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In the world of ecommerce and distribution, both wholesale and retail play a crucial role in the supply chain. These models complement each other given that the wholesaler acts as an intermediary between manufacturers and retailers, while retailers take care of bringing products directly to the end consumer. Both models are fundamental in order to guarantee that products reach their destination in an efficient and profitable way.
Choosing one or the other can make a huge difference to your business’s profitability, logistics and operations. Making the right decision will have an impact on factors such as inventory control, margins, customer management and market reach. Each model has its own advantages and challenges, and what can work for one business isn’t necessarily the best option for another.
In this article, we compare both business models, giving you a clear overview of their differences and helping you to make the best decision for your business. Whether you are starting out in the world of ecommerce or looking to optimise your strategy, here you will find information to help you to find the perfect strategy for your business.
What is wholesaling and how does it work?
Wholesaling consists of purchasing products in large volumes directly from manufacturers or distributors to later sell to retailers, applying a profit margin. This model is based on economies of scale and competitive prices thanks to the power of negotiation offered by volume purchases.
Main features:
- Purchase of large quantities at reduced prices 📈
- Distribution to retailers or companies
- Profit margins based on volume
- Direct relationship with manufacturers
One of the key aspects in wholesale is the ability to negotiate with suppliers. By purchasing large volumes, wholesalers can access better payment conditions, exclusive discounts and an optimised and more efficient supply chain. This enables them to offer competitive prices to retailers, who then add their profit margin before selling to the end consumer.
According to a recent report by Statista, the global B2B ecommerce market is expected to reach a gross volume of 20.9 billion dollars worth of goods in 2025.
Here at BigBuy, we are wholesale experts, offering our customers a catalogue containing more than 400,000 products, more than 10,000 top brands and quality European stock. You can read more about wholesaling at BigBuy – Wholesale.
What is retail and what are its advantages?
Retail is the model in which products are sold directly to the end consumer. Retailers purchase products from wholesalers and sell them through physical stores or ecommerce.
Key advantages:
- Direct access to the customer 👥
- Possibility of branding and marketing
- Control over the setting of prices and margins
- Increased personalisation of the customer experience
The retail market is constantly growing, and online sales are expected to reach 25% of all sales in 2026. Moreover, the rise of social media and digital marketing has enabled retailers to reach wider audiences and generate more effective loyalty strategies. On the other hand, the retail model presents major operational and investment challenges, given the abundance of products and brands available. The search for differentiation and value creation is a challenge that many retailers must face to avoid failure in their online sales journey.
Wholesale vs Retail: Comparison of models
As you have already seen, the wholesale and retail sales models are two very different approaches in both physical and online commerce. While retail focuses on selling directly to end consumers, the wholesale model focuses on selling to intermediaries or distributors.
Within the latter, wholesale dropshipping stands out as an option that offers multiple advantages, particularly for certain businesses. In this model, the wholesaler takes care of the logistics and inventory, enabling the retailer to reduce their risks, operating costs and the need for storage, which favours scalability and flexibility for the company. This structure is ideal for entrepreneurs who are looking to optimise their resources and expand their business quickly without large initial investments.
The table below shows the main differences between the two models:
| Feature | Wholesale | Retail |
| End customer | No (sells to retailers) | Yes |
| Purchase volume | High | Low |
| Profit margins | Low but based on volume | High per unit |
| Contact with end customer | Low | High |
| Branding | Limited | Extensive |
| Initial investment | High | Variable |
Initial investment and operating costs 💰
Another key aspect to consider is the management of logistics and available stock. Wholesalers handle large volumes of inventory, requiring appropriate storage, usually in large spaces. Retailers, however, can opt for models with low stock or even without any stock at all, such as in the case of dropshipping.
Dropshipping is an increasingly popular option for retailers who want to reduce risks and operating costs. Using this model, retailers sell products without needing to store them, since wholesalers or suppliers ship directly to the customer from their facilities on behalf of the retailer.
Management of inventory and logistics 🚚
Un altro aspetto chiave da valutare è la gestione logistica e dello stock disponibile. I grossisti gestiscono grandi volumi di inventario, che generalmente richiedono uno stoccaggio adeguato, in grandi spazi. I rivenditori, invece, possono optare per modelli con poco stock o anche senza, come il dropshipping.
Il dropshipping è un’alternativa sempre più popolare per i rivenditori che vogliono ridurre rischi e costi operativi. Con questo modello, i rivenditori vendono prodotti senza la necessità di immagazzinarli, poiché i grossisti o i fornitori si occupano della spedizione diretta al cliente dalle loro strutture e per loro conto.
Profit margins and profitability ✅
The wholesale and retail models have fundamentally different commercial approaches, which has a significant impact on how profit margins and product prices are structured. In the retail model, sellers target end consumers directly, which generally means higher profit margins per unit. This is due to the fact that retailers can set higher prices to cover their operating costs, such as renting commercial premises, inventory management and customer service. However, higher profit margins do not always compensate for the high costs associated with managing your own inventory and the need to maintain a solid infrastructure.
On the other hand, the wholesale model, and wholesale dropshipping in particular, offers a completely different approach. Using this model, wholesalers sell large quantities of products to distributors or retailers, who then resell to the end consumer. The profit margins are usually lower per unit in comparison to the retail model, but the advantage lies in the economies of scale. As wholesalers sell large volumes of products, they can negotiate lower prices with manufacturers, which enables them to obtain higher overall margins despite the unit margins being lower.
Economies of scale play a key role in prices within the wholesale model. By purchasing products in large quantities, wholesalers can take advantage of volume discounts, allowing them to offer more competitive prices for both retailers and end consumers. Additionally, wholesale dropshipping eliminates the need to store stock and manage logistics, which reduces operating costs significantly. This also translates into a lower initial investment and a lower risk for retailers operating with this model. In terms of profits for businesses, the wholesale model offers key advantages, particularly for entrepreneurs who are looking to operate more efficiently and with a lower initial investment.
Relationship with customers 🫂
In the retail model, the retailer interacts directly and constantly with the end consumer, which enables them to implement personalised loyalty and branding strategies. This close relationship makes it easier to create a positive shopping experience, increasing the likelihood of customers making repeat purchases and staying loyal to the brand. Plus, retailers can tailor their offers to individual preferences, improving satisfaction and loyalty.
Branding also plays an essential role in the retail model, since the direct contact enables the brand to convey its values and mission more effectively. From customer service to marketing campaigns, retailers can build a strong and distinctive identity that resonates with customers, promoting long-term loyalty and recognition.
In contrast, the wholesale model does not allow for a direct interaction with end consumers, limiting the possibility of building loyalty and branding in this sense. However, wholesalers can focus on building loyalty with their retail customers through competitive pricing, volume discounts and a personalised service. If you are interested in delving deeper into building loyalty with your customers in your online store, we recommend you read our article on Loyalty in online stores.
Which is the ideal model according to your business’s size and goals?
Choosing between the wholesale and retail model will depend on factors such as initial capital, capacity for scalability, focus on branding or the sales strategy you wish to adopt in your business:
• Initial capital: If you have a large amount of money available to invest, the wholesale model may be more profitable since it enables you to bulk buy products at low prices and sell them at higher prices, obtaining solid profit margins. However, it requires a greater capacity for logistics and inventory management.
• Scalability: The wholesale model is ideal for those looking to expand quickly. You can sell in large volumes and take advantage of economies of scale to reduce unit costs. Moreover, wholesale dropshipping allows you to scale quickly without needing to handle inventories, making it an attractive option for new entrepreneurs who are seeking growth without a large initial investment.
• Focus on branding: If your goal is to build a solid brand and create a direct relationship with end consumers, the retail model is most suitable. This model enables you to offer a personalised customer service and stand out in the market, giving you the opportunity to create a loyal community around your brand.
• Dropshipping: If you want to sell products without needing to manage inventories, dropshipping is an excellent option. This model enables products to be offered directly from the supplier to the consumer without holding stock. Discover Dropshipping from BigBuy and start selling without logistics complications.
In summary, the wholesale model is the most suitable for sellers with resources to handle large volumes and who are seeking rapid expansion. On the other hand, the retail model is ideal if your priority is to build a strong brand and establish a direct relationship with your customers. Dropshipping is perfect for those wanting to minimise risk and operating costs, enabling an agile and flexible growth.
Conclusion: Wholesale or Retail? Choose the model that drives your business towards success 🚀
Choosing between the wholesale and retail models is a key decision that will have a direct impact on the profitability, operations and growth of your business. While the retail model enables you to establish a direct connection with the consumer and work on building a brand, the wholesale model stands out for its ability to offer competitive prices on a large scale. The retailer is able to have close contact with the consumer, making it easier to build loyalty and branding. In addition, wholesale dropshipping comes out as an excellent choice for those who want to minimise their initial investment and operating costs, making it easy to expand quickly without needing to manage inventories.
Each model has specific advantages that may be better suited to your goals and the resources you have available. If you want to expand quickly, taking advantage of economies of scale and managing large volumes, the wholesale model will be the most suitable. On the other hand, if you want to build a solid brand and establish close relationships with consumers, the retail model is the path to follow. And if you prefer to reduce risks and operating costs, dropshipping may be the ideal option to optimise your business.
Make the best choice and take your business to the next level with BigBuy! 🚀
