There are a
number of stages
that must take
place before a
product can
actually be sold
to an end user.
Whether you are
a supermarket
selling food, a
specialty shop
selling designer
clothes or a
construction
company needing
machinery,
normal business
practices follow
a certain
pattern.
First, the raw
materials needed
for the
particular
product must be
gathered. Next,
the raw
materials must
be assembled or
manufactured to
put the product
together. The
finished product
is sent to a
wholesale
distributor who
then fills
orders requested
by retailers or
other end users.
At each level
the price
increases,
allowing
everyone a
chance to make a
profit.
When you see an
advertisement
for "Everything
Sold at
Wholesale
Prices", what
you are really
seeing is a
sales or
marketing tool
designed to peak
the potential
customer's
interest by
giving them a
break from
normal retail
prices. In
reality, unless
the items are
being liquidated
(as in a
bankruptcy
case), the
wholesale prices
are still high
enough for the
retailer to earn
a profit on the
sale.
Wholesale prices
vary depending
on the product
and the size of
the order. If
you contact a
wholesaler of
tools and place
an order for 100
hammers and 100
screwdrivers,
you'll be quoted
a price below
the
manufacturer's
suggested retail
price (MSRP).
Increase the
order to 1,000
of each item and
the price per
piece will
likely go down.
This
"discounted"
wholesale price
continues for
several levels.
Once it reaches
a point where
the wholesaler
can not make
enough money to
earn a profit
for their
efforts, the
discounted price
can go no lower.
For instance,
you might see
the following
wholesale price
schedule. Assume
the wholesaler
obtains the
product he is
selling for .70
per widget.
0-100 widgets =
1.25 per piece,
101-1000 widgets
= 1.12 per
piece,
1,001-10,000
widgets = 1.03
per piece and
finally 10,001
or more widgets
= .94 per piece.
Variations in
prices are based
on total revenue
generated for
the order. You
can net $250 in
profit by either
selling 1,000
items with a .25
markup or 250
pieces of the
same product
with a $1.00 per
piece markup.
Wholesaling is
an important
step in the
process of
bringing a
product from
development to
end-user sale.
In return for
facilitating the
distribution and
sale of
products,
wholesalers are
compensated.
Business
probably would
come to a halt
without
wholesalers.
