RETAIL TRADE VS WHOLESALE TRADE — SIMILARITIES AND DIFFERENCES

Retail trade can be defined as buying goods and services from the wholesaler or directly from the manufacturer and then selling them in smaller quantities to the final consumers.

It involves buying goods in break-bulk from the wholesaler and selling them in smaller units to the consumers.

Wholesale trade, on the other hand, is the buying of goods and services in bulk from the manufacturer and then selling goods in break-bulk to the retailer or directly to the consumer.

It is the activity of buying goods and services, not for immediate consumption, but resale or intermediate uses.

Both wholesale and retail trade have similarities and differences which we will look at in this post.

Similarities Between Wholesale Trade and Retail Trade

1. Both are divisions of home trade: Home trade can be divided into wholesale and retail trade.

Accordingly, wholesale and retail trade are divisions of home trade.

2. Both have the same revenue model: The revenue of a wholesaler and retailer is the difference between the purchase price and the selling price.

3. Both are intermediary activities: Wholesalers and retailers are intermediary activities as they buy and act as links between the manufacturers and the consumer.

Instead than buying products for their own consumption, wholesalers and retailers buy products to resell to end users directly or indirectly.

The intermediary nature of wholesale trade and retail trade can be explained with this phrase: "A manufacturer sells goods to the wholesaler, who then sells to the consumer, who in turn sell to the final consumer"

Therefore, we observe the purchasing and resale of goods and services up until the point where they reach the end consumer

4. Both provide credit facilities to their customers: Both wholesalers and retailers offer credit facilities to their respective customers.

Wholesalers provide credit facilities to the retailer by allowing him to buy now and pay after selling the goods

Similarly, retailers provide credit facilities to consumers by allowing him to buy now and pay later.

5. Both are sources of market information: Both retailers and wholesalers are sources of invaluable market information to the manufacturers.

The retailer gathers market information, including consumer preferences and feedback, and relays it to wholesalers, who then communicate it to manufacturers.

Differences Between Wholesale Trade and Retail Trade

1. Retail trade involves purchasing goods from wholesalers, whereas wholesale trade involves purchasing from producers

2. In wholesaling, goods and services are sold to the retailers but in retailing, goods and services are sold to the consumers.

3. A person engaged in wholesaling activity is called a wholesale trader, wholesale distributor or wholesaler.

In contrast, a person engaged in retail activity is called a retail trader, retail distributor or retailer.

4. A wholesaler buys in bulk and sells in break-bulk to the retailer whereas the retailer buys in break-bulk and sells in units to the consumer.

5. The price at which a retailer sells goods and services is usually higher than that of the wholesaler.

As a result, the wholesale price is usually lesser than the retailer's price.

The reason retail price is usually higher than wholesale price is that retailers,  having bought goods at the wholesale price, must increase the price of the goods to earn profit.

6. Retailers frequently offer a wide range of products from various brands.

While a wholesaler frequently focuses on the sale of a specific or related type of goods and services.

7. Retail trade requires less capital to start up than wholesale trade, which requires large capital.

8. A retailer sells items that will be consumed right away, while a wholesaler sells items that will eventually be resold.

9. The retailer connects the wholesaler and consumer, while the wholesaler connects the producer and retailer.

Thus, the wholesaler acts as a middleman between the manufacturer and the retailer, and the retailer acts as a middleman between the wholesaler and the consumer.

10. Retailers typically face more competition compared to wholesalers because they are always similar retailers that are also selling the same goods.

In contrast, wholesalers typically face less competition compared to retailers, because they are rarely many wholesalers who specialize in the same goods.

11. Wholesalers are indirect sellers to the consumer because they sell goods to the retailers, which are then resold to the consumer 

A retailer, on the other hand, sells things directly to customers, making him a direct seller to the consumer.

As such, the retailer is very familiar with the consumer than the wholesaler.

12. Wholesalers are direct buyers of the manufacturer while retailers are indirect buyers of the manufacturer.

As such, the wholesaler knows the manufacturer more than the retailer.

13.  While wholesalers usually store goods in their warehouse, retailers usually store goods in their stores.

14. Wholesalers typically operate on a large scale as they buy and sell in bulk, and have warehouses for storing large stock of goods.

Retailers, on the other hand, operate on a small scale because they usually buy in smaller quantities from the wholesalers and keep goods in their stores.

15. The business activities of wholesalers are typically not limited to a particular city. Rather, it extends to different cuties and towns.

This is opposed to retailers, whose business activities are usually confined to a locality or city 

16. The act of personal selling is a prerequisite for retailers since they deal directly with consumers.

On the other hand, wholesalers may not require the art of personal selling because they do not deal directly with consumers.

READ ALSO: MEANING, TYPES AND CHARACTERISTICS OF DOMESTIC TRADE

17. Unlike retailers, who buy in smaller quantities, wholesalers gain economies of scale from bulk buying of goods

18. Retailers are known to offer after-sale services to customers in the form of free installation etc.

On the other hand, the wholesalers do not offer after-sale services, although they may offer to transport goods to the retailer's shop.

Tabular Comparisons of Wholesale trade and Retail trade

Features Wholesale tradeRetail trade
Buys fromProducersWholesalers
Sells toRetailersBuys in
BulkOne Break-bulk
Sells inbreak-bulkUnit
Is it a division of home trade?YesYes
Revenue margin Difference between between selling price and Buying priceDifference between selling price and Buying price
PriceHigher than that of retailerLesser than that of retailer
Capital requirementLargeSmall
CompetitionFewMany
Capital requirementLargeSmall
Scale of operation LargeSmall
Knowledge of personal sellingVery importantLess important
Credit facilitiesLargeFew
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