Before we dive into the nitty-gritty of wholesale and retail pricing, let’s get our basics clear.
What does it actually mean to buy wholesale, and how does that compare to buying retail when you’re sourcing inventory?
Buying wholesale is like shopping in bulk at a major discount, but it’s only for businesses.
When you buy wholesale, you’re getting your products from wholesalers who sell in large quantities at prices much lower than retail. They can offer these low prices because they make their money by selling lots of stuff to businesses like yours.
Buying retail is a little different.
It means you’re getting your products from other retail stores -the kind that sell to the general public in smaller amounts. These stores have already bought the items from wholesalers, marked them up to make a profit, and now you’re buying from them. Now, because you’re paying more for each item than you would if you bought directly from a wholesaler -when you go to sell those items, your profit margin is smaller.
For example, let’s say you buy a set of coffee mugs from a retail store instead of a wholesaler. You pay $10 per mug, compared to $3 per mug wholesale. If you sell the mugs for $15 each (which is competitive with what others are charging), you make just $5 profit per mug or a 33% profit margin.
