling products directly to the end consumer,
wholesale involves selling products in bulk to
other businesses such as retail stores.
What is wholesale?

Wholesale is the process of buying large quantities of goods

from manufacturers or distributors and then reselling them in
bulk at a discounted price to other businesses. Although
wholesalers sell their goods at a lower price, they still manage
to get profit from the transaction because their selling price is
higher than their original buying rate.
For example, a wholesaler may buy 1000 pairs of socks at $2
per pair for a total of $2,000. They could then sell 100 pairs of
socks each to 10 different retailers at three times the price of
the original rate at $6 per pair. After deducting the cost of
storage and delivery, they could end up with significant
profits.
To sum up, wholesalers:
 Buy large quantities of products from wholesalers and distributors at
wholesale rates.
 Resell the products in bulk (but in smaller quantities) to retail stores and other
businesses at a profit.
 Do not sell directly to the end consumers.

In some cases, manufacturers may also sell their finished products directly to
retail stores, wherein they become the wholesaler themselves instead of having
a separate intermediary.
Four (4) Major Types of Wholesalers

• Merchant Wholesaler

• Specialized Wholesalers

• Full-Service Wholesalers

• Limited Service Wholesalers

Merchant Wholesalers

• The wholesalers that purchase products directly from

the manufacturer are called merchant wholesalers.
There is no restriction on the channel where these
products are ultimately sold, offline or online. These
wholesalers are commonly used in the FMCG
industry or the agriculture industry.
Specialized Wholesalers

• Specialized wholesalers are those wholesalers

who deal in specialised products only. For
example – a used car wholesaler sells directly to
other used car dealers.
Full-Service Wholesalers

• As the name suggests, full-service wholesalers

provide complete services to retailers. They
generally operate in the retail market and deal in
consumer durables or engineering products,
taking responsibility for everything except the
servicing of the product.
Limited Service Wholesalers

• This type of wholesaler has a small turnover and

sells products through a limited number of
channels. For example, a wholesaler purchases
products, stocks them and sells them online.
What is retail?

Retail is the process of selling products directly to the end-user.

A retail business would buy goods in bulk either from a
wholesaler or distributor or directly from the manufacturer at a
discounted rate. They would then sell them individually at a
higher price, which allows them to make a profit from the
transaction.
What Is Retailing?

Retailing refers to selling goods in smaller lots, without any

purpose of further resale, to the end customers. Retailers are
the middleman between wholesalers and end-users, as they
purchase goods in bulk from wholesalers and sell them further
to buyers at higher prices.

The prices are comparatively higher because the retailer

incurs many additional expenses. Expenses such as
marketing costs, shipping and logistics costs, employee
salaries, and warehousing costs are all included in the retail
price of a product.
In short, a retail business serves as the final point of
contact in the supply chain as they sell the products
directly to consumers.
For example, a retailer may buy 100 pairs of socks for $6 per pair and then sell
them for $12 each. This allows them to make a profit after necessary
deductions on shipping and storage expenses.

To sum up, retailers:

Buy products in bulk at a discounted rate from a manufacturer, wholesaler, or
distributor.
Resell the products individually to the end-user at a profit.
Sell directly to the end consumers.
Since retail businesses have to sell directly to consumers, they also have to
effectively market the product to attract customers. In the case of direct-to-
consumer brands, the brand handles the entire process of manufacturing
products, marketing them, and selling them directly to the end-user without
using any intermediary such as a retailer or a wholesaler.
Types of Retailers

• Convenience Stores
• Departmental Stores
• Super Markets
• Shopping Malls
• Retail Chains
• Franchisees
• Specialty Stores
• Factory Outlets
Convenience Stores

• The best thing about a convenience store is that

it is located close to residential areas and hence,
easily accessible to the customers. However, it’s
relatively small and offers a limited range of
groceries, Fast Moving Consumer Goods
(FMCG) products or consumable products such
as snacks and beverages.
Department Stores

• Compared to convenience stores, department

stores are larger. This is because various
departments, such as food, apparel, beauty &
personal care, are under one roof.

What is in departments store: often include the following:

clothing, cosmetics, do it yourself, furniture, gardening,
hardware, home appliances, houseware, paint, sporting
goods, toiletries, and toys.
Super Markets

• A supermarket has even more space than a

department store, offering even more categories
of products. These also include home decor,
electronics and much more.
Example of supermarket in the Philippines:
 Robinsons Supermarket
 SM Supermarket
 Savemore Supermarket
 Puregold
 Waltermarket Supermarket
 Metro Supermarket
 The Marketplace
Shopping Malls

• Needless to explain, a shopping mall is a space enclosing

a combination of various retail stores. These retail stores
share the area and do business individually. For a
customer, everything is easily accessible in a single place.
This results in a better shopping experience for someone
who wants to purchase multiple products of multiple
categories.

Example of Shopping Malls in the Philippines

 SM Mall of Asia
 SM City Manila
 Ayala Malls in Makati City and Cebu
 Greenbelt Makati
 Gaisano Mall of Davao
Retail Chains

• Retail chain refers to a chain of exclusively

designed and promoted stores that deal in
particular goods and services. These stores sell
the same products under the same brand
name, but multiple such stores are located in
different regions. For example, jewellery stores
by Tanishq, apparels, medicines and food
chains.

Examples:
 Jolibee
 Rustans
 Mercury Drug
Franchisee

• Franchisee is an easier way of entering the

retail sector. In a franchisee, a sizeable
supporting organization licenses a store to be
owned and operated by you on its behalf.

For example, Domino’s, Burger King, Jolibee,

Mang Inasal, Greenwich, Dunkin Donut, Mister
Donut, etc.
Specialty Stores

• As the name suggests, a specialty store is a

shop that offers a particular category of
products such as medicines, stationery, food
items, etc. The reach of this kind of store is
limited to one specific retail market.

Examples:
 Athlete’s Foot (sports shoes only)
 La Local Store (Filipino made products, food, novelties and home
decors)
 Go Local (initiated by the DTI, Filipino concept store showcasing
modern and indigenous quality products by MSMEs.
Factory Outlets

• Factory outlets are those retail stores that sell

the products directly to the customers at
relatively low prices, without the involvement of
any middlemen. Manufacturers own and operate
these outlets.
For example:
 Reebok and Nike Factory Store
 Addidas Factory Outlet
 158 Designer’s Boulevard (Rustan's and Stores Specialists Inc.'s outlet offers the
world's top brands. Burberry, Prada, Ralph Lauren, Banana Republic.)
Wholesaling Vs Retailing
By now, you must have understood the basics of wholesaling and retailing. Coming to the point, how
different are the two? This table will help give you a clear picture:

Point of Difference Wholesaling Retailing

A retailer purchases products from a

A wholesaler purchases products in wholesaler and sells them further in
Meaning
bulk from a manufacturer. small quantities to the end-
customer.

Price Lower Higher

Transaction Volume Larger Smaller

Business Reach Broader Narrower

Competition Lower Higher

Product Range Limited Wider

Need For Promotion Less More

Cost Lower Higher

Capital Investment Huge Little

Why Choose Wholesaling?

• Wholesaling is a suitable business model for you if

your goal is to build a large customer base without
much effort. You will be able to grow your business
faster if you’re into wholesaling, as your products
will be accessible to more customers. Once you
capture an audience for your products, retailers will
prefer you for their business and will stock up on
more of your products.
Brand Awareness

• Wholesaling builds awareness for your product.

Instead of consumers having to purchase
exclusively from a particular shop, be it virtual or
brick-and-mortar, consumers can see your
products in various outlets. It can allow a wide
range of consumers who might otherwise not
have been aware of your products to build a
relationship with your brand.
Drop-shipping

• The wholesaling business model will also enable

you to dropship. Drop-shipping is a method
where a merchant sells a product but doesn’t
own the inventory. A retailer receives the order,
and the wholesaler dispatches it directly to the
end customer. This method gives you the
advantage of retaining ownership while an expert
retailer handles the front end of things.
International Expansion

• Wholesaling makes expanding into global markets much

faster and easier. Any growth and expansion are defined
primarily by your relationship with those clients who buy
goods from you. If they sell globally, so will you, as you’re
just getting the goods to where they need to sell them.

• From another point of view, you will be

shipping goods internationally in a few large containers
instead of sending hundreds of small retail packages when
selling via wholesale. Depending on your workflows and
product costs, this could be a cheaper way of selling
internationally.
Benefits of Retailing

• The retailing business model is ideal if you want to

retain complete control of your product lines and
establish a close relationship with your customers.
There is a lot to think about if you’re in this
position, but you can respond to your customers’
demands and potentially changing needs.
Targeted Consumer Base

• Retailing lets you specifically target a tailored

consumer base. You can personally select the
most likely channels to reach customers who
need and want your product. This may be a
brick-and-mortar shop, an online shop, or a mix
of both. An important thing here is to ensure
you’re reporting on these sales channels so that
you can make changes quickly if needed.
Personal Connection

• You can get to know your customer base in great detail.

You’re dealing with them directly to get a sense of their
preferences and habits, and your business can respond
quickly. Reporting and analysis are also easy. You’ll be
able to see who your best customers are, so perhaps
you could target them with a personalized offer.

• On the other hand, you can also see which customers

haven’t bought from you in months; you may want to
send them a personalized email to get them to buy
from you again.
Total Control Over the Brand

• Having control allows you to ensure that your

brand identity isn’t diluted or damaged. You’re in
control of where your product is seen, how it’s
presented, and what other products it’s displayed
with. You are in control of the product’s marketing
to ensure that the messages being put out to the
world are consistent with how you want your
product to be viewed.
Price and Profit Margin

When developing a retail strategy, you can

decide for yourself the price you will
sell your product and its profit margin. The entire
profit will be yours and won’t be shared with a
wholesaler.
Should I do wholesale or retail?

For some, it’s less about understanding the differences

between wholesale and retail and more about which one
would be the better choice for them. So let’s take a closer
look at the benefits you can enjoy and the challenges you
need to overcome for each type of business model. This
will give you the information you need to better guide
your decision.
Wholesale benefits and challenges

With wholesale distributors having access to wholesale pricing,

they can buy goods at a significantly lower rate than retail
businesses. The ability to ship out products in bulk also allows
them to enjoy lower fulfillment costs. As a result, their overall
spending is lower, which gives them a good opportunity to earn
huge profits.
Moreover, wholesale businesses typically have long-term deals
to supply products in bulk to retail businesses. This has a twofold
benefit–not only does it give them assured long-term income, it
also enables them to enjoy higher average order value.
Another major benefit of selling wholesale is that since you’re
dealing with high average order value, there’s a good chance
of scaling your business. The business model allows for a
lower cost per unit and higher revenue, which can support
scalability.
In spite of these benefits, it’s also important to weigh the
challenges of managing a wholesale business. One of the
major challenges to overcome is in terms of competition since
the market is dominated by leaders in the industry. New
businesses entering the market need to work on building their
credibility to gain reliable customers.
Additionally, although wholesale businesses have access to
wholesale pricing, they have to invest in enormous amounts of
goods at a time. The cost of procurement can easily build up when
you have to buy thousands of units to qualify for wholesale pricing.
Another important consideration is fulfillment. While wholesale
businesses can enjoy lower fulfillment costs, the process of fulfilling
large quantities of orders comes with its own set of challenges. For
starters, storing large volumes of inventory requires significant
warehouse space. Moreover, there may be transportation risks and
capacity restrictions involved with shipping out bulk orders.
Retail benefits and challenges

Retail benefits
For retail businesses, one of the major benefits is the ability to
build a brand and a personal connection with consumers. Since
retailers are selling goods directly to the end customers, they have the
chance to build a relationship with them.
This also means they can gain access to first-party behavioral data that
can inform their marketing and procurement strategies. For instance, it
becomes much easier to provide personalized product
recommendations based on each customer’s buying history.
Without intermediaries involved, retailers also have more control over
their brand identity. They’re completely in control over how their
products are displayed and marketed as well as the quality of service
they provide. This enables them to build a strong and consistent brand
image that isn’t affected by the shortcomings and mistakes of business
partners.

This increased control also extends to pricing strategy, giving them the
freedom to decide their rates based on their target profit margin. That
also means they can easily adjust their pricing if their current rates
aren’t delivering the kind of profit margins they expect. As a result, retail
businesses are able to generate considerable revenue with the right
pricing strategy.
Retail challenges:
However, all these benefits don’t come without a price. There are a number of
challenges that retail businesses need to overcome, especially since they
directly deal with end consumers. For starters, it’s complicated to market their
products to different types of consumers who may have varying needs and pain
points.
Additionally, fulfillment can be a major headache with consumers expecting
fast and affordable shipping. With retail businesses having to deliver orders to
customers across different locations, there are challenges involved with
strategically distributing inventory to ensure efficient and low-cost delivery
for all their customers.
What is Broker?
A broker is a person or firm who arranges transactions
between a buyer and a seller. This may be done for a
commission when the deal is executed. A broker who
also acts as a seller or as a buyer becomes a principal
party to the deal.
What is the role of a broker?
Its role primarily consists of providing a point of
contact for institutional clients seeking to buy or sell
financial or non financial products. Regulatory
restraints require the broker to act as a pure intermediary,
taking no positions or dealing risks in the financial
markets.
What is Merchant?
A merchant is a person or a company that sells goods
or services. The merchant will sell products for a profit
and facilitate the customer's buying journey. They can be
an online retailer or a wholesaler and sell to any source,
as long as they are selling for profit.
Final Say

Now that you know about wholesaling and retailing in detail,

it’s up to you to choose the right model for your business.
Considering the wholesaling vs retailing debate, both have
their pros and cons. Before choosing one, understanding
how each of the two works is important.

Evaluate how much control you would want over your brand,
how much face-to-face contact you wish to have with the
customer, how much money you have in your bank to invest,
and many more such factors.