Topic: Retailers make more profit than wholesalers during inflation. - page 3. (Read 946 times)

In this case, at a glance, we see that retailers are more profitable than wholesalers, but in reality, wholesalers earn more profit than retailers
where wholesale providers must have calculated their initial capital in doing business, in contrast to retailers who only calculate final sales.
because in the trading dictionary they have counted up to the worst things like their product is defective until it doesn't sell or expires

in these inflation times, many people prefer retail over wholesale. because the price is relatively cheap and affordable by the community.

However, I think retail and wholesale profits are the same. it's just that retail has more buyers.

That is the reality,companies use the inflation as excuse to hike the price of goods and services. This happens especially in countries where there are no authority to regulate the buying and selling of goods. The companies take this advantage and rip the final consumers.

Op, you made a very nice analysis and to your environment and according to the factors in your calculation you are correct but you did not remember that wholesalers sell in bulk while retailers sell in ones. Don't undermine the profit in and mass sells.

If they label it as fresh meat and the only trick they apply to it is the ice sheet inside the package you can avoid that easily, I haven't seen in my life anybody doing a perfect cover, it will have at least some tiny white circles if that happens, well that meat is at least 1 year old and it has spent at least 3/4 of that in the freezer. If the dots are bigger than 2 cm, then it's 3 years. I advise everyone to not buy frozen meat, it's not worth it even looking at the price, the taste is not the same anyway even if they are both fresh and the risks are just too big, even unintentionally you have a malfunctioning freezer that can't keep the temperature and in one week after 7 cycles of frost defrost that's dog food.

But the things where you can't avoid it as a recycled ingredient are the salami and baloney, I haven't bought those from a market in years and I don't plan on.


There is no rule for any of them to make more than the others, it depends a lot on what you're selling, where you're selling, and from the start the margin rates of everyone. For raw food like fresh meat, everyone makes nearly the same, for exotic food imports the supplier of those will make more than everyone as he is the one at risk of ending with unsold expensive merchandise. The reseller of fish products will make a few pennies in Calais and a fortune per kilo sold in Wien, if we go into beverages, I can tell you for sure you can get the 2.5L bottle at 1.10 Euros directly from the producer while it can peak to 3.5 Euros on highway 24/7 shops.

It's not a rule for anything, producers can be forced to sell at a loss so they will lose 100 euros per ton instead of it rotting away and losing 300 euros, a wholesaler can end up with stocks and they will do the same, retailers might end with it rotting and nowhere to go even for half a price and take the loss also.
If things will be that simple Europe wouldn't be throwing away 150 million tons of food (officially) as I think the numbers are actually double.

Its always been like this and as a consumer then there's nothing we can do but to deal with those high prices if there's nowhere you could eventually go.If the herd or the community would be sticking out on a said retailers or even going into those wholesalers then for sure they cant really still avoid those high prices.There might be differences but we know that wholesalers cant really just provide out on small quantity incase you would be buying up something.Speaking about profitability in between these two wont really be that such a high issue or something that we could talk on.They are making money no matter what angle they would
make.Its up into some system or ways on how they would really be playing out those prices whether it is really just right or too much, there's nothing we can do.

Companies will always try to pass additional costs to the end consumer, this is just how it is, however I agree with you that with the excuse of the high inflation some businesses are raising their prices even more than what it is necessary to cover their additional costs, but there is nothing we can do, and if governments try to solve this then they will just make it worse as they always do, so the only thing we can do as customers is to identify the businesses which are employing those tactics and then never buy from them ever again.

I disagree with you OP, because if wholesalers buy goods from the manufacturers in this inflation season, he or she will do some calculation to know how to sell the goods to retailers to make a suitable profits from the business.   Let me use this chain of distribution to show you how manufacturer and wholesalers earn well more than retailers, manufacturers will sell to wholesalers to make a good profits, and wholesalers will also sell to retailers to make a good profits , but retailers will sell to final consumer to make a little profits from their business.

I see that you gave the analysis based on mathematical tools but it doesn't work in economics tools of analysis. There is no way a retailer makes profit more than a manufacturer and a wholesaler. A retailer always sells his or her goods based on the expenses done after purchasing the commodity. Like if a manufacturer sells bread to a wholesaler at the rate of $400 and the wholesaler also sell it at the rate of $410  to a retailer based on his or her expenses the retailer might finally sell it to the consumer at the rate of $600. The wholesaler still make more profit. Because the wholesaler bought it in a large quantities and sell it to different retailers while retailers bought it in a small quantities and remember the consumers are more than the total number of breads the retailer bought, so the profit is always shared between the manufacturer and the wholesaler although the retailer also make profit but can not compared to the wholesaler's profit.
But the consumers suffered the highest inflation in the world.

I understand. It may be true but the retail seller here around me is still having troubles with their sales. The reason is the competition.
People will find a way to buy cheaper necessities and they will ask every retail shop about their prices so they could compare it to the nearest they have.
Stocks are also going down and it became a big problem for every retail shop. Their businesses are also in the brink of closing down because they cannot sell anything anymore and ordering it from far wholesalers will mean paying more.
Unless a consumer is forced to buy at a retail shop even at a high price there won't be sales.

I own a retail store, and it's not like that in reality. I did increase the price of some goods because the prices of middlemen increased, it didn't mean I was taking advantage of this moment for a fleeting profit. However I think of consistent profits, at least maintaining the number of requests by adjusting prices that do not make my customers run to other stores.

Let's picture it from the two ends and compare them together, wholesalers don't need to struggle before they make their sales, all they need is a warehouse and a huge capital, their target on profits is little amount but sinfe they deal with quantity then each item been sold will accumulate a good amount for profit realization, as for retailers, they buy little in quantity and have a direct sale with the consumers, this makes them have chances of manipulating price by hiking some, they also suffer the losses of damage and poor market sales whenever their inflation, this same inflation can favour them and also at the other end discomfort them in many ways, but i will also prefer wholesaling than retailing.

the reason may be according to their individual needs and do not want to buy goods in large quantities because every consumer of course buys only when they need it.  in contrast to wholesalers who can stockpile goods in large quantities with cheaper purchases even though the profits are small but can attract customers to be able to take goods from them.  but when there is inflation, of course, not only in one item such as the raw material for bread flour mentioned by Op, but there is an increase in several other types of goods and of course wholesalers know in advance than retailers.  This situation will be exploited by retailers by looking for a larger profit percentage

The narrative of this topic may mean to some considering business that going into retail can be more profitable for them when compared to Wholesaling just as you have suggested. But for me wholesaling remains the best option because some other factors in business have not been considered and the example you have given to support your claim is not sufficient. Though it may seem that retailers can make more money simply because they can adjust their price for consumers during inflation, wholesalers also adjust their price for retailers so they can still afford the price from the industries/manufacturers. Retailers also increase cost to reflect the cost of transportation of their goods as well. So the profit that you think retailers make may not be so much since there are some cost like transportation that will be subtracted from whatever they make as profit.

I only know that a good part of the meat that should be destroyed comes to my country and the surrounding countries through various legal (but also illegal) channels and is then sold as fresh meat mainly in various retail chains. So instead of paying for the safe destruction of food (which is expensive), some even manage to sell the meat and make money, but some would just say "what's new in the Balkans" - everything and everyone has its price and every product has its buyer.

Most people consider inflation as a negative phenomenon, but some people welcome it with open arms, because it is a time for extra profit for those who know how to use it.

I think it’s not calculated properly. Retailer would not increase the prices just out of thin air man! The price circulation is process from raw materials to finished products. Retailer would increase the price if let’s say wholesaler increases the prices, transport of material gets increased or may be packaging costs are higher and much more accountable stuff which gives final price. Even this is true from the very basic that’s raw material of making bread which might cost higher then this is directly felt by end user since middle chain will increase the marginal % that they are getting incurred by previous party. Retailer Will be in loss if they increase the prices but customer sees that wholesale market delivers at lower rates then they would rush there!!

Simple math like this never works in real life.
You're simply thinking of this sells for that, that for this and you make it sound like both have the same costs and nobody is counting any losses.

I'll give you a few examples of why we've stopped selling as a retailer of meat and stuck to supplying a few large superstore chains.
First, you will need a space to self that, the more traffic the higher the rent, you need an employee, you need a lot of legal stuff, you need to take care of a lot of regulations for being a food retailer, and you need to be careful of inspections, you need to worry about your employee not to make mistakes or "mistakes" and more important than everything, you need to really balance the stuff you are selling, because you can end u with unsold stuff that is just going to end up ...nope, not the trash can, here you need to pay for wasted food disposal.


Let's assume just for fun that one of those goes to waste, he bought 6 for 450, and he only sells 5 for 500, from the 33% profit you're down to 10%, and this is not really overall profit as you haven't included the cost. The producer doesn't have this problem, he knows in advance because of long contracts what he has to produce each day and who is going to buy, the retailer has to deal every day with up and downwards demand and take the risks.

I disagree with your point of opinion, the wholesalers still make more profits than the retailer because they sell bulk quantity and also they can simply run their system with less expenses while the retailers has more extra expenses like electricity,rent, salary and interest for their loan since we call them as small business so obviously I conclude that they are running their business with loan money which is generally has high interest rates than for the bog business.

This happen because it is more convenient for a person to buy in small number than in bulk, last year I want to buy goods in bulk since I will get more discount for it and I will have stock in my house but then inflation happen, I am not buying goods for pcs I know that merchant is actually getting more money in small orders but then I can't afford to buy many pieces right now because the price is higher than my budget. I doubt that normal  people in my country  can afford to buy bulk as well, I mean those normal wage earner those that are not poor nor rich.

On a turn over base the wholesaler makes the more profit than the retailer because he sales not only for the retailer but for many retailer that queue up to the goods. He is having chains of people coming but the retailer is not that way. The patronage is not much but individual number is small comparing to number that wholesaler have and that is meaning greater chance of profit also.

During inflation? Err.. retailers make more than wholesalers all the time. The business of wholesalers is selling in bulk and making their money through shifting stock at a large scale. In fact it is always a tug of war, where retailers are usually able to apply more pressure to wholesalers, in the form of demanding better pricing, because they actually call the shots in this business relationship. Wholesalers often cannot replace their customers easily and will usually accept lower margins to keep business going. For wholesalers they simply have to pass the pressure on to their suppliers or lose a proportion of their revenue. None of this is new and doesn't change much during recession type circumstances.