🚀 Ignite your growth: Discover 30+ new tools to get ahead in our new Ecwid Igniter. Learn more →
Everything you need to sell online

Set up an online store in minutes to sell on a website, social media, or marketplaces.

How Does Wholesale Business Work? A Comprehensive Guide

7 min read

In the retail industry, the term “wholesale” can refer to two different business models. Firstly, a wholesale business could mean buying items in large quantities, storing them in a warehouse, and then selling them to other businesses. Alternatively, a wholesale business may also refer to a company that creates its own products and sells them directly to other vendors, who then sell these goods to their customers. The two models are similar, but with some significant differences. Let’s take a look at some of the ins and outs of wholesale businesses.

How to sell online
Tips from e-commerce experts for small business owners and aspiring entrepreneurs.
Please enter a valid email address

How Are Wholesale Goods Distributed?

Wholesale goods are distributed in a multiple-step process.

Usually, a wholesaler will purchase their products from a manufacturer or distributor and then sell them to another retailer to market them to end customers. Many wholesale suppliers will look for trending products, ensuring they supply the most popular goods to their buyers. When a wholesaler identifies a trend in the market, they will research cost-efficient goods, compare deals offered by various manufacturers, and acquire those products ready to be sold to retailers.

What Are the Different Types of Wholesale Business?

The wholesale environment consists of numerous wholesalers, some of whom work independently, while others work alongside a few trusted producers. Typically, a wholesale business will fall into one of several categories. These include:

Merchant wholesalers

This is the most common type of wholesaler. They will purchase large volumes of a good or product, which they eventually sell in small quantities for a higher price. Merchant wholesalers, as a rule, do not make their own products, but they’ll have a deep understanding of their stock and know when to sell them to retailers in different industries.

Brokers

Generally speaking, a broker does not own any of the products they are trying to sell; they simply serve as the “middle man” between wholesalers and their customer base. Therefore, a good broker will negotiate a suitable deal between both parties and usually take a commission cut once the deal is complete.

Distribution and sales

In some cases, a manufacturer will forgo waiting to find another wholesale business and instead will hire employees to represent their company as a wholesaler. As such, they will contact wholesalers and offer their goods to them, creating the best deal for their business.

What is Wholesale Pricing?

The term “wholesale pricing” refers to the price a manufacturer or distributor will charge wholesalers who wish to place a bulk order. When a wholesaler purchases in bulk, they receive a substantial discount, making it possible for them to make a tidy profit following retail markup.

For those unaware, retail markup is the price a wholesaler charges a retailer for their product minus the price originally paid to the manufacturer. For example, if your wholesale business buys 1000 products for $4,000, each product will cost $4. They might then sell these items in batches of 50 to retailers for a price of $400. As such, the price per item has been raised to $8, which means the wholesaler can make a profit of $4,000 once they have moved the entire shipment.

In short, this is how wholesalers make money and grow their business.

What Is the Difference Between a Distributor, Retailer, and a Wholesaler?

When customers purchase a product from an online retailer or a physical store, they usually do not think about the process required to bring that item to market. Wholesalers, retailers, and distributors all play a role in getting the item from the manufacturer and onto the shelves. Each entity has its own specific responsibilities within this network.

A distributor is an agent who works independently with a manufacturer to help sell their items to retailers and wholesalers. They will often enter into an agreement in which they cannot sell similar products from competitors.

However, this is not always the case and usually depends on the type of agreement in place. A distributor will usually be responsible for a large volume of products and may very well hold these items in a warehouse for as long as a year. Whenever a manufacturer deals with a potential new customer, that buyer will have to go through the distributor as their first point of contact.

Secondly, a wholesaler is a person or company that buys large quantities of products from the distributor to sell at a wholesale price to other retailers. Typically, a wholesaler will stick to certain types of goods or markets. However, if they are looking to diversify, a wholesaler may carry various items ready to explore different industries and grow their business. If a wholesaler only stocks products that do not compete with their manufacturer, they are deemed, distributors. However, they will warehouse their items for much shorter periods, usually no longer than six months.

Some wholesalers will even assemble the products ahead of time as part of the resell process.

Finally, retailers are a business that sells the product directly to the customer, typically for consumption rather than resale. Therefore, a retailer has to find a distributor or wholesaler who sells their goods at a fair price point and in the appropriate volume to make money.

Typically, retailers make their money by purchasing products in relatively small quantities at wholesale price, then selling them at a high price that covers all their expenses (salaries, utility bills, rent, advertising costs, other overheads, etc.)

How Can Ecwid Help You Manage Your Own Online Wholesale Business?

At Ecwid, we are determined to make the ecommerce industry as easy as possible for entrepreneurs and business owners. If you are looking to create a wholesale business, we provide powerful ecommerce tools that make running your business easy, no matter your needs or level of experience.

You can build your own online wholesale store from scratch, then sync and sell across many platforms, including your own website, social media pages, marketplaces, and more.

 

Table of contents

Sell online

With Ecwid Ecommerce, you can easily sell anywhere, to anyone — across the internet and around the world.

About the author

Max has been working in the ecommerce industry for the last six years helping brands to establish and level-up content marketing and SEO. Despite that, he has experience with entrepreneurship. He is a fiction writer in his free time.

Ecommerce that has your back

So simple to use – even my most technophobic clients can manage. Easy to install, quick to set up. Light years ahead of other shop plugins.
I’m so impressed I’ve recommended it to my website clients and am now using it for my own store along with four others for which I webmaster. Beautiful coding, excellent top-notch support, great documentation, fantastic how-to videos. Thank you so much Ecwid, you rock!
I’ve used Ecwid and I love the platform itself. Everything is so simplified it’s insane. I love how you have different options to choose shipping carriers, to be able to put in so many different variants. It’s a pretty open e-commerce gateway.
Easy to use, affordable (and a free option if starting off). Looks professional, many templates to select from. The App is my favorite feature as I can manage my store right from my phone. Highly recommended 👌👍
I like that Ecwid was easy to start and to use. Even for a person like me, without any technical background. Very well written help articles. And the support team is the best for my opinion.
For everything it has to offer, ECWID is incredibly easy to set up. Highly recommend! I did a lot of research and tried about 3 other competitors. Just try ECWID and you'll be online in no time.

Your ecommerce dreams start here

By clicking “Accept All Cookies”, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts.
Your Privacy

When you visit any website, it may store or retrieve information on your browser, mostly in the form of cookies. This information might be about you, your preferences or your device and is mostly used to make the site work as you expect it to. The information does not usually directly identify you, but it can give you a more personalized web experience. Because we respect your right to privacy, you can choose not to allow some types of cookies. Click on the different category headings to find out more and change our default settings. However, blocking some types of cookies may impact your experience of the site and the services we are able to offer. More information

More information

Strictly Necessary Cookies (Always active)
These cookies are necessary for the website to function and cannot be switched off in our systems. They are usually only set in response to actions made by you which amount to a request for services, such as setting your privacy preferences, logging in or filling in forms. You can set your browser to block or alert you about these cookies, but some parts of the site will not then work. These cookies do not store any personally identifiable information.
Targeting Cookies
These cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.
Functional Cookies
These cookies enable the website to provide enhanced functionality and personalisation. They may be set by us or by third-party providers whose services we have added to our pages. If you do not allow these cookies then some or all of these services may not function properly.
Performance Cookies
These cookies allow us to count visits and traffic sources, so we can measure and improve the performance of our site. They help us know which pages are the most and least popular and see how visitors move around the site. All information these cookies collect is aggregated and therefore anonymous. If you do not allow these cookies, we will not know when you have visited our site.