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