Editor’s Note
This article provides a clear, foundational explanation of the wholesale business model, detailing its role in the supply chain between manufacturers and retailers.
A wholesale business involves buying large quantities of products from a manufacturer and selling them to a retailer. Typically, wholesale products are bought at a discounted rate, which allows wholesalers to generate a profit. The retailer then sells the products to end consumers at a higher price.
Wholesalers are an intermediary in the supply chain, managing the supply of goods from manufacturers to retailers as efficiently as possible. Because wholesalers purchase large amounts of stock, they can access lower prices and pass on those savings to retailers. Wholesalers may also help retailers source specific goods for customers.
The wholesale business model has seen changes recently, thanks in part to wholesale marketplaces like Faire. These platforms have allowed small businesses to engage in wholesale activities by increasing access to a global audience of buyers.
Whether you’re using a marketplace or your online store, it’s easier than ever for online businesses to sell to both retailers and consumers. You can create dedicated shopping experiences for customers, whether they’re other businesses, resellers, or the end user.
The different types of wholesale businesses include:
**Distributors.** Wholesale distributors purchase products in bulk from manufacturers and sell them in bulk to retailers. They often handle logistics, storage, and transportation.
**Manufacturers.** Manufacturers produce goods and may sell them directly to retailers or wholesalers. Some act as their own wholesalers.
**Merchant wholesalers.** Merchant wholesalers are intermediary parts of the wholesale supply chain. These vendors purchase items in bulk from suppliers, store goods, and sell wholesale products back to retailers in smaller amounts.
**Brokers/agents.** Brokers and agents make a commission off of deals made between businesses and wholesalers.
**Manufacturers’ sales branches.** These are wholesale operations owned and operated by the manufacturer. They stock and sell the manufacturer’s products directly to retailers or other businesses without using independent wholesalers.
**Online B2B platforms.** These platforms connect manufacturers, wholesalers, and retailers digitally. Examples include Faire and Alibaba.
Wholesale is when businesses sell products in bulk to other businesses, usually at lower prices. Retail is when businesses sell products directly to individual customers at a higher price per item.
Here’s a breakdown that details wholesale vs. retail:
| Category | Wholesale | Retail |
| :— | :— | :— |
| **Unit economics** | Lower per-unit price, high volume. | Higher per-unit price, low volume. |
| **Customer relationship** | Business-to-business (B2B). Long-term contracts and repeat orders. | Business-to-consumer (B2C). More transactional, subscription, or loyalty-based. |
| **Order size** | Large, bulk purchases. | Small, individual purchases. Typically one-off or a few units. |
| **Sales channel strategy** | Private portals, distributors, trade shows, B2B platforms like Faire or Alibaba. | Online stores, physical shops, or marketplaces. |
| **Customer support** | Personalized support with account managers. Focused on efficiency, logistics, and margin. | Support geared toward product education, satisfaction, and service experience. |
| **Marketing approach** | Relationship-driven, volume-focused. | Emotion-driven, brand-focused. Content includes storytelling, UGC, product lifestyle imagery. |
| **Price flexibility** | Negotiated pricing tiers based on volume and contract length. | Set prices, with occasional discounts, promotions, or bundles. |
One of the myths about wholesale ecommerce is that you need significant cash flow and industry connections to get started. In fact, wholesale operations can be started much like you would start any business.
Ecommerce tools and platforms give you ways to scale your growth, from negotiating with suppliers to reorganizing your sales channels to accommodate business-to-business (B2B) sales.
Follow these steps to start a wholesale business:
1. Decide what wholesale items to sell
2. Pick a supplier
3. Get wholesale licenses and permits
4. Set a wholesale pricing strategy
5. Create an online wholesale store with Shopify
6. Market and sell your wholesale products
7. Manage wholesale operations
8. Expand your team
Picking a product niche can be overwhelming, but by creating some selection criteria, you can build a profitable wholesale catalog.
Consider these product features when choosing wholesale items to sell:
**Seasonality**
Some products have