Small Business Terms Defined: What Is “Wholesale”?

by Greg DePersio

1 min read

“Wholesale” is one of those retail terms that most people think they understand, but that means a bit more to people working in retail small businesses. “Wholesale” contrasts with “retail,” which refers to the price sellers charge customers for goods. Wholesale is the somewhat cheaper price charged to retailers for the same products. Buying wholesale usually confers a per-unit discount, but it often requires bulk purchases at a higher absolute price.Because of this volume requirement, wholesalers typically market their inventory to retail store owners, expecting them to buy, for instance, thousands of candy bars to sell to hundreds of end users before they spoil. Sometimes wholesalers open their doors to the end customers themselves, who are usually happy to skip the retail middleman and buy bulk goods at steep discounts. This strategy works best with consumable but non-perishable goods, such as shoes, which can be bought in bulk and left in the closet until needed. It works less well for large purchases of easily spoiled goods, such as bananas, which can go bad before you get halfway through the five dozen you had to buy to get the discount.Wholesalers are not to be confused with distributors. Distributors typically sell one line of products, none of which compete with each other, within a single company’s line of goods. Wholesalers offer competing goods from multiple producers in the same way retail stores do. Most wholesalers are themselves buying wholesale, getting somewhat steeper discounts for buying goods in quantities that are probably unrealistic for single customers, and then trusting that enough retailers are available to buy up the stock before it spoils on them.Knowing how wholesale works can save retailers and customers money, streamline your retail business, and possibly get you some cheap shoes all at once.

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