If I have a product that is sold at Walmart, so to say, do I make money when someone buys my product from Walmart or does Walmart buy my product in bulk to sell and that’s how I make my money? This question has bothered me for decades, thanks!
In: Economics
There are two basic ways things get sold at retail.
One is the retailer buys it from the manufacturer, and the manufacturer gets paid for the wholesale order. (There may be a wholesaler or distributor involved as a middle man, in which case the manufacturer gets paid by the wholesaler.) If something doesn’t sell at the store, the manufacturer has already been paid, but you can probably expect the store to buy less in the future.
The second is the manufacturer effectively rents shelf space in the store, and the manufacturer gets paid only for what sells.
There are also in-between versions that work as a hybrid of the two. For example, the wholesale contract may give the store the right to sell back unsold product. In many cases, the store doesn’t have to pay for the wholesale order up front but maybe a month or two later, so they may be able to pay for the wholesale order with money they made reselling it.
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