There are two main types of trade: retail and wholesale. What is each of them, what features does it have, and for what purposes is it best suited?
First of all, the key difference is in the volumes and types of sales. In bulk, we sell, as a rule, large quantities of goods or services that are necessary for the buyer to conduct business. Retail, in turn, is already in the sale to end consumers, private individuals. It can also be not only single, but also large - it all depends on their needs and desires.
Wholesale Principles
Wholesale: what is and what features does this form of trade have? In it, each buyer goes through an identification procedure, that is, an agreement is concluded with each of them. Wholesale buyers are, as a rule, individual entrepreneurs or legal entities. They carry out trade for running their own business, and each has its own specific goals. This can be both the production and consumption of goods, or their subsequent resale. Most often, goods purchased in bulk serve precisely for resale.
That is, in wholesale trade, the main operations occur between entrepreneurs and organizations. Goods and services are not sold for the needs of the end user, but serve the purpose of doing business. The main feature of wholesale trade is the obligatory identification of the buyer.
Scheme and examples
It is easier to understand what opt is, using concrete examples. The main wholesalers are the manufacturers themselves; they are the ones who are at the origins of the financial “chain”. They directly create their products, and are engaged in its marketing. This product can be very different: clothes, shoes, household appliances, cosmetics, souvenirs, food, etc.
In most cases, manufacturers resell products to other wholesalers, that is, dealers, and those to other resellers. Before the product reaches the final customer, it will go through many stages of resale. How much exactly depends on the product itself and on the financial condition of the market at the moment. At the other end of the chain is a retailer - it is he who sells the products to the ordinary consumer.
Wholesale Benefits
Despite the impressive volumes, it’s much easier to wholesale from stock than retail. No time-consuming advertising, no other marketing costs that can keep the buyer. Sales volumes can be stable, or the product can be sold singly - it all depends on the goals of the seller. In any case, with proper quality and good demand, the shipment and purchase of large quantities of goods will be carried out continuously.
What are the other differences, so it is in the features of paying taxes. Wholesalers can fall under both a general and a simplified tax system (DOS or STS, respectively). But in general, the principles of taxation for wholesalers are much simpler than in the retail industry.
A “nightmare” of any retailer is a buyer who is dissatisfied with the quality of the goods or the service provided. The situation can be very unpleasant, even hysteria and litigation. Wholesale buyers do not behave this way, because they have a contract on hand, and in it there are clearly defined conditions and rules of conduct for the parties in case of a conflict.
Retail Sales
Speaking of what wholesale and retail are, one main difference can be noted: while in wholesale, a product can go through several stages of resale, then in retail this situation is excluded. The product is not intended for further resale, but for direct use by the consumer.
Buyers themselves create demand for a particular product and dictate the needs of the market. Retailers - a category that has the best opportunity to study and analyze this demand and to build their activities in accordance with it.
Where and how are retail products sold?
There are tons of options. Sale of goods and the provision of services can be carried out both in the store and on the street, as well as at the home of the buyer. The methods are also different: by mail, via the Internet, in personal sales or by phone.
The seller in the retail sales system is in direct contact with the buyer. That is, he has to take into account the tastes of each consumer, please him and contribute in every way to making a purchase. And in case of conflict - to deal with complaints.
There are also many risks for the retailer. For example, you have to have poorly sold goods on the counter - thus, buyers get the impression of a wide range and potential choices. On the other hand, there is a risk of damage to goods that were not sold on time. In addition, you have to make financial concessions: for example, to sell a product at a low price, often at cost, so that the buyer purchases other products.
However, all this has a flip side - after all, the margin on retail goods is much higher than on wholesale. This means that the profit from such sales will be much greater.
Requirements and features of sales
It is not enough to understand what wholesale is and what retail is - you need to analyze all the key features of these types of sales and understand what problems you may encounter in the process of this activity.
Differences
What are the differences between wholesale and retail?
- Different assortment. A retailer works with a small assortment of a particular supplier, a wholesaler works with a wide range from different suppliers. The average wholesaler has from 5,000 positions in the assortment matrix. What is small wholesale? This is when in the assortment from 100 to 1000 positions, depending on the specifics of the product itself.
- Different volumes. Wholesalers have to work only with large volumes and wholesale price. In addition to tangible profits, this entails more serious financial investments at the initial stage, as well as larger problems in case of failure.
- Different logistics. This area is the most “problematic” for the wholesaler, because he has to face many difficulties for each type of product: storage, availability, customs clearance, staff. When it comes to seasonal goods, things get even more complicated.
- Different turnover. If we are talking about gigantic volumes, but at the same time low turnover, the wholesaler must have a huge warehouse for storing his goods. In general, everything is simple: the faster the circulation of goods, the higher and more stable the profit. Any delays here are fraught with neglect - for example, due to the costs of storage, accounting, salaries of warehouse personnel, etc.
- Different planning criteria. In the field of wholesale purchases, the seller deals not only with large profits and serious goods flows, but also with a large financial leverage. It is important to calculate, with the maximum guarantee, the volume of future sales, to be sure that the goods will be sold on time, and to have guaranteed profit for the purchase of a new product.
Retail and Wholesale Issues
Nothing is perfect, both retail and wholesale companies face problems. However, wholesalers have to bear more serious losses. With what it can be connected?
- There is no creditor confidence, which means that there is no way to get leverage. There may be problems with the payment of the previous batch of goods or the purchase of the next.
- Illiterate planning, as a result of which surplus goods are accumulated that are in the warehouse “dead cargo”.
- Unstable work with retailers. This can be either a sudden increase in the volume of their work, or a cessation of activity or a decision to completely change the assortment. In any case, there is little pleasant - after all, the wholesaler has planned certain volumes and will suffer serious losses if they are not sold.
- Supply disruptions. It happens that goods purchased at a wholesale price are not fully prepared. Or there were problems with its shipment at customs. Or at the transportation stage there was a force majeure. The consequences of all these troubles affect a wide range of customers. In retail, such situations also happen, but they are not so widespread.
- Human factor. We are all human, and everyone can make a mistake. For example, ordering the wrong position from the catalog or making a cash gap. Worse, when there is a wrong work with the buyer, as a result of which he goes to the competitor. All this must be strictly monitored in order to avoid serious problems with the budget.
To summarize
What is wholesale and what is retail, sorted out. What problems can be encountered in each type of activity is also understandable. As well as the obvious advantages of each type of sales. On the other hand, where lies the thin line between wholesale and retail - the criterion is purely individual. For bulk purchases, the minimum amount can be determined in each individual case by the seller - be it ten or a thousand items.
In general, we can say that wholesale trade is easier, because the terms of trade are governed by the contract. But at the retail margin you can earn more.