What does wholesale mean, and how can companies charge a lower price per item because of it?
In: 3
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.
Latest Answers