Wholesaling your products simply means that you’re selling a larger, guaranteed quantity to a retailer. The retailer serves as a “middleman” who markets and sells the products to their customers. Wholesaling gives you the opportunity to sell a larger quantity of products more predictably, and tap into the customer base that the retailer has already built. However, wholesale products are typically priced a bit lower than direct sale products, meaning that you’ll make slightly lower profits on them. Wholesale products are typically priced at two times their cost.
The direct sales, or “direct to consumer,” model is where many small businesses start. DTC gives you the ability to build your own unique customer base, forgo the middleman, and collect the highest markup on your products. When starting out, the DTC model can give you invaluable insight into what your customers respond to. Earnings aren’t split with a retailer with this model and you have full control over how you price your products, but keep in mind that this typically requires a bit more groundwork, as you’re not able to rely on the retailer for marketing, shipping, and other services they may provide. Direct sales products are typically priced at three to four times their cost.
You don’t have to pick just one model! Many businesses use both wholesale and direct sales models, but it’s important to understand the difference between them so you can price your products accordingly.