Distinctive features of wholesale and retail trade. Wholesale and retail trade
Retail(retail, English retail) - sale of goods to the final consumer (individual). Moreover, it does not matter at all how exactly goods or services are sold (by personal sale, by mail, by telephone or through a vending machine), and also where exactly they are sold (in a store, on the street or at the consumer’s home).
Unlike wholesale trade, goods purchased in the retail trade system are not subject to further resale (according to current legislation, paragraph 1 of Article 492 of the Civil Code of the Russian Federation), but are intended for direct use.
The relationship between the seller and the buyer in the retail system is usually regulated by a special law. In the Russian Federation this is the Law on Protection of Consumer Rights.
Federal Law dated December 28, 2009 N 381-FZ (as amended on December 23, 2010) “On the fundamentals of state regulation of trade activities in the Russian Federation” (adopted by the State Duma of the Federal Assembly of the Russian Federation on December 18, 2009) introduces the following definition of retail trade:
"...3) retail trade - a type of trading activity associated with the acquisition and sale of goods for use for personal, family, household and other purposes not related to business activities;..."
The subjects of the retail trade process are the seller and the buyer. Retail trade includes the sale of goods through vending machines.
There is a concept of a retail store format. This is a set of characteristics inherent in any type of store. These characteristics are:
Sales area
Number of product items
Customer service level
Product placement technology
Wholesale trade uses supply agreements, retail trade uses retail purchase and sale agreements. Thus, the main difference between wholesale and retail is the purpose of the purchase. The definition of wholesale or retail does not depend on the type of payment and the quantity of goods sold. However, you are not required to set a purchase goal either at the time of sale or after it.
If a person comes to you without documents, then he can purchase goods only for personal use, since entrepreneurial activity without registration is prohibited. Therefore, it will be retail.
If a person comes to you and shows you a certificate of registration as a legal entity, it means that the goods are not being purchased for personal use. It will be wholesale.
If a person comes to you and shows you a power of attorney from a legal entity, it means that the goods are not being purchased for personal use. It will be wholesale.
Wholesale- trade in consignments of goods. Most often, goods purchased from a wholesaler are intended for subsequent resale. But it is also not uncommon for large consumers of goods to act as buyers. Wholesale trade is an intermediary between the manufacturer and retail trade. Participates in accelerating the movement of goods, synchronizing production and consumption.
In other words: wholesale trade (wholesale) is trade between organizations, organizations and entrepreneurs, entrepreneurs and entrepreneurs. That is, this is trade when a product is sold not for final use, but for business needs (for resale or for use in production). However, it is worth noting that when a wholesale seller (legal entity or entrepreneur) sells a product to a wholesale buyer (entrepreneur or organization), the wholesale seller cannot know exactly what the product will be used for. For example, a budget library buys a notebook - this notebook can be used both for resale, if the library has a retail outlet (that is, used for business activities), and for final consumption - for example, issued to a librarian. Libraries are institutions that are a priori not created for profit; they are simply allowed to conduct business if there is a desire and opportunity. If the notebook is given to the librarian, then this is final consumption, and the transaction of selling the notebook was not a wholesale trade.
Trade is one of the areas of entrepreneurial activity and represents a certain type of commodity-money relations between the seller and the end consumer. Let's consider the specifics and features of retail and wholesale trade, as well as their main differences.
Retail trade – what is it?
Trade has long been considered a popular and profitable type of human activity. Its main goal is to generate income by satisfying the needs of the end customer.
The seller is the connecting link between the buyer and the manufacturer of the product: the entrepreneur purchases all kinds of goods in bulk and sells them at retail to customers with a certain trade margin, while benefiting himself.
If we give a brief definition of retail trade, then it is the sale of goods to the final consumer to satisfy his personal goals not related to commercial activities. Retail offers customers the following types of services:
- selection of goods among products of a similar purpose (for example, a certain type of alcohol from different manufacturers);
- independent selection of various goods at retail outlets (self-service stores);
- comprehensive (full) service (assisting the buyer at all stages of the purchase, up to free delivery);
- mixed type – sale of goods in small wholesale and retail (large stores, supermarkets).
Today, consumers have the opportunity to purchase any goods in stores on their own, make purchases in online stores, and also receive them at home via courier delivery. The main functions of retail trade include:
- commodity market monitoring;
- competitor pricing analysis;
- determining consumer demand for a certain type of product;
- search for products that meet consumer demand;
- formation of prices taking into account the cost of goods, advertising, storage, delivery.
Supermarkets and hypermarkets widely use the model of wholesale and retail trade in food, household goods and other consumer goods. If we consider retail outlets based on the range of products offered, they can be conditionally divided into specialized stores, department stores, supermarkets, as well as retail enterprises offering consumers various services:
- Specialized retail stores offer a narrow product range. An example of them would be retail outlets selling books, flowers, building materials, sporting goods or clothing. There are also stores with a limited product range, where they can sell jeans, underwear, children's toys, men's shirts, etc.
- Supermarkets are large retail establishments specializing in self-service for visitors. Such stores are characterized by high sales volumes, low costs and average profitability. Mostly consumers visit them to buy food, household goods or household chemicals.
- Department stores have several product groups at the same time. Customers can purchase all kinds of clothing, household goods, tools and equipment for household needs, as well as everyday household goods at such outlets. A feature of such retail outlets is the presence of product departments in which a certain group of products is located.
- The service provided by retail service enterprises is in great consumer demand. This should include cinemas, medical institutions, educational institutions, banking organizations, restaurants, hotel complexes, hairdressers, repair service enterprises.
Important: according to statistics, the number of organizations providing retail services is steadily growing and is an order of magnitude greater than the number of retail outlets for food and consumer goods.
Wholesale trade – what is it?
The commercial activity of enterprises aimed at selling goods in certain quantities (both large and small) is called wholesale trade. Such organizations mainly cooperate directly with manufacturers of all kinds of products, purchasing them in bulk for the purpose of further resale to the retail chain.
The rapid development of wholesale trade enterprises is easily explained by the high demand for various goods among consumers and continuously growing profits. This type of commodity-money relations is of great benefit to buyers: increased competition and product range invariably entails a reduction in the cost of various product groups, which ultimately leads to lower selling prices in retail stores.
Without wholesale trade organizations, it is difficult to imagine the full-fledged operation of most enterprises producing all kinds of products. This is due to the fact that goods are produced in certain cities, and it is not possible to find the required number of consumers in one locality.
In turn, wholesalers contribute to the distribution of products across various regions, significantly increasing the consumer network. Please note that the business itself that produces goods or food is a wholesaler. Products can be sold at special prices through special wholesale stores or through an agreement with the sales department of the manufacturer.
Thus, a product can be resold several times between different organizations before it reaches the end consumer through retail stores. Wholesale trade enterprises pursue the following goals:
- development of sales channels for goods;
- searching for suppliers of products for retail chain enterprises;
- creation of reserve financing for the flow of goods;
- purchasing large quantities of goods from manufacturers;
- increasing the number of intermediate buyers of goods (wholesale);
- monitoring and detailed analysis of trade turnover in the retail network.
Wholesale trade enterprises perform a number of important functions that form the relationship between producers and the end consumer. They also provide regional communication within the state. It is worth noting that wholesale trade organizations stimulate the work of manufacturing plants to create new products.
It is important to understand that wholesalers take risks and can incur large financial losses. This is primarily due to products that are not in demand among consumers, and therefore retail stores do not buy them. The wholesaler will not be able to return the money invested in the product.
Like retail stores, wholesale trade enterprises purchase products from manufacturers in a certain range, taking into account consumer demand. Wholesalers are required to stock up on various products depending on the season and also ensure their storage. For this purpose, specialized terminals and warehouses are used.
Wholesale companies ensure the process of goods distribution not only within a certain state, but also far beyond its borders. In addition, they control the quality of the goods that are supplied to the retail chain.
Products can be delivered to retail stores with a deferred payment for a certain period of time, which is a kind of lending and stimulates the growth of purchase volumes.
What is the difference between wholesale and retail?
Let's figure out what differences exist between wholesale and retail. By definition, retail enterprises interact with a specific category of consumers, who can be both organizations and individuals, as well as separate divisions of various companies.
Important: If the buyer is not engaged in business activities and purchases certain products under standard conditions, they will be sold at retail. No one can determine the exact volumes of goods for them to be considered a wholesale batch. In many respects, this issue is regulated by the type of contract (wholesale trade enterprises enter into shipping agreements with buyers).
Wholesale and retail trade differ from each other in their documentation. Retail enterprises use cash and sales receipts, as well as other documents confirming payment. Wholesalers working for OSNO draw up contracts with customers, provide them with invoices, delivery notes, and also maintain a purchase ledger and a sales ledger.
Both types of trade differ from each other in the purpose of the goods. If a retail store sells to the end customer a product that will be used by him for personal purposes without pursuing a commercial purpose, the wholesale company sells for the purpose of obtaining commercial gain.
Both retailers and wholesalers accept cash and non-cash forms of payment when paying for products. They also have the right to cooperate with individuals and legal entities.
What is retail?
Retail sales of all kinds of products to the end consumer (without further resale of the goods) is called retail. On the territory of the Russian Federation, trade relations between retail participants are regulated by the Law on the Protection of Consumer Rights.
Retail trade can be organized by having a cash register at the point of sale and issuing a receipt to the consumer for the purchase made. Today it is customary to distinguish several types of retail:
- The classic type of organization of work of a retail trade enterprise is street retail. This includes shops located on pedestrian streets of populated areas, as well as retail outlets located on the ground or first floors of buildings and residential buildings. Today, shopping centers are direct competitors of street retail, since they have a large number of all kinds of trade enterprises (shops, boutiques, mini-markets, as well as retail service enterprises) and a large assortment of various goods. The location of street stores and the absence of shopping centers, large markets and supermarkets are the main conditions for the successful operation and development of street retail.
- Retail trade in food products, the quantity of which is located in large retail areas, is usually called food retail. It is distinguished by the constant income of its owners, because food products, regardless of the financial solvency of the population, will be in daily demand. Supermarkets and megamarkets are successful food retail projects.
- Retail trade in non-food consumer goods (household appliances and chemicals, sporting goods, clothing, building materials, household goods) is a format of the so-called non-food retail. In food stores, this group of products is called related products. The range of such products is selected taking into account seasonal consumer demand or upcoming holidays.
- Selling goods through virtual stores or one-page websites is called online retail. Payment can be made using cash or non-cash payments.
- The provision of services by cellular operators to the population is called mobile retail. The large increase in profits in this trade segment is easily explained by the demand for communication services.
- A set of stores, the design and operation of which consist of a single format and within a certain trading concept, is called chain retail. In other words, this is a network of retail outlets of one owner (less often several), which are easily recognizable by their corporate identity. Such a trading enterprise has a unified logistics system responsible for the delivery and wholesale purchase of products. Chain retail offers potential buyers attractive prices for goods and a wide range of products. As a rule, such enterprises receive considerable profit due to the volume of sales from all points of the network.
Retailers – what are they?
Supermarkets, various types of stores, markets and other retail outlets that carry out retail sales of goods to the end consumer are called retailers. These organizations operate in various segments of commodity turnover. The main ones include:
There are two main types of trade: retail and wholesale. What is each of them, what features does it have, and for what purposes is it most suitable?
First of all, the key difference is the volume and type of sales. We sell wholesale, as a rule, large quantities of goods or services that the buyer needs to conduct business. Retail, in turn, consists of sales to end consumers, individuals. It can also be not only single, but also large - it all depends on their needs and desires.
Principles of wholesale trade
Wholesale: what is and what features does this form of trade have? In it, each buyer goes through an identification procedure, that is, an agreement is concluded with each of them. Wholesale buyers are, as a rule, individual entrepreneurs or legal entities. They trade to run their own business, and each has their own specific goals. This can be both the production and consumption of goods, or their subsequent resale. Most often, goods purchased in bulk are intended for resale.
That is, in wholesale trade, the main transactions occur between entrepreneurs and organizations. They are not sold for the needs of the end user, but serve business purposes. The main feature of wholesale trade is the mandatory identification of the buyer.
Diagram and examples
It’s easier to understand what wholesale is using specific examples. The main wholesalers are the manufacturers themselves; they are the ones at the origins of the financial “chain”. They directly create their products and sell them on the market. These products can be very different: clothing, shoes, household appliances, cosmetics, souvenirs, food, etc.
In most cases, manufacturers resell products to other wholesalers, that is, dealers, and those to other resellers. Before a product reaches the final buyer, it will go through many stages of resale. Exactly how much depends on the product itself and the financial state of the market at the moment. At the other end of the chain is the retailer - it is he who sells the products to the average consumer.
Advantages of wholesale trade
Despite the impressive volumes, trading wholesale from a warehouse is much easier than retail. There is no need for time-consuming advertising or other marketing expenses that can retain the buyer. Sales volumes can be stable, or the product can be sold individually - it all depends on the goals of the seller himself. In any case, with proper quality and good demand, the shipment and purchase of large quantities of goods will be carried out constantly.
What else differs is in the features of paying taxes. Wholesale trade enterprises may fall under both the general and simplified tax systems (OSN or simplified tax system, respectively). But in general, tax principles for wholesalers are much simpler than in retail trade.
The worst nightmare of any retailer is a customer who is dissatisfied with the quality of the product or the service provided. The situation can be very unpleasant, even leading to hysterics and court proceedings. Wholesale buyers do not behave this way, because they have an agreement in their hands, and in it there are clearly defined conditions and regulations for the behavior of the parties in the event of a conflict.
Retail sales
Speaking about what wholesale and retail are, one main difference can be noted: if during wholesale sales a product can go through several stages of resale, then during retail sales this situation is excluded. The product is not intended for further resale, but for direct use by the consumer.
Buyers themselves create demand for a particular product and dictate the needs of the market. Retailers are the category that has the best opportunity to study and analyze this demand and build their activities in accordance with it.
Where and how are goods sold at retail?
There are plenty of options here. The sale of goods and the provision of services can be carried out both in the store and on the street, as well as at the buyer’s home. The methods are also different: by mail, via the Internet, in personal sales or by telephone.
The seller in the retail sales system contacts directly with the buyer. That is, he has to take into account the tastes of each consumer, please him and facilitate the purchase in every possible way. And in case of conflict situations, deal with complaints.
There are also a lot of risks for a retailer. For example, you have to have poorly selling goods on the shelf - thus, buyers get the impression of a wide range and potential choice. On the other hand, there is a risk of damage to goods that were not sold on time. In addition, you have to make financial concessions: for example, selling a product at a low price, often at cost, so that the buyer purchases other products.
However, all this also has a downside - after all, the markup on retail goods is much higher than on wholesale ones. This means that the profit from such sales will be much greater.
Requirements and sales features
It is not enough to understand what wholesale is and what retail is - you need to analyze all the key features of these types of sales and understand what problems you may encounter in the process of this activity.
Differences
What are the differences between wholesale and retail?
- Various assortment. A retailer works with a small assortment from a specific supplier, a wholesaler works with a wide assortment from different suppliers. The average wholesaler has from 5,000 items in the assortment matrix. What is small wholesale? This is when the assortment ranges from 100 to 1000 items, depending on the specifics of the product itself.
- Various volumes. Wholesalers have to deal only with large volumes and wholesale prices. In addition to tangible profits, this entails more serious financial investments at the initial stage, as well as larger problems in case of failure.
- Various logistics. This area is the most “problematic” for a wholesaler, because he has to face many difficulties for each type of product: storage, availability, customs clearance, personnel. When it comes to seasonal products, things get even more complicated.
- Various turnover. If we are talking about gigantic volumes, but at the same time low turnover, the wholesaler must have a huge warehouse to store his goods. In general, everything is simple here: the faster the turnover of goods, the higher and more stable the profit. Any delays here are fraught with a negative impact - for example, due to the costs of storage, accounting, wages for warehouse personnel, etc.
- Various planning criteria. In the field of wholesale purchasing, the seller deals not only with large profits and serious product flows, but also with a large financial leverage. It is important to calculate, with maximum guarantee, the volume of future sales, to be sure that the product will be sold within a certain period of time, and also to have a guaranteed profit for the purchase of new goods.
Problems in retail and wholesale trade
Nothing is perfect, and both retailers and wholesalers face challenges. However, wholesalers have to bear more serious losses. With what it can be connected?
- There is no trust from creditors, and therefore no opportunity to get leverage. There may be problems with payment for the previous batch of goods or the purchase of the next one.
- Incompetent planning, as a result of which surplus goods accumulate, lying in the warehouse as “dead weight”.
- Unstable work with retailers. This could be either a sudden increase in the volume of their work, or a cessation of activity or a decision to completely change the range. In any case, this is not very pleasant - after all, the wholesaler has planned certain volumes and will suffer serious losses if they are not sold.
- Supply disruptions. It happens that goods purchased at a wholesale price are not ready in full. Or there were problems with its shipment at customs. Or force majeure occurred during the transportation stage. The consequences of all these troubles affect a wide range of clients. In retail sales, such situations also happen, but they are not as large-scale.
- Human factor. We are all human, and everyone can make a mistake. For example, by ordering the wrong item from the catalog or by doing worse, when the customer is dealt with incorrectly, as a result of which he goes to a competitor. All this must be strictly monitored in order to avoid serious budget problems.
Summing up
We figured out what wholesale is and what retail is. It is also clear what problems can be encountered in each type of activity. The advantages of each type of sales are also obvious. On the other hand, where the fine line lies between wholesale and retail is a purely individual criterion. For wholesale purchases, the minimum amount can be determined on a case-by-case basis by the seller - be it ten or a thousand items.
In general, we can say that trading wholesale is easier, since the terms of trade are regulated by an agreement. But you can earn more at the retail markup.
Trade has always been the most important product of the life of any society. Even in ancient times, those countries that promoted the development of sales on their territory not only strengthened their power, but also additionally created the general wealth of the entire population without exception. The first trade involved the exchange of surplus products, at this point there were no standards, so everything simply happened in the same quantity. Gradually, the main idea of such relationships became the individual needs of a person. In the modern world, retail and wholesale trade has appeared, which focused not only on different numbers of buyers, but also on specific features
Features and functions of wholesale trade
This type of relationship involves selling in large quantities. Such volumes are purchased for subsequent resale or professional use in business. In other words, wholesalers are intermediaries between manufacturers and retailers. At their expense, the efficiency of the overall trading process is ensured. Wholesale trade is much more productive due to the scale of operations and a greater number of business contacts. Goods purchased from such enterprises are used for further resale or for business needs.
Functions:
- sales and its promotion;
- procurement and creation of product range;
- splitting large quantities of goods into small ones;
- warehousing;
- full or partial transportation;
- risk taking;
- providing the necessary information about the market;
- management and consulting services.
Factors influencing the development of wholesale trade:
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Differences
Retail and wholesale trade have some features:
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Classifier of companies
Wholesale trade enterprises are of the following types:
- Merchant wholesalers are independent enterprises that always have full right to own the goods they sell. They can provide both a full service cycle, which includes storage, installment payment and delivery, and a limited one, requiring immediate payment for the goods and not providing for delivery.
- Brokers and agents. Such firms are, in a sense, intermediaries in the buying and selling process, who receive a certain amount of money for their services and do not bear any responsibility for the goods.
- Wholesale branches and offices of manufacturers belong to one of the main types of trade; they work directly with the buyer and are official representatives of a particular manufacturer.
- Various specialized wholesalers. Available in some sectors of the economy, they collect goods from small traders in large quantities and sell them to large enterprises.
Wholesale trade accounting
The choice of account depends on the type of activity of the company. The Chart of Accounts uses the following: 41 - “Goods” and 45 - “Goods shipped”. Account 41 is needed to control data on the availability and movement of inventory items, regardless of the method of their acquisition. Accounting takes place according to the costs of the enterprise for its acquisition without taxes. Account 45 is used to record the movement of shipped products and sales revenue. Additionally, finished products that are given on a commission basis are taken into account. The cost of goods is calculated from the actual production cost and the cost of shipping products.
There are the following types of wholesale trade:
- sales from warehouse;
- sale in transit.
According to the law, revenue for goods sold is displayed in accounting at the time of shipment. Simply put, immediately after the actual shipment, the accountant reflects this transaction in accounting, even if payment has not yet been processed. Revenue is considered to be the money received for the goods; in accounting it looks like this - D-t 62 / K-t 90.1 “Revenue”. The next operation is to reflect the tax.
The most necessary accounting entries
The following are used for accounting:
- accounting of received goods - D-t 41 /K-t 60 /;
- VAT reflection - D-t 19.3 / K-t 60;
- reduction of debt to the supplier - D-t 60 / K-t 50, 51;
- advance payment to the supplier - D-t 60 / K-t 50, 51.
The different types of wholesale trade do not affect the fundamentals of accounting.
Retail
This type of relationship represents the sale of goods to the end consumer for their own needs without further resale. An indispensable attribute is a cash register and a receipt. A retail store must meet certain characteristics:
- area of retail premises;
- number of product names;
- service level;
- product placement technologies.
The main basis of this trade is the margin - the difference between the purchase price and the selling price; it is the margin that is the main income. The main purpose of retail trade is to provide maximum convenience when offering goods to the consumer, regardless of personal capabilities. There are the following types of retail companies:
- by breadth of assortment;
- By ;
- according to the nature of the service.
The above types of trade can be combined and create a new direction, such as wholesale and retail trade. It is a mixed form of relationship, which is usually carried out through trading houses or distributors. With this type of relationship, wholesale transactions of small and medium size occur, they are carried out from the warehouse of the retail outlet.
Retail companies
The main factors for are:
- product range;
- price level;
- concentration of the trading network;
- type of ownership;
- level of services;
- service feature.
Most common businesses
In retail trade, each enterprise belongs to a specific group:
- Specialized stores - carry out trade in a specific group of goods. Their main task is to satisfy the needs of specific target markets. There are no other products on their shelves.
- Department stores are large enterprises that sell a wide range of different goods. Here, each group is distributed into a separate department, which is a specialized store with a full range of products. In such places there is no self-service; the presence of a seller and a counter is required.
- Supermarkets are engaged in satisfying the needs of potential buyers. The peculiarity is that there is self-service, low prices and a large volume of sales.
- Supermarkets - the presence of a large retail area and an assortment of various goods, minimal labor costs for sales personnel. It has both self-service and full service departments. Payment occurs after all purchases are made when leaving the store.
- Hypermarkets - the trading area is gigantic in size, the product range is represented by a huge number of different products. The main principles are: low prices, extended opening hours, large parking lot, self-service. In such stores you can not only make long-term food purchases, but also purchase any goods that belong to other groups.
- Convenience stores are small in size and carry a limited range of specific items. They are located close to customers and provide only popular goods that are sold over the counter. These are small shops located either in residential buildings or close to them.
Retail and wholesale trade have their own special sales points that meet certain standards.
Non-traditional forms of sales
Previously, purchases could only be made in certain places. To do this, you had to visit the store, select a product and immediately pay money for it. This form has always had disadvantages: a lot of time, lack of the right product, and others. Today, other forms of trade have emerged that are great for goods with low turnover:
- Order by phone - your orders are collected over the phone, after which you receive delivery to the specified address at a convenient time.
- Vending machines - provide 24-hour sales with full self-service.
- Discount ordering service - facilitating certain groups of people who make purchases at discounts.
- Peddling is when sellers come to your home.
Retail and wholesale trade have many differences, but together they create the economic situation of any city and even state.