How Retail Companies Differ from Wholesale – Definition & Full Guide
What is the Difference Between Retail and Wholesale?
We’ve mentioned previously that wholesalers do not sell to the final consumer, but there are exceptions. The organizational chart of a wholesale company, the structure of the departments, and the areas of expertise of the white-collar employees it employs and the wholesale companies are different.
Since the wholesalers do not sell to a large number of end-user customers, there are many differences, including advertising and marketing strategies, qualitative and quantitative characteristics of the sales staff, and the setup of the customer service department. The sales strategy of the wholesaler is to periodically sell large volumes to a certain number of retail companies.
It is not uncommon for a wholesaler to sell goods directly to consumers. Companies such as Costco, Sam’s, and Bj’s Wholesale set up membership repository clubs for consumers. These retail stores, which only sell to members, sell to their customers in minimum quantities on a parcel and package basis, even if they are at the end consumer.
One of the main differences between wholesale and retail is the price. The retail price is always higher than the wholesale price. The reason for this is that retail stores are opened at central points and will sell many products purchased at one time over a long period, in other words, they need additional budgets such as depreciation costs, advertising, and marketing. Finally, the advantage of selling many products at once allows for smaller profit margins.
How Does the Supply Chain Work?
Retail firms are positioned at the point before the consumer in the supply chain: Producers, wholesalers, retailers, and consumers Products supplied from the manufacturer or wholesaler arrive at the retailer’s store. The retailer keeps a limited number of products in its warehouse due to its limited stock capacity. In other words, a regular supply chain should operate between the retailer and the manufacturer to avoid stock shortages.
Actors Forming the Supply Chain
Manufacturers: Producer companies that produce for the demand of wholesalers or retail companies using raw materials or semi-finished products. Wholesalers: It delivers the products purchased from the manufacturer to the retailers. The wholesaler’s sole function is not to act as an intermediary.
There are often considerable physical distances between retailers and manufacturers. Besides, manufacturers do not produce according to small orders from individual suppliers, so if there is no wholesaler every once in a while, it will not be possible for the retailer to supply goods on time.
Retailers: Buying products from wholesalers in small quantities in proportion to the shelf capacity of the store.
Consumer: The end-user, that is, the people who buy products from the retailer to consume, i.e. the end customers.
We may encounter surprises in retail stores. When you enter a white goods store, you can come across a cafe that resembles a greenhouse garden where you can sit and have coffee. Classic products such as refrigerators, ovens, dishwashers are around you, but you are presented with a different experience with a design you have not encountered before.
The basic logic is that a retail store does not strive to market its products to its customers directly. Customers’ different experiences affect their purchasing decisions positively and differentiate this retailer from all competitors.
To illustrate experiential retail, we can give more current examples. For example, think about a product presentation with performance, in a glassware shop with a professional kitchen to promote kitchenware and the offering of snacks cooked in their pots to customers. Shopping centers that organize various public events and entertainment activities are other examples. Street musicians performing at different points of the mall, pantomimes performing acrobatics, dancers performing dance performances, etc…
Today, rival brands produce more than one model for the same product group, so rival brands have a large number of similar products. When quality and price elements are similar, you need to find ways to make an impact that will differentiate you in the customer’s mind.
e-Commerce Statistics– “Statista.com“
- There are 3.5 billion social media users in the world.
- The number of online shoppers in the world is 2.8 billion people.
- 65% of the US population, 46% of the Chinese population, 73% of the UK population, 59% of the Japanese population, 70% of the German population are shopping online.
- E-commerce revenue in the United States will increase by $ 56.4 billion in 2020 to exceed $ 600 billion.
- Approximately 68.5% of the total population over the age of 15 in the world have a bank account. 52% of this population uses digital payment methods.
- India will rank first in terms of e-commerce growth in the retail industry.
- In 2024, 95% of retail sales will be made through e-commerce.
- Popular e-commerce sites like Amazon.com have many e-commerce categories, including electronics, home improvement, food, sports and fitness, health and medicine.
- It has over 12 million products in stores selling on Amazon.com.
- In China, e-commerce sites are expected to generate more than $4 trillion in annual revenue by 2023.
- More than 80% of all products on eBay are new products installed in the last three months.
- In 2020, global e-commerce volume is expected to approach $ 1 trillion.
- Cross-border e-commerce revenues in Europe are expected to approach 200 billion euros in 2020.
- 23.6% of European consumers find it advantageous to shop from e-commerce sites located outside of Europe.
Largest Retail Brands
Due to its turnover and number of employees, Walmart is considered the largest retail company in the world. On the other hand, 7-Eleven is the company with the most stores. The number of 7-Eleven stores exceeded 71,000 as of 2020. The ownership of the US-based company, which was founded in Texas in 1927, passed to the Japanese in the nineties. 7-Eleven is a global market chain operating in many countries, mostly in the USA, Japan, and Canada. Walmart operates in 27 countries, with 55 different brands and more than 12,000 stores. Walmart’s total store number is only 5/1 of 7-Eleven. On the other hand, Walmart is bigger than 7-Eleven, because of the size of its stores and selling capacity.
U.S. Retail Companies
Walmart and Amazon rank among the top two on the list of the world’s largest retail companies as U.S. companies. The U.S. economy has a high purchasing power and a large population. The local retail market is very competitive It is no coincidence that leading e-commerce companies such as amazon.com have been established and rapidly globalized from the USA, where the internet network was born and which hosts many technology companies.
The USA is the world’s largest retail market with sales of five trillion USD. Despite the rapidly increasing market share of e-commerce, physical stores still dominate the retail market. Hypermarket and grocer companies such as Walmart, Costco, and Kroger are among the largest physical retail companies. Amazon, The Home Depot, and CVS are other U.S. companies that are on the list of the world’s top 10 retail companies.
European Retail Companies
Europe’s largest retail companies; French Carrefour and British Tesco hypermarkets, both of which are discount stores.
German retail companies “Schwarz Gruppe (Lidl) and Aldi” are other major European retailers. Both companies are companies with subsidiaries outside Germany, selling throughout Europe. Germany, England, France, with their population density and high purchasing power, are the E.U. countries where retail giants show the most interest.
Asian Retail Companies
China, Japan, and India are major markets in the Asian continent due to their population density. These countries are home to some of the world’s largest retail companies. Japanese Seven-Eleven Chinese Alibaba and JD.com are companies that sell online not only in the Asian market but all over the globe, Seven-Eleven also has thousands of physical stores in different countries.
Types of Retailers
- By Service Quantity:
Retailers using the pick-it-yourself method, Limited service retailers
- By Product Line:
General Stores, Specialty Shops, Department Stores, Limited Type Stores, Hypermarkets, Service Retailers
- Retailers by Price Practices:
Discount Stores, Stores Below Wholesaler Price and Stores Selling Below, Retailer Price, Independent discount stores, Factory to Ring Outlets, Wholesale Clubs
- Retail by Organizational Structures:
Independent Retail Stores, Chain Retail Stores.
Types of Retail Stores
• Retail Store
The store retail sector is the center of retailing channels. Touching and looking at the products and browsing the stores are indispensable means of socializing for consumers. In this context, the store retailing sector inevitably has ongoing importance.
• Independent Stores
Independent retailers are small businesses. The owner of the company and the sales staff are the same person: these are the shops where consumers are served face to face. The physical area, stock capacity, product variety, and capital of these enterprises are limited. These types of enterprises are quite common as they can be established without large-scale capital.
• Combined Retail
Combined retailers are associations formed with an agreement to combat traditional wholesalers and retailers, mostly chain stores, in the distribution of foodstuffs and to reduce purchasing costs. Companies can join these groups by only signing an agreement with their company name. They cooperate in purchasing products and services.
• Chain Stores
Stores under the same business name, with a single trade name and managed from a single-center, are named with this name. When opening new stores in different cities or countries, the method of opening a chain store is used to avoid formal transactions from scratch and to improve brand awareness.
There is no standard definition for supermarkets in the literature; the definition varies from country to country. It’s also called a department store or discount store.
Shopping malls are huge shopping complexes; It contains a basic hypermarket as well as a large number of independent shops and entertainment complexes. It is usually located outside the city and offers parking services to its customers. The mall is the largest retail store.
Hypermarkets are big markets that are larger than 2500 square meters, offer open or closed parking service, and have a minimum range of products between 40k-60k. However, it varies from country to country.
• Corner Store
This name defines stores that are located in a separate corner within a store and operate independently of the current store. A store inside a hypermarket that sells a brand’s glasses is called a corner store. Within the same store, there may be a pharmacy, a gift shop, and different corner stores like this.
• Discount Stores
Discount stores that originate in the USA are widely available in Europe. The point is these are low-priced products. The feature of these stores is that discounted sales are not seasonal. The discount continues for 12 months.
The main features of discount stores are listed below.
- Wide variety of products
- Popular products in its group
- Prices targeting low and middle-income customers
- Customer service is limited.
- Additional fees are required for some services.
- Open 7 days a week.
- Simple aisles that are not flashy
Wholesale vs retail: Which business model?
Retail businesses should master the basics such as product selection, purchasing, sales, and marketing. You should determine your supplier when choosing the products, you should calculate which customer base and in what price range you can sell these products. As retailers are businesses that sell the goods to the final consumer, they can be flexible about the price, but they have limited stock areas. The products are often products with a shelf life. Most small retailers operate with a limited budget. Therefore, they should determine their marketing strategies correctly.
On the other hand, retailing is a complex business. You should take care of the financial and administrative affairs of your business, and follow up everything as both a salesperson and a manager. A retailer must also be an expert in their product group and analyze the competitors in the market very well.
If you have creative business ideas, have high energy, and can control every stage of the supply chain, the retail business model may suit you.
Wholesale businesses only sell to retail companies. They don’t need to set a sales and marketing strategy based on the end customer. Their customers are generally known; they sell a certain number of products at regular intervals, so their financial and administrative processes are based on predictable data. On the other hand, wholesale is a routine business. If you lose existing customers, it is difficult to gain new customers as the retailers in the market are limited. A high amount of capital is required to start this type of business.
If you are knowledgeable about proactive customer management and logistics, know the industry and retailers in which you plan to start a business. Finally, if you have sufficient capital, wholesaling may be a suitable business model for you.