A wholesale price is the price offered to purchasers of manufactured goods or to commercial sellers in many cases. Sometimes, small warehouse stores like Costco offer wholesale prices to some of their customers who own businesses. These prices are usually about half the price of something that could be purchased at retail value. Sellers or producers of other goods (like restaurants) confer a higher price to the retail customer, often at a 100% or more mark-up.
Goods don’t just have to be manufactured; they can also be grown. A farmer for instance, offers a wholesale price to a grocery store or a produce buying company. The produce buying company may spend money to package or repackage goods for sale, usually in smaller lots. These are then sold at a retail price that is much higher than if you were to purchase the goods from the farmer on your own.
Part of the reason that manufacturers of goods or growers can offer wholesale is because they sell their goods in bulk. A grocery store doesn’t buy just one tomato from a farmer; it buys several tons of tomatoes. This way the farmer, though selling the goods at a lower price than what they would cost in a grocery store, is assured a larger sum payment for the goods, and is able to get rid of his produce.
The same applies to any manufactured item. Retailers don’t go looking for one manufactured item, unless it’s exceptionally large or special ordered. Instead they buy thousands of the item and are assured a lower price. Larger retailers, who make very large purchases of the same item and have the ability to offer these items at a high number of stores, may be able to get better prices than would a small independent store that can only purchase a small number of a single good. Purchasing volume is important when determining wholesale.
Wholesale price reflects a number of things. It must account for the cost of manufacture, materials, any packaging and storage. This is why we see so many items in the US made in foreign, and often developing, countries. Manufacturing, storage, and even the cost of materials may be much cheaper in India, Mexico, Indonesia or China (to name just a few countries) than it is in the US.
What’s somewhat ironic is that many of the things purchased at wholesale price from manufacturing companies outside the US are given considerable mark up. Slap a designer name on a T-shirt that cost a dollar at wholesale, and you can sell it for $30 US dollars (US) if not more. Did these things really cost that much more when they were sold at wholesale? The answer is probably not, but they are marketed to brand conscious Americans who are willing to pay considerably more money at retail price if they get a “brand name” product.
Due to the fact that wholesale price for goods can be so much lower than retail markup, there’s often considerable price flexibility on certain items, particularly clothing and furniture. Generally, even when a company offers sales or clearances they may still make a profit, though not as high a one as they’d get if they sell things at full price. Consumers wise to this price flexibility tend to wait for sales to shop. They know that prices can be flexible when markup is high, and there’s no point purchasing something at full retail price when you can purchase something at a price much closer to wholesale.