Should you wholesale or retail? What’s the best choice for your brand?
I often hear, “I want to retail my products on my own website because the profit margin is higher.”
And yes, it’s true that you can charge more when you sell direct to consumers.
By comparison, wholesale prices are often half your recommended retail price, whilst your cost of goods is still the same.
So why would you choose wholesale vs retail? Here’s what to consider:
Where do customers typically buy your type of product?
This is really the number one question you need to ask yourself.
If you think about it, most of us are well trained to buy certain products in certain locations.
For example, most of us buy groceries at the supermarket because it’s convenient.
But some people buy their fruit and veg at an organic market, because they specifically want quality, fresh organic produce.
One of my clients manufactures a range of all-natural, palm-oil-free soaps and skincare.
She initially started out as a retail eCommerce business. But when she launched, she found it was really difficult to get traffic and sales on her website.
Part of the problem was that her products are the sort of item that many people habitually buy when they’re grocery shopping.
They’re not actively searching to buy this kind of product online.
Wholesale allows you to reach a much bigger audience
On the flip side, my client quickly found a couple of large retail stores whose particular focus is on natural, vegan and/or palm-oil-free products.
When these stores picked up her range, her sales volume increased dramatically, enabling her to scale her production significantly.
Since being stocked in these well-known retailers, brand awareness within her specific target audience has quickly increased for her brand.
Her online sales have also increased in this time, which is a natural bi-product of that increased brand awareness.
Gain credibility
If you are a new brand entering the market, it can be quite slow going trying to build an audience online.
The world wide web is a cluttered place these days. Trying to cut through that noise and build a profile is hard.
Being seen on the shelves of customers’ favourite retail stores is one of the fastest ways to be ‘seen’.
For my client, being stocked on the shelves of major retailers within her specific niche gave her new brand the credibility it needed for customers to trust it and buy it.
What’s your average order value?
Another consideration when deciding whether to focus your efforts more on wholesale vs retail, is your average order value, or the average price per product.
If your retail price is really low, many consumers won’t purchase online because the cost of shipping makes the price of the product too expensive and not worthwhile.
In some respects, this is also what my client experienced.
Despite their prices being more on the expensive side for their product category (to be expected with all-natural products), a bar of soap or a stick of deodorant is still an inexpensive item to purchase online.
More consumers are likely to want to pick up these items when they’re already shopping in-store.
Wholesale = volume and simplicity
Yes, you may only make half the profit margin per product when you sell wholesale compared to retail.
But, retailers will typically place much MUCH larger orders with you than any individual customer.
Additionally, packing a large order for a wholesale stockist is almost as simple as packing a small order for an individual customer. In fact, the customer service aspect of managing wholesale stockists is often easier than dealing with lots of customers placing smaller orders!
Think about it – having 50 stockists paying you $500 a month each is a lot easier than dealing with 500 customers spending $50 each!
You don’t have to choose – you can do both
It doesn’t have to be wholesale vs retail. These days it’s very common for brands to sell both wholesale and retail on their own website.
For most brands, this is the right model. It’s pretty hard to find retailers to stock you in every corner of the country (or world). So by selling online on your own website you can get to customers who can’t buy your stuff in their local store.
They key to managing both well is to treat your stockists well. Don’t undercut them with aggressive discount promotions only available to customers of your own website!
Get help to build your brand and grow your revenue – faster!
Book a complimentary Growth Strategy session with us today. There’s no obligation to buy at the end of it, and I guarantee you’ll walk away with a much better plan for how you’ll grow your business and achieve your goals than you have right now!
