The foremost decision as you step into the world of eCommerce is the choice between B2B wholesale and B2C retail for your business model. This will determine your business strategy and the organization of your supply chain. This blog post will explain and compare these two business models, so you can make the right choice for you.
Wholesale means purchasing large quantities of products from manufacturers or distributors and reselling them in bulk at a discount to retail stores and other businesses, but not directly to the end consumers. While the prices are quite low, the wholesalers sell them at a higher rate than they buy them for, so they can make a significant profit. Manufacturers sometimes also act as wholesalers, selling their products directly to retail stores.
Retail is the selling of goods directly to the end consumers. Retail businesses purchase goods in bulk from wholesalers, distributors, or manufacturers at discounted rates and sell them individually at higher rates. The retail business requires effective product marketing.
The first of the two main differences between wholesale and retail is the type of buyer. Wholesale buyers are retail stores and other businesses, while retail buyers are end consumers.
Secondly, wholesale pricing is such that manufacturers or distributors can make a profit. Retail pricing involves adding a markup to the inventory acquiring cost so retail businesses can make a profit.
Aspirants of the eCommerce world want to know which of the two is better. Neither is overall better than the other, but if you want to know which is a better choice for you then read on to review the pros and cons of each business model.
Wholesale distributors have access to wholesale pricing, which is much less than retail pricing. Shipping items in bulk leads to overall lower fulfillment costs and gives higher profits. Wholesale businesses enjoy the assurance of long-term business via long-term contracts and get a higher average order value. Wholesale businesses maintain a high inventory turnover ratio since they ship out bulk sums of products. With the lower costs per unit and higher revenue, wholesale businesses have a good chance to scale.
The cons of managing a wholesale business include the greater need for new businesses to work on gaining customers by building their credibility since there is a lot of competition. Wholesale businesses require heavy investments. Fulfilling bulk orders requires having sufficient warehouse storage space and poses transportation risks while shipping out bulk orders.
Some of the main benefits of retail businesses include the ability to build a brand, connect with the end consumers, and gain a hands-on experience dealing with customer reactions and responses to their products. This way it is easier for retail businesses to plan their strategies accordingly and offer personalized recommendations for products. Retailers have complete control over the marketing and display of their products as well as their quality of service, which aids in building a consistent brand image. Retailers can decide their product prices based on their target profit margin and enjoy greater flexibility in price adjustments when needed.
Despite the greater control over how retailers market their products, it is complicated to market products to different types of consumers with varying needs. Customers expect fast and cost-effective deliveries, which poses a challenge for retailers since doing so requires strategic allocation of inventory.
If you want to grow your customer base and enjoy the benefits of both business models, then a hybrid method is also a viable option. This way, you can enjoy better sales and revenue. Although this requires extensive planning and extra effort in building a workable strategy, you always have the option to fall back on if the other isn’t running as smoothly.
Once you have decided on the model you want to opt for or whether you want to try out both, you may consider making things a bit easier for you by collaborating with a trusted third-party logistics (3PL) company such as ShipBots.
ShipBots aims to make things simpler for you by using intelligent software to streamline both wholesale and retail fulfillment. The automation feature makes it easier to get purchase order data on the ShipBots analytics dashboard and create packing slips. Moreover, ShipBots takes care of your entire fulfillment process from receiving and strategically storing new inventory such that it lowers delivery costs and duration to picking, packing, and shipping orders.
Ready to learn more about 3PL fulfillment services? Contact a wholesale and retail fulfillment services expert to get a custom quote.
