Setting up a business has a lot of technicalities and processes associated with it. One of the major aspects of it is to set up the distribution of the product. If you start something and do not have your selling model sorted, your business is more likely to not catch the wind as you would want it to. Basically, the product that you see on the shelves of a supermarket has changed hands several times before landing there.
Due to this particular reason, the costs of commodities vary markedly from the time it is manufactured to the time it reaches a customer. The whole setup is known as a supply chain, and it is instrumental in forwarding the very essence of a business. Therefore, the various steps in the supply chain must be discussed in detail, which this article intends to do.
The Basic Difference Between Manufacturing, Wholesale, and Retail Businesses
Before looking at the process individually and determining each of their nuances, it is better to take a look at it from the broader perspective first. It all starts with the manufacturing of goods. It is then sold as bulk to either a distributor or a wholesaler. A manufacturer can also sell directly to a retailer, but it involves a certain amount of risk. According to demands, a wholesaler orders something in bulk and stores it so that they can supply it to the retailer.
However, with the advent of e-commerce and online platforms, even wholesalers can put their product out in the market. Following the more traditional approach, the wholesaler passes on the goods to the retailer, who finally puts it up in the consumer market. You can start a business at any of these processes and gain maximum profit. You also need to be aware of the fact that a businessman’s role changes with each of these aspects. A little more detailed look into it will reveal the intricacies of the three types of business.
1. Manufacturing Business
The word manufacture means to produce. This gives a fair idea of what a manufacturing business is mostly about. A manufacturer takes the raw material, turns it into finished products, and tries to sell them to the interested parties. A few commonly associated questions related to it are:
What is a manufacturing business?
Like mentioned before, a manufacturing business uses different raw materials and components and turns them into finished goods. This can either be done by humans or even machines or robots.
An assembly line concept is used for manufacturing. That is, one step is sequentially followed by the other. Generally, there are workstations in place, and the goods move from one to another until the final one is made.
Where does the product go after manufacturing?
After a finished product is manufactured successfully, it can either go to a distributor or a wholesaler who will buy it in bulk or go to the retailer directly. However, it is the former that is more conventionally followed. The manufacturer sets up a price of the product to sell based on the expenses. Two other unconventional methods are sometimes implemented as well.
In the case of more indigenous and personalised merchandise, the manufacturer can directly sell the product to customers, bypassing all the other levels. Moreover, the product can also go to another manufacturer for further additions or modifications. These are all the options that a product has after the manufacturing process is completed.
What are the different types of manufacturing production?
They are primarily of three types:
- Make-to-order is based on a customised order that someone places to the manufacturer, and the manufacturer starts the production based on the number. It is the safest approach, as all the products are guaranteed to be sold.
- Make-to-stock is the type of manufacturing done based on predictions and data regarding sales that was available previously. It is a risky endeavour, as it is based on past experiences, and there is no guarantee that it will mimic the same this time around.
- Make-to-assemble is a mixture of the safe and the risky approach. All the parts required to make a product are made first, but they are assembled only after an order is placed. It is the best of both worlds.
How is manufacturing different from wholesale and retail business?
The important point of consideration here is its difference from the other two. One of the most glaring differences is the fact that only a manufacturer actually produces the goods. The other two merely sell them.
Since the manufacturer has a diverse range of options to handle the goods after production, business chances are good. However, since there is a good part of the investment involved, the associated risks are also more than the others.
2. Wholesale Business
This is another important aspect of any business’ distribution chain that needs to be seen in detail.
What is a wholesale business?
A wholesale business basically involves buying goods from the manufacturer in large quantities, dismembering them if required, reassembling or repacking them accordingly, and then selling it to a retailer.
For them, quantity is more important than the quality of the product. They do not look into various aspects of packaging or displaying the product, they just act as middlemen to move a business forward.
What can a wholesaler do with the product?
Traditionally speaking, a wholesaler fixes up the price of a product and sells it to a retailer. However, they can even sell it in the market themselves using an online platform. They can even keep more lucrative pricing than the retailers and increase their chances of selling.
What are the types of wholesale business?
They can be of two types
- Merchant wholesalers buy the products in bulk and then sell them by dividing them into small quantities.
- Agents are the representatives of the wholesaler, who bargain for the product from the manufacturer.
What are some key aspects of the wholesale business?
The important considerations of a wholesale business is the fact that the market that it occupies is relatively large and the finances involved in it are also more. The business is more widespread, as there is no confined space to sell the product. The art of selling is mostly about negotiations and not convincing the customer to buy the product, which is in stark contrast to a retail business.
3. Retail Business
What is a retail business?
A retail business involves buying a product from various sources and finally selling it to the consumer or customer without any scope of further reselling. They do not look at the quantity. Instead, they go for smaller amounts and concentrate on the marketing and displaying aspect of it. The money made from retail is considered to be the highest in this whole process.
What are the types of retailers?
These are basically places where the goods are sold.
- Supermarkets tend to have a large variety of products on offer to be sold to the customers.
- Department stores are individually or group-owned and products are sold in the market by them.
- Convenience stores sell lesser types of products but the ones that are not available easily, making it convenient for the people around.
What are some characteristics of a retail business?
As pointed out before, the amount of profit that can be made from the retail business is more than manufacturing and wholesale business. This is because they buy a product at a lesser price and sell it at a higher one. The size of the business is relatively small, and it reaches out to a limited number of people. The products have to be displayed in such a manner that it is attractive to the customers. Thus, the art of selling becomes important.
Now that you have a fair idea after the whole distribution process of a product and how each one of them works, you can choose to start a business of your own based on what is most convenient for your strategy or idea.
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Q. Which is the cheapest among manufacturing, wholesale, and retail?
Ans. Wholesale is the cheapest in the entire supply chain of business.
Q. Why is wholesale considered the cheapest?
Ans. Wholesale is considered to be the cheapest because the orders that are placed are in bulk, and massive discounts are provided for the same by the manufacturers for big orders.
Q. What is meant by wholesale price?
Ans. The wholesale price is the amount at which the product is bought in bulk, mostly after a big discount.
Q. Some examples of good retail-based stores in India.
Ans. Few of the famous retailers in India include Pantaloons, D-Mart, Reliance Smart, and Shoppers Stop.
Q. Which business has the maximum outreach?
Ans. Wholesale business is spread across different states and sometimes nations and has the maximum outreach.
Q. Which business needs to concentrate on display and the art of selling?
Ans. The retail business has the art of selling and display as its major features and needs to concentrate on it.