A traditional retail shop follows a relatively simple business model: it buys in stock at a reduced rate and then sells it to customers for profit. In exchange, customers pay more for the convenience and service they get at the shop.
As businesses have developed, things have changed but the central idea is still true: a successful shop needs to source products at cheaper wholesale prices and then sell at retail. But why is wholesale pricing different and how do you access it? Here’s a quick guide to setting up shop and optimising your existing shop’s cashflow.
Start a retail business
To buy products at wholesale prices, you’ll need to be part of a retail business rather than an individual. Visit Companies House for more information on starting your business and bear in mind that you may need to also apply for some specific licences if you’re selling food, alcohol or other licensed goods.
What is wholesale?
A wholesale product is usually priced cheaper than the ‘recommended retail price’. A business typically buys from either a wholesaler, who holds large amounts of stock, or direct from the producer/manufacturer. The buyer will receive a cheaper ‘wholesale’ price because they buy larger quantities or have established relationships and agreements.
While it may be theoretically possible to secure great prices direct from producers, most retailers just don’t have the time required to negotiate and manage all of the separate agreements that would need to be made.
What is a wholesaler?
Wholesalers like us are specialist wholesale businesses that do all of the hard work for you, establishing individual brand or manufacturer relationships so they can offer a full range of products at wholesale prices.
When it comes to buying wholesale to sell at retail, choosing a wholesaler as your supplier gives you access to their existing network of products and suppliers – meaning you can start stocking a greater variety of products than you would alone. In addition, you’ll be able to negotiate pricing with the wholesaler that can usually be customised to fit your specific needs and cashflow.
Wholesale vs retail pricing
The difference between wholesale and retail prices can be as much as 2x the original unit cost, but margins will vary greatly depending on the products and your shop’s circumstances.
Calculating margins is one of the trickiest parts of shop ownership. You’ll need to speak to our team first to get your wholesale pricing, then consider your energy and utility costs, any employee wages, competitor pricing, VAT implications and local customer demand. Then you can set appropriate prices.
For anyone hoping to start a business buying at wholesale and selling at retail, the best start you can make is to organise a great relationship with a wholesale distributor that can match your product needs and support your growth. Speak to our team today to see how we can help you launch a full range of wholesale foods, drinks, confectionery and more.
