8 Key Differences Between Wholesale vs Retail

1. Relationships
2. Price
3. Inventory
4. Profit Margins
5. Ecommerce Requirements
6. Repeat Business
7. Delivery Speed
8. Marketing and Customer Reach

1. Relationships
Retail usually requires simple, transactional relationships with the general public - resolving
issues with orders, answering product enquiries, etc. A good chunk of time may be spent
building brand advocates on social media, but as a rule, the relationship is straightforward, and
doesn’t need to progress to anything substantial.

The relationships that a wholesaler builds need much more time and effort. As with the master
salesperson, the wholesaler understands that one of the reasons that customers buy from you
is because they like and trust you. Solid relationships with clients are built over many months,
and require a great deal of patience in order to become profitable. Trust is extended in both
directions - you’ll need to be confident that the client can pay their outstanding order balances
regularly, and on time.

Cameron Ross - owner of kitchen supply store Cheflink - believes that wholesaling is all about
building trust with clients. Wholesale clients need to have a high degree of confidence in you, so
that when the time comes for a substantial order at the right price, you can be relied on. "They
need to know that someone has got their back", he says.

It’s clear that you’ll need to have good salesmanship (or hire sales reps) if you’re planning on
selling wholesale. For Cameron, being a wholesaler feels like a big responsibility, but a lucrative
one. He believes that:

It’s like trying to be a third wheel to their business.

Sometimes, the level of trust is so high that your clients will place wholesale orders without even
asking for a price.

2. Price
Retail customers typically purchase small quantities of items, and while competitive pricing is an
important influencing factor when deciding to buy, it isn’t essential. Wholesalers, on the other
hand, will demand the most competitive price that can be offered, because they’re ordering
much larger quantities. This requires a good ongoing knowledge of your market’s pricing, so
that the necessary adjustments can be made to satisfy your wholesale clients. The difference
between the wholesale and retail price must be understood in order to offer the right pricing for
the right type of customer.
With both wholesale and retail selling, you may find yourself competing directly with your
wholesale clients, which can result in one of you being out-of-pocket, damaging your
relationship. This problem can be resolved by forging contracts, covering agreed pricing
parameters to reduce the risk of undercutting each other. Alternatively, you can be exclusive
with your retail products, with the remaining items in your inventory being available solely to
wholesalers (though this reduces your sale quantities.)

| Related Reading: Double Your Sales and Expand Your Reach With B2B Wholesaling

3. Inventory
As a retailer, you should have a good grip on how much inventory is required to fulfill customer
demand, and be able to anticipate changes throughout the year. This can be a delicate
balancing act; introducing wholesale to your business requires careful planning, to prevent your
optimum inventory levels being affected. The last thing you want is to fulfill a large wholesale
order, only to be left with nothing to sell to your retail customers (who typically provide higher
profit margins.)

Inventory requirements for each new wholesale client will need to be factored into your supplier
purchasing, to ensure that you retain the optimum stock levels for your business, freeing up
cash in the process. If you manufacture your own products, it’ll be necessary to optimize your
production process so that you can meet the demands of your customers.
There’s also drop-shipping to consider - a practice in which a separate company manages the
storage function of distribution, processes your orders, and delivers them to your customers.
While this practice can be utilized for both retail and wholesale customers, the drop-shippers will
need to develop a good understanding of your stock demand, so that they don’t get caught out.

Additional warehouse/storage space will likely be required when deciding to sell wholesale,
which must be factored into your decision. Do you currently have space to store thousands of
new items? Cross-docking - the process of receiving an order from a supplier, and then shipping
it straight to the customer without storing it in the warehouse - can help to ease storage
problems. Or perhaps it’s time for an exciting move to a larger location?

| Related Reading: How to Streamline Your Warehouse Operations in 5 Easy Steps

4. Profit Margins
One of the main reasons to sell products to both retail and wholesale is your profit margins. As a
wholesaler, large quantities of items can be bought from suppliers at lower cost prices,
increasing your profit margins when selling the stock to retail customers. Lower product unit
costs also allow you to be more competitive with your retail prices on your webstore.

5. Ecommerce Requirements
Selling wholesale calls for set of different features for your webstore. Check first to see if your
ecommerce platform can do the following:

Display different prices for wholesale and retail customers

Selling wholesale is selling in bulk, and so naturally comes with a reduced product unit price. As
such, you’ll need to be able to differentiate product pricing for retail, and wholesale customers,
displaying different pricing to each customer group when they’re logged into your webstore. This
can be achieved with Neto using the customer groups add-on, in combination with the multilevel
pricing add-on to set quantity-based pricing.

Repeat orders from order history

Depending on what you sell, retail customers are less likely to re-order the same products from
you, whereas it’s quite common for wholesale customers. This means you’ll need to make it
easy for them to quickly re-request orders from their order history, in addition to making any
small changes that they might need. This functionality is built into every Neto webshop template,
allowing both retail and wholesale online customers to quickly reorder entire orders when
needed.

Manage account and pay account balance

Another feature that is useful for retailers, and essential for wholesalers, is the ability to pay off
an account balance. When selling wholesale, it’s common for the order to be payable at a later
date, and by allowing the client to pay their balance from the webstore itself, you won’t need to
employ additional office staff to process the payments manually. Again, this feature is available
in Neto’s webshop templates, as standard.

6. Repeat Business
One of the good things about wholesaling is re-selling to the same customer over and over; a
customer with whom you have a solid, steady business relationship. As mentioned above, it’s
rare for a retail customer to purchase the same product twice, but common for wholesalers to do
so. Wholesaling allows you to sell much more of the same product.
| Read the wholesale Case Study: Bambella Designs

7. Delivery Speed
Since the prodigious rise of delivery speed-demons Amazon, it’s become clear that customers
want quick delivery, and will happily pay for it. Amazon’s Prime service (which includes fast
shipping) has an estimated 90 million members.

Cameron from Cheflink believes that over time, logistics will become increasingly important for
retail selling.

Logistics will be the name of the game [for retailers]

As a retailer, you’ll need to do your very best to bring down your shipping delivery times, in
order to compete with giants like Amazon. When it comes to wholesaling, your clients are more
likely to place their orders in advance, so delivery speed is less of a priority for them.
Wholesale clients that you have strong relationships with are also more likely to be from your
own backyard, making delivery times quicker, and much cheaper.

8. Marketing and Customer Reach

While email is a key component when marketing to retail customers, it’s less important for
wholesale customers, who usually have a good idea of what they want to order. When email
marketing does occur for wholesale businesses, it needs to be much more targeted, to fit the
unique, consistent requirements of the client.

A physical catalog is something to be considered for wholesale customers - an often preferred

method of browsing. This can be challenging because the catalog must be regularly updated in
order to convey the most competitive pricing.

Selling wholesale has the fortuitous effect of gaining access to a wider range of stores and
outlets, which broadens your customer base. As your products hit the shelves of more and more
stores, your branding is being advertised to larger audiences, increasing brand awareness and
organic traffic to your own ecommerce store.

A small amount of branding control must be relinquished when selling wholesale to retailers -
you can’t be sure that they’ll display or advertise your products in accordance with your brand
identity, where they’ll be placed in the store, and what kind of company they’ll keep.
Wholesaler, Bambella Designers, have a large following on Instagram and use the platform to
get their products seen.

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Selling in as many ways as possible is fundamental to the growth of your business.

Wholesaling, while challenging, can be a highly profitable sales avenue, and Neto offers some
of the key tools that you’ll need in order to be a successful wholesaler.

Though there’s plenty of challenges to overcome, wholesaling allows you to reach an entirely
new audience, and with perseverance, you can carve out a lucrative, fresh area for your
business.