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retail vs. wholesale

Contributor(s): Corinne Bernstein

Retail is the sale of merchandise from a specific point (such as malls, markets and department stores) in small quantities directly to the consumer. Wholesale is the sale of goods in bulk at a discount to merchants for resale to retailers; industrial, commercial, institutional or professional users; or other wholesalers – sometimes involving a middleman (agent or broker).

In retail, products generally sell for higher per-unit prices for each unit than they would under a wholesale model. By moving goods in mass quantities from manufacturing to distribution, wholesalers can benefit from economies of scale and sell products at lower costs.

As small-scale vendors, retailers usually can control when, where and how their products are sold and can work one-to-one with customers and receive regular, in-person feedback. This feedback enables retailers to incorporate new designs into their products. However, retailers juggle marketing, sales, billing and fulfillment roles. They often need to invest in in-store marketing and retail overhead, so their expenses are higher than wholesalers.

Compared with retailers, wholesalers (sometimes called jobbers and distributors) play a less hands-on role and interact more with businesspeople. Although wholesalers physically assemble, sort and grade goods in large lots, they can divide them up and repack and redistribute them in smaller lots. Wholesalers focus on managing manufacturing, maintaining inventory and getting products to a specific location quickly and efficiently. 

In many industries, wholesale operations have decreased as new technologies eliminate links in the distribution channel. In some cases, the internet enables manufacturers to bypass the wholesale sector completely and market directly to the consumer.

This was last updated in May 2017

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