Is it worth selling wholesale at a lower price?
A wholesale order earns less per piece than a retail one, but it skips ads and per-order shipping, so compare the real profit on both before you say yes or no.
A shopkeeper or a gifting company asks if you can supply 20 pieces at a better rate. The offer is tempting because it is one big order, but the per piece price is lower than what you earn from your own customers. Is it worth it? The answer is in the numbers, and they are not always what they first look like.
The headline comparison
Say a product costs you Rs 250 to make. You sell it retail at Rs 500 and wholesale at Rs 350 for 20 pieces or more.
- Retail profit per piece: Rs 500 minus Rs 250 is Rs 250.
- Wholesale profit per piece: Rs 350 minus Rs 250 is Rs 100.
For 20 pieces, retail would earn Rs 5,000 and wholesale Rs 2,000. On this view, wholesale looks like a loss of Rs 3,000.
The costs that retail carries
That comparison is unfair, because retail orders come with costs that a wholesale order mostly does not. To sell 20 pieces retail you need 20 customers, and each one needs to be found, served and shipped to.
Take illustrative figures. Say each retail order costs Rs 150 in ads, shipping and packing combined, beyond the Rs 250 product cost.
- Retail profit becomes Rs 250 minus Rs 150, which is Rs 100 per piece.
- For 20 pieces, that is Rs 2,000.
Now the two are equal at Rs 2,000, and the wholesale deal involved a single buyer, one parcel, one conversation and one payment. If your actual retail costs are higher than Rs 150 per order, wholesale wins on profit. If they are lower, retail wins.
The numbers above are examples. Use your own ad cost per order, shipping and packing. contribution-margin-per-order-worked-example shows how to get them.
Things that favour wholesale
- Cash comes faster. One payment replaces many small ones, and COD delays and refusals go away. See cod-payout-delay-cash-gap.
- Production is easier to plan. You can make 20 in one batch and save time. batch-production-cost-per-unit shows the effect.
- Fewer returns and fewer customer messages.
Things that favour retail
- Stronger brand building. Retail customers see your photos, your packaging and your store, and they can come back.
- You keep control of price. A wholesale buyer may sell at any price, even a low one, and confuse your own customers.
- You own the customer details. A reseller does not hand yours over.
Questions before you agree
- Does the buyer pay in advance, or in part? Asking for an advance protects you.
- Who pays for freight?
- Is it a one-off or does it repeat? A repeating order is worth more than a single one.
- Will it use up stock you could sell at full price in a busy season?
- Does it have a minimum, so you do not give the wholesale rate for five pieces?
A decision routine
- Compute profit per piece for each channel after all per order costs.
- Multiply by the quantity.
- Add the value of cash timing and time saved, honestly.
- Decide, and write down the minimum quantity and rate you will repeat.
Wholesale is not a better or worse channel in general. It is a way of trading margin for certainty and time. If you want a related question, setting a rate for people who resell your products for you, see reseller-price-and-margin-split.