What is wholesale?
Wholesale is buying and selling goods or services in bulk quantity. Buying wholesale means buying large amounts of goods from early in the supply chain to realize a discounted price per unit. In business, wholesale means a business model where a third-party earns a profit by acting as the middleman between the originator of the good and smaller businesses or retail customers.
Wholesale as a noun: Selling wholesale is one of the most popular business models for Amazon FBA sellers.
Wholesale as an adjective: A wholesale business can be very profitable.
Wholesale as a verb: The company wholesales branded products to Ecommerce sellers.
A simple definition of wholesale is buying or selling bulk quantities.
What is wholesale price? Wholesale price is the discounted price received by purchasing goods higher in the supply chain, usually in bulk quantities.
What is wholesale market? The wholesale market refers to the market for products that can be bought and sold at wholesale prices.
What is wholesale trade? Wholesale trade refers to the business activity of buying products in bulk from manufacturers or distributors and reselling them to retail costumers.
What is a wholesaler?
A wholesaler is a business that purchases bulk quantities of products directly from manufacturers, distributors, farmers, or other top of supply chain suppliers, for the purpose of reselling them to retailers like shops, supermarkets, and Ecommerce stores. A wholesaler typically makes between a 15% to 30% profit margin, according to Square. Wholesalers are responsible for storing their product inventory in a warehouse until it sells and moves into the hands of the retailer. Most wholesalers don't sell directly to retail customers who only need a small quantity of their product. Instead, they sell to businesses and individuals who need larger quantities of a single product.
How does wholesale work?
Wholesale works by buying bulk products to get them for cheaper and then reselling them at a higher price in smaller quantities. Even though a wholesaler is only an intermediary, they play a critical role in the proper functioning of the supply chain. Wholesale enables more products to reach the market by lessening the risk and financial burden for the retail business. Without these intermediaries, retailers would have to place higher volumes of product orders directly from the manufacturer and have fewer resources to spread around their product catalog. The wholesale market allows retailers to buy smaller quantities of more products and still earn a sizeable profit margin.
Wholesale vs Retail
The difference between wholesale and retail sales is that wholesale is for large-scale purchases, while retail purchases are made in smaller quantities for individual use.
Wholesale
Retail
Wholesale and retail examples
A wholesale business example is Cencora (A.K.A. AmerisourceBergen). Cencora is an American drug wholesale company that does wholesale distribution for pharmaceutical products. The company helps pharmaceutical manufacturers bring products to market by handling the efficient supply of their products to US hospitals, pharmacies, and other health centers.
A retail business example is Best Buy. Best Buy purchases goods from manufacturers like Sony and resells them at a higher cost to customers that visit its stores.
Wholesale vs Distribution
The difference between wholesale and distribution is that distributors have more intimate relationships with their manufacturing partners. Distributors have exclusive selling agreements with a limited quantity of manufacturers to sell their products. They also often perform promotional services to get wholesalers and retailers to buy the manufacturer’s product.
In contrast, a wholesaler doesn’t owe allegiance to a single manufacturer. They can buy and sell similar products from competing manufacturers, so they have larger product catalogs than distributors do.
What are the 5 types of wholesalers?
1. Merchant wholesalers
Merchant wholesalers buy directly from the manufacturer and take title to the goods they store and sell. Then they resell the goods to businesses, government agencies, or smaller wholesalers for a profit. Merchant wholesaling is the most common type of wholesale in the Fast-Moving Consumer Goods (FMCG) industry. FMCG includes cheaper products that sell quickly, like fruit, milk, and soda.
2. Full-service wholesalers
A full-service wholesaler provides comprehensive services including buying, selling, storage, sorting, transporting, financing, training sales associates, and providing market feedback to the product manufacturer. These types of wholesalers commonly operate in the consumer durables and engineering products industries.
3. Limited-service wholesalers
A limited-service wholesaler stocks the products of a manufacturer and sells them through a single sales channel. For example, having the authority to sell the manufacturer's products only through Ecommerce.
4. Brokers and agents
Brokers and agents coordinate deals between manufacturers and buyers to earn a commission on the sale. They assume no risk in a wholesale transaction. These types of wholesalers are common in real estate and the chemical markets.
5. Specialty wholesalers
Specialty wholesalers sell specialized items. For example, a used phones specialty wholesaler would specialize in the market for used phones and how to refurbish them for retailers or consumers.
What is wholesale Ecommerce?
Wholesale Ecommerce is the segment of wholesale market trading that takes place through online channels. Over the last few decades, wholesale Ecommerce has grown substantially to encompass a major portion of the overall wholesale marketplace. As of 2020, data from Statista highlights that Ecommerce makes up over 31% of all wholesale trade sales in the United States. B2B Ecommerce marketplaces like Alibaba have made it substantially easier for a wholesale supplier to connect with B2B buyers. B2B wholesale Ecommerce is one of the reasons there are so many Amazon FBA sellers using the wholesale model.
What is Amazon wholesale?
Amazon wholesale is buying branded wholesale goods and reselling them on the Amazon marketplace. The Amazon wholesale business model entails an Amazon seller buying products from a wholesale distributor in bulk and reselling them at the retail price on Amazon for a profit. Amazon is a popular choice for Ecommerce wholesale because of Amazon FBA. By selling through the Amazon FBA program, Amazon wholesale sellers can send their bulk product inventory to be stored in the Amazon warehouse and shipped out once sold. Wholesale buying is immensely popular on Amazon, with 26% of Amazon sellers using this sourcing method over other options like private label.
Is Amazon a wholesaler?
Amazon itself is not a wholesaler. However, you can access wholesale products through Amazon on the Amazon Business marketplace. Amazon Business is where businesses can buy wholesale products through Amazon's network of wholesale suppliers.
How to make money selling wholesale products online?
1. Set up a business
Set up a legal business entity like an LLC and apply for a reseller permit in your state of business. You need a business for wholesale because obtaining a reseller's permit requires you to have a legal business entity. A reseller's permit allows you to avoid paying sales tax when you obtain your wholesale products and is usually required when opening wholesale accounts with wholesalers.
2. Open wholesale accounts
Contact wholesalers and open wholesale accounts for your business. Opening a wholesale account means the wholesaler gives you access to buy products in bulk from their product catalog. The easiest way to find wholesalers is by searching a supplier marketplace like Alibaba or ThomasNet. However, you can also try other strategies to find wholesale distributors like joining professional networks, attending industry trade shows, or contacting a brand directly to inquire how you can obtain their products at wholesale price.
3. Choose an Ecommerce sales channel
To make money online with wholesale, you need somewhere for customers to find your products on the internet. Common sales channels for Ecommerce wholesale include listing products on Ecommerce marketplaces like Amazon or eBay, or setting up a custom website store with Shopify or WooCommerce. If you choose to sell through your own online store, you'll also have to run a marketing campaign to drive traffic to your products.
4. Set up logistics
Having somewhere to store bulk quantities of products and a system in place to send them to the retail customer is a key component of a wholesale Ecommerce business. If you sell through Amazon and use the FBA program, Amazon handles all the logistics for you. If you don't sell through Amazon and don't want the hassle of storing and shipping products yourself, you can use a third-party logistics (3PL) service like ShipBob.
Other wholesale definitions
What is wholesale real estate?
Wholesale real estate is a real estate investment strategy that entails convincing a property owner to sell their home to obtain the contract, and then selling the contract at a marked up price to an interested real estate investor. A real estate wholesaler gets houses priced below market value by targeting customers that are highly motivated to sell for various reasons, like needing quick access to cash or getting rid of a property that fell into disrepair. Real estate wholesaling is a good way to get into real estate for those who don't have money to fund real estate projects themselves.
What is Wholesale Price Index?
A Wholesale Price Index measures the overall change in the price of goods that are sold at wholesale. Wholesale Price Index is calculated as: (Current Price / Base Period Price) × 100
What is wholesale club?
A wholesale club is a retail store that sells bulk quantities of products to provide customers a discounted price by buying larger quantities. Sam’s Club and Costco are examples of wholesale clubs.
What is wholesale banking?
Wholesale banking is discounted banking services for large clients, like banks or other financial institutions, government agencies, and large companies. Wholesale banking involves services like currency conversion, business financing, and underwriting. Major financial institutions provide wholesale banking to large clients who meet requirements like holding a certain amount of cash reserves at the bank or making a high volume of transactions through the bank.
What is wholesale mortgage lending?
Wholesale mortgage lending is pooling money to be used in mortgage loans that the lender accesses through third-parties. A wholesale mortgage lender does not deal directly with customers themselves, but instead partners with other major financial institutions like banks or credit unions to match their money with mortgage loans of a pre-specified criteria. In contrast to a traditional mortgage loan that comes from the same financial institution the borrower applies for the loan through, a wholesale mortgage loan is funded by a third-party financial entity.
What is wholesale life insurance?
Wholesale life insurance is life insurance offered through a business that employs between 5 and 50 employees. The business does not qualify for true group life insurance that covers 50+ people, but their size does allow the business's employees to get a discount compared to the coverage offered on the individual market.
How is wholesale similar to local lead generation?
A wholesale business makes money by acting as the middleman to make brands’ products more accessible to retail sellers. Similarly, a local lead generation business is a middleman that makes brands’ services more accessible to customers by making their services more visible on the internet. In terms of online business models, both wholesale and local lead generation are great options because you don’t have to deal with the hassle of actually developing the product or performing the service yourself. You make money by connecting people who need something with people who can meet those needs with the right solution.
