Wholesale vs Retail: A Guide for New Resellers

This guide is for people who are starting to buy goods at wholesale to resell in a shop, a boutique or online. It explains how wholesale and retail prices relate, the price levels you will see, the paperwork wholesalers ask for, and how to check that a product leaves you enough margin. Example numbers are illustrative only.

The basic difference

Wholesale is selling goods in quantity to another business that will resell them. Retail is selling to the end customer, usually one or a few at a time. As a reseller you sit in the middle: you buy at wholesale and sell at retail.

	Wholesale (you are the buyer)	Retail (you are the seller)
Who buys	Businesses	Individual consumers
Order size	Cases, packs or minimum order values	Single units
Price per unit	Lower	Higher, to cover your costs and margin
Sales tax	Usually exempt with a resale certificate	Usually charged to the customer, where applicable
Paperwork	Account application, tax ID, resale certificate	Receipt or order confirmation
Payment	Prepay at first; sometimes trade credit later	Paid at checkout
Returns	Usually only for damaged or wrong goods, by agreement	Under your own store policy

The price levels you will see

A product can carry several prices at once. Knowing which is which avoids confusion when comparing suppliers:

Manufacturer or distributor price: what the wholesaler pays. You rarely see this.
Wholesale price: what you pay as a business buyer.
Quantity break or tier price: a lower wholesale price for larger orders.
MSRP: the manufacturer’s suggested retail price. A guide, not a rule.
MAP: a minimum advertised price some brands set for resellers. If a MAP policy applies, advertising below it can cost you your account with that brand.
Your retail price: what you charge your customer.

How the margin works

Your gross margin is the difference between your retail price and your landed cost (wholesale price plus freight, duties and prep), divided by the retail price.

Example 1 (boutique, illustrative): you buy a top at $12 wholesale in a pack of six sizes. Freight adds $1 per unit, so landed cost is $13. You price it at $32. Gross profit is $19 per unit, a margin of about 59%. If two of the six sell only at a clearance price of $16, profit on those two falls to $3 each. Average profit across the pack is ($19 × 4 + $3 × 2) / 6 = about $13.67 per unit. Plan for markdowns when you set the full price.

Example 2 (online, illustrative): you buy a kitchen item at $5, with $0.75 per unit freight and $0.50 prep: landed cost $6.25. You sell at $18 on a marketplace that takes 15% ($2.70) and you pay $4.50 to ship it. You keep $18 − $6.25 − $2.70 − $4.50 = $4.55, a margin of about 25%. The wholesale price was less than a third of the retail price, but fees and shipping took most of the gap.

The lesson in both: compare the retail price with your full cost per sale, not with the wholesale price alone.

Documentation wholesalers ask for

To buy at wholesale prices, expect some of the following:

EIN: a federal Employer Identification Number, issued free by the IRS.
State seller’s permit and resale certificate: lets you buy goods for resale without paying sales tax to the supplier, in states with sales tax. Register with your state tax agency; the SBA’s licenses and permits guide explains where to start.
Business license: required by some cities or counties.
Proof you sell: a website, marketplace store link or storefront photos.

Requirements vary by supplier. Some closeout sellers, for example, do not ask for a business license, while brand distributors usually do.

Buying wholesale as a small reseller

Start with low minimums. Your first orders are tests. A slightly higher unit price at a low minimum is often better than a great price on a quantity you cannot sell.
Ask about pack ratios. Apparel is often sold in prepacks with a fixed mix of sizes. Make sure the mix suits your customers.
Keep every invoice. You need them for your cost records, your taxes and, on some marketplaces, to show where your stock came from.
Compare suppliers on landed cost. Two suppliers with the same unit price can differ a lot once freight is added.

Selling both wholesale and retail

Some businesses do both: a brand that sells online to consumers and wholesale to boutiques, for example. If you do this, keep your wholesale price low enough that your stockists can make a margin at your own retail price, or they will not reorder.

Where to find wholesale suppliers

Browse by the kind of store you run: apparel and clothing and fashion accessories for boutiques, gifts for gift shops, and Amazon FBA suppliers for online sellers.