What Is the Difference Between Wholesale Price & Retail Price?
Wholesale price is the price a retail establishment pays for a product. Retail price is the price at which they sell that same item to the public. The difference between the two prices is called retail markup. Markup occurs to pay the retailer for the service they provide by offering the consumer the product.
Definitions
All retail establishments purchase the goods they sell in their stores at wholesale prices. This gives them the opportunity to mark up the goods to a retail price to cover the cost of obtaining the goods, warehousing them and presenting them for sale as well as put money in the pockets of the retailers themselves.
Retail Prices
Retail prices are not set; theoretically, however, they are limited by what the market will allow. For instance, if the retail price of a product is $10 and the average market price of the same product in other establishments is $8.00, the retailer will not sell any items, as the consumer will go elsewhere for a better deal.
Pricing Strategies
The retail price is determined by a number of factors: wholesale price, market price and supply versus demand. All of these factors figure into a pricing strategy for the retailer.
Wholesale Prices
Wholesale prices also vary based on market conditions and the availability of items. The more scarce a product is, the more the retailer will need to pay for it, thus the higher the retail price will need to be to cover expenses.
Relationship
While wholesale prices and retail prices are distinctly different, they directly impact each other. Fluctuations in one will ultimately translate into fluctuations in the other.
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