By Guest Blogger: Debbie McGrew for Debt.org, America’s Debt Help Organization
So, you want to own your own business? Before starting this new business venture, there are many decisions that will have to be made, and among them is the decision to buy wholesale or retail. Purchasing products at wholesale prices and then selling them at retail value is a great way to launch your own successful, profitable business. However, it is important to understand the difference between wholesale and retail to understand the many benefits of buying wholesale.
- Retail. Buying retail consists of buying goods for sale directly to consumers, not necessarily in large quantities, and for a higher price. Retailers must take other costs, such as employees, rent, taxes and advertising into account when selling their products. These costs are then factored into the price that customers are charged.
- Wholesale. In contrast, the wholesale market consists of a manufacturer that sells products to a middleman, who then sells the products to the public at retail value to make a profit.
However, there is more to running a successful business than buying low and selling high, and there are many reasons why buying wholesale can drive a profitable business.
Wholesale markets improve efficiency in food distribution by centralizing all transactions at a single location, which in turn, allows wholesalers to sell larger quantities of goods at a lower price.
Wholesale markets also provide greater stability of supply and sale of produce, because everything is centralized and easily accessible to operators, which reduces uncertainty concerning supplies and completion of sales transactions.
Popular warehouse stores like Sam’s or Costco offer wholesale prices to their customers. Their prices of manufactured goods could be as much as half of the retail price. However, goods are not always manufactured; they are sometimes grown.
A farmer for example may offer a grocery store his or her products at a wholesale price, because the grocery store would buy the farmer’s product in bulk. A grocery store wouldn’t buy just one apple and a handful of potatoes; it would need to buy large quantities because of its high demand for produce.
The grocery store is then able to sell the goods at retail value to make a profit. And although farmers are selling the product at a lower price, they are guaranteed a regular, large payment.
Buying your products from a wholesale market also allows for some price flexibility, which is important when you are in control of your own business profits. You can buy your products at wholesale prices and put them on sale or clearance, which will make your customers happy, while still turning a profit. The profit of sale items would not be nearly as significant if you bought the products at retail value.
Buying wholesale and selling retail can be a great way to run a profitable business, but it can be, at times, challenging. It’s important to learn all you can before you dive into the wholesale market.
Debbie McGrew writes and blogs for Debt.org, America’s Debt Help Organization