What does wholesale mean, and how can companies charge a lower price per item because of it?

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What does wholesale mean, and how can companies charge a lower price per item because of it?

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Anonymous 0 Comments

A couple other comments are correct-ish.

You make paper swans by hand. They cost you 10 cents and people buy them for $1 each. It’s a relaxing hobby and you sell about 10 paper swans per month.

Now you make a paper-swan making machine. It makes 1,000 swans per batch. You buy boxes that hold 1,000 paper swans per box. It now only costs 1 cent to make each of them because you made a good machine with large batches that saves you on labor costs and it uses a bit less paper per swan.

But now there are not 1,000 people in your town who want paper swans. So you call a wholesaler who buys 1,000 swans for $250 dollars (25 cents each).

You now made a 25 times return on that original penny you spent to make the swans. You deduct the cost of the packaging and the labor costs it took to box them up from your profit margin and you’re still only spending less than 2 cents per swan, for perhaps a 15-20 times return, depending on the specifics.

But now you can sell 1,000 swans in one batch instead of 1 and they cost you less than 2 cents instead of 10 cents. And you can now sell as many as you can distribute instead of 10 per month and making only $9 per month after expenses.

The wholesaler sells a box of 1,000 paper swans to department store chains for $500 per box. He doubled his money.

The department store unboxes them and sells them for the original price of $1. They double their money, minus their overhead costs, which they pay anyway because adding one product makes no difference since they sell 800 different products already anyway, and they already have all the staff and shelves and other things ready to sell stuff.

Now you find distributors across all continents. You build a factory full of paper-swan making machines. You open a factory store and host tours. You make millions from being the most efficient and celebrated maker of paper swans in the world.

You do not care that you share the money with other people, because setting up a worldwide distribution system and retail stores is very expensive, might not turn a profit, and other businesses have proven their systems work great.

And now you are super rich because you knew how to delegate everything you were not good at and you focused on the thing you do best.

Anonymous 0 Comments

A couple other comments are correct-ish.

You make paper swans by hand. They cost you 10 cents and people buy them for $1 each. It’s a relaxing hobby and you sell about 10 paper swans per month.

Now you make a paper-swan making machine. It makes 1,000 swans per batch. You buy boxes that hold 1,000 paper swans per box. It now only costs 1 cent to make each of them because you made a good machine with large batches that saves you on labor costs and it uses a bit less paper per swan.

But now there are not 1,000 people in your town who want paper swans. So you call a wholesaler who buys 1,000 swans for $250 dollars (25 cents each).

You now made a 25 times return on that original penny you spent to make the swans. You deduct the cost of the packaging and the labor costs it took to box them up from your profit margin and you’re still only spending less than 2 cents per swan, for perhaps a 15-20 times return, depending on the specifics.

But now you can sell 1,000 swans in one batch instead of 1 and they cost you less than 2 cents instead of 10 cents. And you can now sell as many as you can distribute instead of 10 per month and making only $9 per month after expenses.

The wholesaler sells a box of 1,000 paper swans to department store chains for $500 per box. He doubled his money.

The department store unboxes them and sells them for the original price of $1. They double their money, minus their overhead costs, which they pay anyway because adding one product makes no difference since they sell 800 different products already anyway, and they already have all the staff and shelves and other things ready to sell stuff.

Now you find distributors across all continents. You build a factory full of paper-swan making machines. You open a factory store and host tours. You make millions from being the most efficient and celebrated maker of paper swans in the world.

You do not care that you share the money with other people, because setting up a worldwide distribution system and retail stores is very expensive, might not turn a profit, and other businesses have proven their systems work great.

And now you are super rich because you knew how to delegate everything you were not good at and you focused on the thing you do best.

Anonymous 0 Comments

Wholesale is the price that retailers pay for items they sell. When you buy a can of soup or a t-shirt, the store you are buying it from paid something like half of what you pay for it. The wholesale price of that can of soup is $1, and you pay $1.99 for it at the grocery store; the store pays the t-shirt brand $12 for the shirt they sell for $24. That markup covers the store’s rent and utilities, the store workers’ wages, advertising, discounts/coupons and shoplifting loss, plus the retailers’ profits. Typically, mark-up is about 100%, but once all those other expenses are covered, retailers have profits of 5-10% (and typically only 2-3% for grocery stores).

Because there is that spread, there may be ways that some companies find ways to pass along less mark-up to offer “wholesale” pricing. Or maybe they are able to sell a product at cost because they make revenue/profit elsewhere… maybe a plumber sells a customer a hot water heater “at cost” of $500, but charges another $500 in labor to install it, while paying the plumber who installs it $25/hr for the 2 hours it took to install.

Anonymous 0 Comments

Wholesale is the price that retailers pay for items they sell. When you buy a can of soup or a t-shirt, the store you are buying it from paid something like half of what you pay for it. The wholesale price of that can of soup is $1, and you pay $1.99 for it at the grocery store; the store pays the t-shirt brand $12 for the shirt they sell for $24. That markup covers the store’s rent and utilities, the store workers’ wages, advertising, discounts/coupons and shoplifting loss, plus the retailers’ profits. Typically, mark-up is about 100%, but once all those other expenses are covered, retailers have profits of 5-10% (and typically only 2-3% for grocery stores).

Because there is that spread, there may be ways that some companies find ways to pass along less mark-up to offer “wholesale” pricing. Or maybe they are able to sell a product at cost because they make revenue/profit elsewhere… maybe a plumber sells a customer a hot water heater “at cost” of $500, but charges another $500 in labor to install it, while paying the plumber who installs it $25/hr for the 2 hours it took to install.

Anonymous 0 Comments

**Manufacture:** Someone who makes a product.

**Wholesaling:** Selling product to a retail store rather than DTC (Direct To Consumer)

**Manufacturing cost:** How much money it costs the manufacturer to make each product.

**Wholesale price:** How much money the manufacturer sells their product to the retail stores. This is the manufacturer’s revenue, and the retail store’s costs.

**Retail price:** What the retail stores sell the product for. This is the retail store’s revenue.

**MSRP:** Manufacturer suggested retail price.

Depending on the contracts, the retail store may or may not be to sell lower than MSRP (which is why same tv at BestBuy is the same price at Walmart).

Some stores sell products as a bundle at a discount, **”volume pricing”**. For instance, a 20pc McNugget is cheaper than 2x 10pc McNuggets. If a store does not offer this, it’s likely either contractual or they do so much business that there is no need to offer a discount, as they can sell out of the products individually (think of it like this: a car salesmen is not going to negotiate the price of a car with you if they know someone can walk in 5min later and pay full price).

Another reason they may offer this is debit/credit card transaction fees. They not only are a fixed % of the same price but also a fixed $ amount (say 10¢). 1000 water bottles sold individually for $1 with a 2%+10¢ fee results in $300 lost. $1000 water bottles sold all together for $1000 with a 2%+10¢ fee results in $200.10 lost.

Anonymous 0 Comments

**Manufacture:** Someone who makes a product.

**Wholesaling:** Selling product to a retail store rather than DTC (Direct To Consumer)

**Manufacturing cost:** How much money it costs the manufacturer to make each product.

**Wholesale price:** How much money the manufacturer sells their product to the retail stores. This is the manufacturer’s revenue, and the retail store’s costs.

**Retail price:** What the retail stores sell the product for. This is the retail store’s revenue.

**MSRP:** Manufacturer suggested retail price.

Depending on the contracts, the retail store may or may not be to sell lower than MSRP (which is why same tv at BestBuy is the same price at Walmart).

Some stores sell products as a bundle at a discount, **”volume pricing”**. For instance, a 20pc McNugget is cheaper than 2x 10pc McNuggets. If a store does not offer this, it’s likely either contractual or they do so much business that there is no need to offer a discount, as they can sell out of the products individually (think of it like this: a car salesmen is not going to negotiate the price of a car with you if they know someone can walk in 5min later and pay full price).

Another reason they may offer this is debit/credit card transaction fees. They not only are a fixed % of the same price but also a fixed $ amount (say 10¢). 1000 water bottles sold individually for $1 with a 2%+10¢ fee results in $300 lost. $1000 water bottles sold all together for $1000 with a 2%+10¢ fee results in $200.10 lost.

Anonymous 0 Comments

Wholesale originates selling the whole case or pallette rather than individual items, basically. Mostly it originally applied to buying in large quantities to break the package and sell individually at a higher per item profit. So like…a comvenience store owner could buy a case of sodas at a unit cost of .50 per drink. They break the case, spend the time stocking them into fridges and sell for 1.00 each. They did other B2B stuff, too. If you’ve got a whole hotel or office building to stock the restrooms for, you don’t want to be buying personal use quantities of soap or toilet paper. You need that stuff by the case if not the pallette.

The big box store he buys from specializes in logistics and scale. They may sell their sodas for less each, but if they’re supplying cases to a pile of convenience stores, concessions stands and so on they get to sell a lot more sodas than anyone else does. They also don’t have to ship to inconvenient locations, spend wage hours breaking down or selling individual items, don’t need as many employees working per item sold, can build their big ass store in a less expensive area since they’re not worried about being convenient to the general public, etc…etc….

At some point folks that went through a lot of stuff figured out they could pay less per unit, especially for nonperishable goods they could load up on occasionally, if they went straight to suppliers like that instead of buying from their local grocer or whatever. Thus was born the Costco/Sam’s model. They still sell to local businesses, but many of their members are just people who are happy to six months worth of toilet paper or cokes, or whatever at a time in order to save money on it.

It’s a bit like buying straight from your grocer’s distribution center. They don’t have to pay for the last mile shipping and stocking of the product, you get a slice of their savings on that as savings in the cost of the items.

Anonymous 0 Comments

Wholesale originates selling the whole case or pallette rather than individual items, basically. Mostly it originally applied to buying in large quantities to break the package and sell individually at a higher per item profit. So like…a comvenience store owner could buy a case of sodas at a unit cost of .50 per drink. They break the case, spend the time stocking them into fridges and sell for 1.00 each. They did other B2B stuff, too. If you’ve got a whole hotel or office building to stock the restrooms for, you don’t want to be buying personal use quantities of soap or toilet paper. You need that stuff by the case if not the pallette.

The big box store he buys from specializes in logistics and scale. They may sell their sodas for less each, but if they’re supplying cases to a pile of convenience stores, concessions stands and so on they get to sell a lot more sodas than anyone else does. They also don’t have to ship to inconvenient locations, spend wage hours breaking down or selling individual items, don’t need as many employees working per item sold, can build their big ass store in a less expensive area since they’re not worried about being convenient to the general public, etc…etc….

At some point folks that went through a lot of stuff figured out they could pay less per unit, especially for nonperishable goods they could load up on occasionally, if they went straight to suppliers like that instead of buying from their local grocer or whatever. Thus was born the Costco/Sam’s model. They still sell to local businesses, but many of their members are just people who are happy to six months worth of toilet paper or cokes, or whatever at a time in order to save money on it.

It’s a bit like buying straight from your grocer’s distribution center. They don’t have to pay for the last mile shipping and stocking of the product, you get a slice of their savings on that as savings in the cost of the items.

Anonymous 0 Comments

Wholesale is the price a manufacturer uses to sell products to distributors and/or retailers. It is the base price of raw materials, labor, overhead, and desired profit margin *for the producer*. Retailers and distributors then mark that price upwards to reflect their costs and required profits for onward sale to consumers. There are other ways to determine “retail” pricing, but that’s the basic model.

Anonymous 0 Comments

Wholesale is the price a manufacturer uses to sell products to distributors and/or retailers. It is the base price of raw materials, labor, overhead, and desired profit margin *for the producer*. Retailers and distributors then mark that price upwards to reflect their costs and required profits for onward sale to consumers. There are other ways to determine “retail” pricing, but that’s the basic model.