What Is Wholesale

What Is Wholesale? Definition and Types (2024)

Learn the basics of wholesale, with benefits and examples of different types of wholesalers, so you can start your wholesale business on Shopify.

Updated on May 22, 2025

What does wholesale mean? Is it purchasing in bulk and at lower prices? What else is there to it? Whether you’re a retailer looking to broaden your product procurement channels, or a manufacturer hoping to acquire a new sales avenue, you’ll come across the term “wholesale” at some point. In this post, we’ll dive into the definition of wholesale, its different types, and key terms.

What does “wholesale” mean?

What’s a wholesaler?

Wholesalers buy goods from manufacturers or producers in bulk and resell them to retailers. Basically, they’re middlemen between manufacturers and retailers, offering bulk products at a discount.

Types of wholesalers

Distributors

Distributors acquire products in large volumes from manufacturers and then sell them off (also in bulk) to retailers. They play no role in the production process of the merchandise. Oftentimes, they also own their own storage facilities to hold these products. Distributors are less known to the public. Sysco, for example, is a distributor that sells food products. If you run a restaurant or health care facility, you know of Sysco. If not, you may not even know they exist.

Manufacturers

In some cases, wholesalers are manufacturers who make the goods themselves. Manufacturers selling wholesale products are both suppliers and makers, so they can sell to distributors or deal directly with retailers. Ashland Conveyor Products, for example, manufactures and sells specialized conveyor equipment and material-handling solutions through its ecommerce site. Manufacturer and supplier Ashland Conveyor Products sells through its own online store.

Suppliers

Merchant wholesalers

Agents/brokers

Manufacturers’ sales and distribution teams

What does “wholesale price” mean?

Wholesale price vs. retail price example

A wholesale candle supplier or manufacturer offers its candles in large volumes at a wholesale price of $19 per unit to a business selling home décor products. After purchasing from the wholesaler, this retailer then re-sells these candles at $26 per unit to its customers, pocketing $7 in profit for every candle sold.

Setting a retail price

• Wholesale price per unit: $25
• Retail price per unit: $25 x 2 = $50

That said, as straightforward as this strategy is, it may not be optimal for all types of business.

For instance, it’s recommended for new candle businesses to list their products at a 25% to 50% markup, while the markup for clothing retailers can range from 100% to 300%.

That’s because the amount of markup a retailer needs to add to earn a profit depends on a host of factors that can vary greatly, according to the product, market, and wholesaler. These include:

• Wholesale cost
• Supplier-to-retailer shipping costs
• Marketing costs
• Product type
• Market
• Retailer-to-consumer shipping costs for online businesses

Benefits of wholesale

In 2022, wholesale trade in the US brought in nearly $6.4 trillion in revenue. Selling bulk can bring many financial benefits for wholesale businesses, including:

• Economies of scale.Handling products in large quantities can lead to cost savings in procurement, storage, and transportation. You can offer more competitive pricing for customers and reap higher profits for your company.

• Volume sales. Selling bulk means higher revenue from single transactions. Wholesalers have higher AOV and volume orders, versus retailers that ship hundreds of lower-priced orders to customers.

• Stable client relationships. Wholesalers often establish long-term relationships with retailers and other businesses. Recurring orders and more predictable revenue are more common in B2B wholesale because profit is fixed. You know how much you’ll make every month.

• Higher brand visibility. If you sell branded products, customers will sell items as they are. This gives you more visibility as they distribute the products.

• Lower promotional costs. Wholesalers generally don’t have massive promotion budgets, so you save more money in marketing and advertising.

Overall, wholesalers can operate with more freedom and control in the supply chain, which makes them more efficient and productive. They influence product quality and can choose the manufacturers and suppliers to work with.

Challenges of wholesale

As with every industry, wholesales comes with a few challenges you’ll face:

• Thin profit margins:Wholesalers see between 15% and 30% profit, where retailers typically make between 20% and 50% profit on the wholesale price. This makes operations more sensitive to cost or sales fluctuations.

• Inventory management: Holding large inventories allows you to meet demand, but it can also tie up capital and run the risk of inventory becoming obsolete or deteriorating. Good inventory management software is key to successful wholesaling.

• Increased competition: The rise of global trade and ecommerce platforms mean wholesalers face competition from local and international suppliers.

• Capital intense: Wholesaling takes a lot of money to kick off, requiring significant investments in inventory, warehouses, logistics, and more.

• Payment and credit risks: Wholesalers usually offer credit terms to their customers, which can lead to cash flow challenges or bad debts if those clients default or delay payments.

• International trade policies and tariffs: For wholesalers importing products, navigating changing tariffs and customs requirements can impact costs and profit margins. Staying informed on international trade policies is essential for successful cross-border wholesale operations.

Knowing these challenges is important for sustaining a wholesale business. With the right strategies, you can navigate these challenges and thrive in your market.

Wholesale terms to know

If you’ve previously done some research on wholesale, you may have come across certain terms and acronyms that look foreign to you. Even though the world of wholesale is new to you, these terms are easy to understand.

Plus, if you’re serious about wholesale—regardless of whether you’re looking to sell or purchase—you’ll need to get yourself acquainted with them.

1. MOQ

MOQ in wholesale stands for “minimum order quantity.”

Even though it’s not always the case, most wholesalers require a minimum number of unit orders from a buyer to be able to offer their prices at wholesale (lower) rates.

2. MOV

MOV is “minimum order value” and its concept is similar to MOQ.

The difference between MOV and MOQ is that the latter deals with unit quantities (e.g., an order for at least 500 units of candles), while the former refers to order amount in dollars (e.g., an order of at least $2,000 worth of candles).

Both MOVs and MOQs can vary greatly, depending on the manufacturer/distributor you work with, the product, and the sector you’re in.

Tip: As a retailer, if you’re using online wholesale marketplaces to source for suppliers, make sure to check whether their directories provide details on minimum orders for you to sort, filter, and make an informed decision.

3. MSRP

MSRP refers to the manufacturer’s suggested retail price.

This is the price a wholesaler recommends its products be sold at by the retail business to the end consumer (i.e., the price listed in the retail store), which is higher than the wholesale price, as it takes into consideration markups by retailers.

Note that this is only a recommendation and it is up to retailers to decide whether or not they want to abide by it.

For instance, they are free to list their prices higher than the MSRP for products in high demand to boost profits, or set them lower during sale seasons.

The MSRP is also commonly referred to as the RRP (recommended retail price).

4. White/private label

White or private labeling is when a store agrees with a manufacturer to sell its product(s) under the retailer’s brand name and logo.

This can either be for wholesale items that the manufacturer is already producing or a new product that the retailer commissions the manufacturer to develop. In both cases, the retailer would almost always have exclusive rights to the product(s).

A good example of a private label brand is Nardo’s Natural. The company specializes in organic skin care products and has created a separate website just for private label business. On the site, it helps with everything from conception to the creation of your skin care products.

5. Wholesale only

“Wholesale only” is a term suppliers use when they’re selling only B2B and not to the general consumer.

6. Back order

Back orders refer to purchases from retailers that have been placed but are yet to be shipped. This is usually due to the lack of inventory from the wholesaler/manufacturer.

7. Buybacks

Buybacks take place when a wholesaler re-purchases unsold products that were originally bought by the retailer.

Conditions for buyback are usually set in advance and agreed upon by both parties. This includes time limit, re-purchase price, circumstance, and more.

8. Purchase order

A purchase order is a document containing the details of the items being purchased.

It usually includes:

• Item quantity
• Item description
• Price per unit
• Total price
• Date
• Payment terms

A purchase order is used to generate an invoice.

9. Net payment terms

This refers to a type of payment plan agreed upon by the retailer and the wholesaler.

It allows the retailer to make payment only after having received the goods and time to sell them.

The most common payment terms are 30, 60, and 90 days, although it can also be as short as seven days and as long as 180 days.

10. Consignment

A consignment is a special arrangement between the retailer and wholesaler in which the retailer only pays for the products after they’re sold.

Under this arrangement, retailers do not purchase the items from the wholesaler. Instead, they simply place the manufacturer’s merchandise in their store and take a small cut from any sales that may happen.

Any unsold products are returned to the wholesaler.

11. Lead time

Lead time is the length of time between the moment a retailer places an order with a wholesaler and the goods’ arrival.

This is also known as turnaround time.

Sell wholesale on Shopify today

It’s clear selling wholesale is a lucrative opportunity for any online retailer. Shopify is built to streamline the B2B sales process with a robust set of tools for managing inventory, processing bulk orders, and maintaining customer relationships.

You can create a password-protected wholesale page on your ecommerce site, or you can integrate with wholesale marketplace Faire to reach a wider audience and sell in bulk online.

Wholesale definition FAQ

What do you mean by “wholesale”?

In wholesale, goods are sold in bulk, usually for resale by retailers instead of direct to consumers.

What is retail vs. wholesale?

Wholesale is when products are sold in bulk to retailers, who then sell them to consumers. Retail businesses sell directly to end users, often in smaller quantities.

What is the definition of wholesale and examples?

In wholesale, goods are sold in bulk to businesses or retailers at a discount, so they can sell them to customers. An example would be a clothing manufacturer selling a lot of clothes to a clothing store or a farmer selling a lot of produce to a supermarket.

Is Amazon wholesale or retail?

Amazon is mainly a retail platform that sells to customers. However, through its Amazon Business program and various other segments, it also offers wholesale-like opportunities for businesses to sell in bulk.

Wholesale

Wholesale is the process of selling goods in large quantities to be retailed by others. Unlike retail , where products are sold directly to the consumer, wholesale involves selling merchandise to a business, which then sells the goods to the end consumer at a marked-up price.

This enables the efficient distribution of goods from manufacturers to retailers. By buying in large quantities directly from manufacturers, wholesalers can take advantage of economies of scale, which allows them to sell these goods to retailers at lower prices.

What is a wholesaler?

A wholesaler is a company or individual that purchases products in bulk from multiple suppliers and sells these products to other businesses for resale, acting as an intermediary between manufacturers and retailers.

Different types of wholesalers exist, each catering to the specific needs and requirements of various manufacturers and retailers:

Types of wholesalers

Merchant wholesalers

This is the most common type of wholesaler. Merchant wholesalers do not produce goods themselves; instead, they buy products in bulk from a manufacturer or supplier, and then re-sell these goods in smaller quantities to retailers. They tend to specialize in certain types of products, allowing them to offer expert knowledge and a wide range of items within a specific industry.

Manufacturers

Some manufacturers act as wholesalers by selling their products directly to retailers or to the end consumers. They produce their own products for resale, which allows them to have a deep understanding of their product line and offer comprehensive product information to their customers.

Distributors

Distributors acquire products in especially large volumes but do not manufacture or produce the products themselves. They often specialize in specific industries and provide a range of services to manufacturers and retailers within that industry.

Brokers and agents

Brokers and agents primarily set up deals between wholesalers and businesses. They earn a commission for facilitating transactions, acting as a liaison between manufacturers or suppliers and the businesses that want to sell their products. They are often hired by manufacturers or suppliers who lack the resources to maintain their own sales teams.

Dropshipping wholesalers

In the dropshipping business model, wholesalers are responsible for storing, managing, and shipping products on behalf of retailers after an order has been placed in their online store. This process is advantageous for retailers because it eliminates the need to maintain large inventories or handle shipping logistics themselves, allowing them to offer a wide range of products without significant overhead costs.

How does the wholesale process work?

Wholesalers, if they don’t manufacture products themselves, purchase goods from manufacturers in bulk at a discounted rate. This bulk purchasing allows them to sell to retailers at a markup, but still at a price that provides a bulk discount to the retailer. The retailer then also applies a markup to the goods when selling to the end consumer.

This process allows manufacturers to sell large quantities of goods quickly, enables wholesalers to make a profit by selling these goods to retailers, and allows retailers to offer a wide range of products to consumers without having to deal with multiple manufacturers.

When setting their own prices, retailers must take into account the wholesale price to ensure they make a profit when selling to the end consumer.

Wholesale vs retail price

The wholesale price is the cost charged by the wholesaler to the retailer. This price is typically lower than the retail price because wholesalers buy goods in large quantities directly from manufacturers, allowing them to take advantage of economies of scale.

The retail price is the cost charged by the retailer to the end consumer. This price is higher than the wholesale price because it includes the retailer’s costs such as rent, staff salaries, and utilities, as well as a profit margin.

How do retailers price wholesale products?

Retailers use various pricing strategies to determine the price of a product. These strategies are part of a broader financial plan, designed to cover costs and generate a profit while remaining attractive to customers.

One of the most common and straightforward strategies used is keystone pricing . In keystone pricing, retail prices are set at double the cost of the wholesale price, effectively a 100(percent) markup.

For example, if the wholesale price of a product is (dollars)10, then the retail price would be (dollars)20. This method ensures prices are kept reasonable in most cases and ensures a healthy profit for the retailer.

However, keystone pricing may not be optimal for all businesses. Retail prices are ultimately determined by a wide range of factors, such as the wholesale cost, marketing expenses, product type, shipping costs, industry standards, supply chain issues, and more.

What are the pros and cons of selling wholesale?

Selling wholesale can be a lucrative business model, but like any business, it comes with its own set of advantages and challenges. Understanding these can help businesses make informed decisions and develop strategies that maximize benefits while mitigating potential drawbacks.

Pros of selling wholesale

• High brand visibility: Selling wholesale can significantly increase a brand’s visibility as products are distributed to various retailers and reach a wider audience.
• Scaling: Wholesale allows businesses to sell their products in large quantities, making it easier to scale operations and increase revenue.
• Stable client relationships: Wholesalers often establish long-term relationships with retailers, providing a stable and predictable source of revenue.
• Bulk sales: Selling in bulk can lead to higher total sales and can be more efficient than selling individual items to consumers.
• Market expansion: Wholesalers can help manufacturers reach new markets that would be difficult to access otherwise.

Cons of selling wholesale

• Thin profit margins: Wholesalers often operate on thin profit margins, especially when compared to retail.
• Increased competition: The wholesale market can be highly competitive, with many businesses offering similar products.
• Inventory management: Managing large quantities of inventory can be challenging and requires significant storage space.
• Dependence on retailers: Wholesalers are dependent on retailers for their sales, and any issues at the retail level can directly impact wholesalers.
• Payment terms: Wholesalers often have to offer flexible payment terms to retailers, which can lead to cash flow issues.

Want to Learn More?

• What Should You Sell Online?
• Best Dropshipping Products to Sell in Fall
• 20+ Trending Products to Sell
• Best Dropshipping Products to Sell in Summer

Start a business and design the life you want – all in one place.

Wholesaling: Definition, How It Works, and Role in Supply Chain

Robert Kelly is managing director of XTS Energy LLC, and has more than three decades of experience as a business executive. He is a professor of economics and has raised more than $4.5 billion in investment capital.

Fact checked by

Fact checked by Suzanne Kvilhaug

Suzanne is a content marketer, writer, and fact-checker. She holds a Bachelor of Science in Finance degree from Bridgewater State University and helps develop content strategies.

Definition

Wholesalers buy goods in bulk from manufacturers at discounted prices and sell to retailers for a higher price.

What Is Wholesaling?

Wholesaling is the act of buying a large number of goods directly from a manufacturer and then selling them to retailers. Wholesalers buy in bulk at a discounted price and sell to a retailer for a higher price, which is how wholesalers make their profit.

Retailers then repackage these goods into smaller quantities and sell them to consumers at an even higher price. Due to the large quantities purchased from the manufacturer at a discounted price, the wholesaler can also pass on this discount to retailers. The retailer sells at a price that reflects the overall cost of doing business.

Key Takeaways

• Wholesalers are not manufacturers. Their business is distributing the end products. They purchase goods from manufacturers in bulk at a discount and sell to retailers.
• Wholesalers also provide cost savings to retailers when retailers buy in bulk from the wholesaler. The retailer then repackages the bulk items into smaller quantities for sale directly to consumers.
• Wholesaling is one step in the supply chain that starts with a supplier of raw materials and ends with a sale to an end-user.
• In banking, the term wholesaling refers to financial services provided to large institutional clients rather than individual retail customers.

Understanding Wholesaling

Most wholesalers do not manufacture the goods they sell but rather buy them from the source and concentrate on the business of sales and delivery to retailers. They are known as the intermediary in the supply chain. It is more cost-effective for a wholesaler to buy in bulk from a manufacturer and receive a discount than it would be to buy items individually.

The wholesaler will then sell to a retailer at a higher price than it paid for the goods but is still able to provide a similar discount to the retailer as they received when the retailer buys in bulk. For example, Walmart will purchase its products from wholesalers in bulk; they may buy thousands of bottles of hand moisturizer.

It will receive a discount on buying such a large volume than if it were to just buy a few. Walmart then stocks its shelves with moisturizers and continuously restocks from its large inventory when the shelves are empty.

A wholesaler should not be confused with an “official distributor” for a brand’s product line. The wholesaler does not generally offer product support, may not be connected directly to the company from which it purchases products, and may even have limited familiarity with the products. Moreover, unlike distributors, many wholesalers sell competing products.

Where Wholesaling Fits into the Supply Chain

Wholesaling is one step in the supply chain, which also includes suppliers of raw materials, manufacturers of finished goods, and retailers to end-users. Retailers purchase goods from wholesalers and then sell them at a high enough price to cover their costs and generate profits.

Supply chain management (SCM) was developed in the 1980s to address the need to maximize efficiency in the business processes involved in moving goods from the original suppliers to end-users.

Wholesaling in Banking and Finance

In banking, the term wholesaling refers to financial services provided to large institutional clients such as real estate developers, pension funds, and large corporate clients rather than individual retail customers.

In the financial services industry, a wholesaler can also be a sponsor of a mutual fund or act as an underwriter in a new issue.

An asset management company that creates and manages mutual funds, employs a mutual fund wholesaler, also known as a mutual fund representative, to sell the product to resellers. Typically, the wholesaler is a salesperson.

In this case, the wholesaler distributes access to mutual funds to companies that wish to make them available to investors. For example, a company that has a 401(k) plan may meet with wholesalers before choosing the asset management company, such as Fidelity Investments or the Vanguard Group, that will offer its products to the company’s employees. Mutual fund wholesalers are compensated from the fees of the mutual funds they sell.

Is Wholesaling Products Profitable?

There are many factors to consider when determining if a business can be profitable and managing it in a way to make it profitable. Generally, wholesaling can be a profitable business because you are buying items in bulk at a discount. Because you are buying these items at a discount, you can sell them to retailers for more than you purchased them for and the demand will be there. The process of buying in bulk at a discount is the key component that can make a wholesaling business profitable.

Is Costco a Retailer or a Wholesaler?

Costco, just like Walmart, is a retailer. Costco sells goods to consumers for final consumption. Costco is not a middleman business that buys items in bulk to sell to retailers. It is the retailer that sells items in bulk that consumers purchase.

Where Can You Buy in Bulk to Resell?

There are a variety of ways to buy in bulk to resell. The primary way to do so is to get in touch with the manufacturers of the goods you are trying to sell. This information is available online. You can try websites such as Wholesale Central, SaleHoo, and Doba.

The Bottom Line

Wholesalers are considered to be the middlemen in the retail supply chain. They buy goods in bulk directly from manufacturers. By buying in bulk, they can obtain the goods at a discount. They then sell these items to retailers, passing on a portion of the discount as well. Retailers then sell to consumers who purchase the goods for consumption.