Wholesale vs. retail: Key differences for small businesses

If you have a product to sell, consider the best approach to bring it to market. According to the QuickBooks Entrepreneurship in 2025 report, 37% of entrepreneurs plan to source materials differently to combat rising prices.

With this in mind, should you opt for wholesale or retail? The best choice for your business depends on various factors, from pricing and profit margins to customer relationships and market reach. 

Deciding on the best business model is no light decision. In this post, we’ll cover the key distinctions between wholesale vs. retail to help you determine the most effective strategy for your business.

What is wholesale?

What is retail?

Wholesale vs. retail: Key differences

How to determine whether wholesale vs. retail is right for your business

Run your business with confidence

Wholesale vs. retail FAQ

What is wholesale?

Wholesale is a business model that involves selling products in large quantities to businesses or other outlets that are not the end-user. 

Instead of selling small amounts of goods directly to customers, wholesalers act as suppliers or distributors, selling their products in bulk to businesses at a lower price. Then, those businesses mark up the goods and sell them directly to consumers or other businesses.

What are the benefits of wholesale?

The benefits of wholesale include scalability through bulk purchasing and distribution, and the ability to reach a broader market through retail partnerships.

What is retail?

Retail is a business model that involves selling products directly to customers.

Retailers act as the bridge between the manufacturers or wholesalers and the customers purchasing the product. The retailer purchases products in bulk from suppliers, directly or through distributors, and sells them in small quantities directly to customers and at a marked-up price. 

Not all retailers buy and sell products from distributors. Some retailers may create and manufacture their own products to sell directly to customers.

What are the benefits of retail?

The benefits of retail include the opportunity to build a strong brand identity, direct interaction with your target customers, and more control over pricing strategies, which can lead to higher profit margins.

Wholesale vs. retail: Key differences

Understanding the key distinctions between wholesale vs. retail can help you make the most informed decision about your business model and sales strategy. Below, we’ll cover how each differs regarding target audiences, pricing structures, profit margins, inventory management, and operational considerations.

Who you’re selling to

One of the main differences between wholesalers and retailers is who you’re selling to. In a wholesale model, you sell products to other businesses, retailers, or resellers rather than individual customers. In a retail model, you sell directly to the consumer. 

The focus of a wholesaler is supplying large quantities of goods to other businesses, who will sell that product to their customers. Their primary concern is meeting the needs of the businesses or retailers purchasing the products, not the final customers. 

Alternatively, retailers focus on the end customer who will purchase the goods for personal use. Unless a retailer creates the product it sells, it probably purchases goods with a wholesale account. If you’re selling products only to distribute “final products,” then you can consider yourself a retailer.

Pricing and profit margin

Wholesalers and retailers also differ when it comes to product pricing structure. Wholesalers typically sell their products at a lower price per unit than the retail price. This allows retailers to mark up their prices and make a profit when their end consumer makes a purchase. 

Retailers set higher prices for their products. This markup covers expenses like overhead costs, marketing, and in-store customer experience

Inventory management

Inventory management is another key difference between wholesale and retail, as they deal with different types of inventory. Since wholesalers tend to sell products in bulk to retailers or businesses, they must manage large quantities of inventory. This makes warehouse space a key consideration for wholesalers to ensure they have enough room for bulk inventory. It also requires careful planning to ensure their product stock levels can meet the demand of their buyers. 

As for retailers, their inventory management strategy prioritizes consumer demand. This requires having the right products available at the right time according to customer preferences. 

Retailers must strike a balance between having sufficient inventory to meet customer demand. Purchasing too much inventory can result in excess inventory costs, and purchasing too little can result in lost sales opportunities. Overall, strategic inventory management is crucial for both wholesalers and retailers. 

Is a wholesale or retail business model more profitable?

Your profit potential for wholesale vs. retail depends on factors such as product type, market demand, operational efficiency, and pricing strategies. However, retail may generate higher overall revenue due to direct customer sales.

How to determine whether wholesale vs. retail is right for your business

Whether you become a wholesaler or retailer depends on a few factors, including your product, inventory management capacity, and business goals.

Considerations for wholesalers 

Starting a wholesale business can allow you to reach a broader market and more readily scale your business. Buying and selling products in bulk can allow for a more streamlined distribution process that can lead to cost efficiencies and a more optimized supply chain. 

To determine if wholesaling may be best for your business, consider the following factors: 

• Product offering and scalability: Can your product be produced and distributed in large quantities? Some products, like unique handmade items or niche products, may be more difficult to scale. 
• Inventory management and logistics: Consider your capacity for efficiently managing large-scale inventories and fulfilling bulk orders, including sufficient warehouse space, order fulfillment systems, and distribution processes.
• B2B and B2B2C relationships: Building relationships with retailers or businesses is crucial for wholesale success. Reliable order fulfillment and effective communication are critical to meeting buyers’ needs and nurturing long-term partnerships.

As a wholesaler, you may not need a point-of-sale system, but you’ll need to deal with invoicing. Each invoice should include:

• Customer purchase order (PO) numbers or billing codes
• Itemized lists of goods and pricing
• Lengthier payment terms

As a wholesaler, a large portion of your time will be spent on supply chain management and logistics. Your main challenges will be getting products to a particular location, overseeing manufacturing, and maintaining and tracking inventory. While wholesaling can be an excellent path to rapidly scaling your business, consider all parts of the process carefully.

What benefit does a wholesaler offer a retailer?

Retailers benefit from wholesale purchases because they can sell wholesale items at a profit without dedicating significant resources to manufacturing the product on a smaller scale.

Considerations for retailers 

A retail business model might appeal to business owners interested in building their brand and creating a unique identity in the marketplace. Retail businesses can also enjoy more control over their pricing structure, adapting product prices based on market demand, competition, and overhead costs. 

To determine if retailing may be best for your business, consider the following factors: 

• Target market and consumer demand: You must understand your target audience and their buying preferences. It's key to cater to a wide range of consumer needs and goals while considering market trends and competition.
• Sales channels and marketing: Consider your ability to choose strategic sales channels that align with your target market. Whether through a physical brick-and-mortar store, an e-commerce platform, or both, assess how you’ll create effective marketing strategies to reach your target customers.
• Customer experience and branding: Consider how you’ll differentiate your retail business and create a positive customer experience. As a retailer, you’re responsible for your product prices, how you represent your product, and the customer experience you provide. 

Another component of retail management is a point-of-sale (POS) system. Retailers need a suitable POS system to complete B2C transactions. This includes the ability to accept credit card purchases. Evaluate how you’ll coordinate sales and manage bills and the other factors discussed above to streamline your business.

How to price products for wholesale vs. retail

When pricing wholesale vs. retail, wholesale goods should be less expensive. If you're a wholesale manufacturer, consider the cost to produce your product, overhead costs, competitor prices, and projected sales to determine how you can profit.

Retailers should mark up the items they purchase wholesale to turn a profit. They should consider the cost per unit of the product and their overhead costs to help determine how to price an item for retail.

Run your business with confidence

If your business can’t yet meet wholesale demands, consider starting as a retailer to establish your product and build a following. As your brand grows, you can consider using wholesale suppliers to put yourself into brick-and-mortar stores. 

Selling your own creations and managing your own business with the help of the right accounting software can give you the level of freedom you desire. Whether you start out as a retailer or a wholesaler, you can achieve this financial freedom and create a successful enterprise.