wholesale-examples

Wholesale Examples In A Nutshell

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A wholesale business purchases goods in bulk from a supplier and then sells them to other merchants in smaller quantities. The wholesaler relies on economies of scale to make a profit. Most wholesale businesses do not sell to the end-user. However, two exceptions are commodities trader Trafigura and big-box retailer Costco. Sysco is the largest wholesale foodservice distributor in the United States while McKesson Corporation is the largest distributor of pharmaceutical drugs and various other healthcare products and technology.

Introduction

A wholesale business purchases goods in bulk from a supplier and then sells them to other merchants in smaller quantities. The wholesaler relies on economies of scale to receive a discount price from the manufacturer and then adds mark-up before selling to the merchant. Most merchants are not the end-user of the product, but as we will discover later, there are exceptions to this rule.

Wholesalers play an important role in the market. They maintain supply-demand equilibrium by storing goods until there is merchant demand. What’s more, a wholesaler is responsible for the distribution and transportation of goods from their warehouse and bears the risks associated with product shrinkage or fluctuations in demand.

The rest of this article will be devoted to discussing some specific wholesale business examples.

Costco

How Does Costco Make Money
Costco makes most of its money from selling merchandise products at low cost, yet in bulk, through its warehouses, which act as stores, and a small, yet much higher margin chunk of revenue comes from its memberships. For instance, in 2023, Costco made over $242 billion in revenue, of which $4.58 billion came from membership revenue.

Costco, also known as Costco Wholesale Corporation, is an American multinational big-box retail chain founded by James Sinegal, Jeffrey Brotman, Sol Price, and Robert Price in 1976.

Costco is a membership-only warehouse that requires consumers to purchase a membership before they can shop. The company is somewhat unusual in that it is a retailer and a wholesaler at the same time. In other words, Costco purchases wholesale products from the manufacturer and sells them to the end-user. However, the company also sells the same goods to other businesses under a more traditional wholesale business model.

Trafigura

Trafigura is a Singaporean commodity wholesaler that was established in 1993. The company sources raw commodities from miners and fossil fuel producers and, like Costco, supplies end-users which include power plants, construction companies, and state governments.

Despite only existing for approximately 30 years, Trafigura is the largest private metals trader in the world with total revenue for 2021 of $231.3 billion.

Sysco

Sysco Corporation is an American multinational involved in the wholesale distribution of kitchen equipment, food products, and tabletop items to restaurants, schools, and health facilities. The company also distributes products to hotels and other food services companies such as Sodexo and Aramark.

Sysco is the largest wholesale foodservice distributor in the United States with over 600,000 clients in 90 countries.

Toyota Tsusho

Toyota Tsusho is a trading arm of the Toyota Group of companies. The corporation’s primary function is to support Toyota’s automotive division and supply other vehicle manufacturers with wholesale parts.

However, Toyota Tsusho is a vast company with additional interests in metals, machinery, energy, chemicals, electronics, food and customer service, and logistics.

McKesson Corporation

McKesson Corporation is the largest distributor of pharmaceutical drugs, healthcare technology, care management devices, and medical supplies in North America. 

The corporation distributes 33% of all pharmaceuticals across the continent with the company reporting full-year revenue of $238.2 billion in May 2021.

Key Highlights:

  • Wholesale Business Overview: Wholesale businesses purchase goods in bulk from suppliers and sell them in smaller quantities to other merchants, relying on economies of scale for profitability. They often don’t sell directly to end-users, but there are exceptions.
  • Role of Wholesalers: Wholesalers help maintain supply-demand balance by storing goods until merchant demand arises. They handle distribution, transportation, and sometimes even bear risks associated with products.
  • Costco: Costco is a membership-based big-box retail chain that operates as both a retailer and a wholesaler. It purchases products in bulk and sells to both end-users and businesses under a single-step distribution strategy.
  • Trafigura: Trafigura is a commodity wholesaler based in Singapore, sourcing raw commodities from miners and fossil fuel producers. It supplies end-users like power plants, construction companies, and state governments.
  • Sysco Corporation: Sysco is the largest wholesale foodservice distributor in the United States, supplying kitchen equipment, food products, and more to restaurants, schools, health facilities, hotels, and other food service companies.
  • Toyota Tsusho: Toyota Tsusho, a trading arm of the Toyota Group, supports Toyota’s automotive division and supplies wholesale parts to other vehicle manufacturers. It also has interests in various industries.
  • McKesson Corporation: McKesson Corporation is North America’s largest distributor of pharmaceutical drugs, healthcare technology, medical supplies, and more. It plays a vital role in the healthcare industry.
  • Business Diversity: Some wholesale companies diversify their interests beyond their primary industries, as seen with Toyota Tsusho’s involvement in metals, machinery, energy, and more.
  • Market Influence: Wholesale businesses significantly impact various industries by connecting suppliers and merchants, ensuring a smooth flow of goods, and contributing to the overall supply chain.

Additional Case Studies

Case StudyDescriptionApplication in Wholesale
CostcoCostco Wholesale Corporation is a global retailer known for its warehouse club model. It offers bulk products to members at discounted prices.– Membership-based model to provide exclusive access – Bulk purchasing and discounts to attract and retain customers – Efficient supply chain management to lower costs and prices
Sysco CorporationSysco is a leading foodservice distribution company that supplies restaurants, hotels, and healthcare facilities with food and related products.– Streamlined distribution and delivery processes – Inventory management and just-in-time delivery to reduce waste – Extensive product variety to meet diverse customer needs
GraingerW.W. Grainger, Inc. is a distributor of maintenance, repair, and operating (MRO) supplies. It serves businesses with essential products and services.– Vast catalog of MRO products – Online ordering and e-commerce capabilities for convenience – Inventory management solutions to optimize supply chain – Focus on customer service and support
Alibaba GroupAlibaba is a global e-commerce and technology conglomerate. It operates various online marketplaces connecting wholesalers, retailers, and consumers.– Digital platforms for B2B and B2C transactions – Facilitating global trade and cross-border transactions – Providing a wide range of products and suppliers – Data-driven insights to enhance sourcing
Cardinal HealthCardinal Health is a healthcare services company specializing in pharmaceutical distribution and supply chain management.– Efficient pharmaceutical distribution network – Compliance and regulatory expertise in healthcare – Inventory optimization for healthcare facilities – Value-added services to support healthcare providers
McKesson CorporationMcKesson is a pharmaceutical distribution and healthcare solutions company. It plays a vital role in delivering healthcare products to various healthcare providers.– Extensive pharmaceutical distribution network – Technology solutions for healthcare providers – Streamlined logistics and supply chain management – Focus on patient safety and healthcare efficiency
HD Supply HoldingsHD Supply is a distributor of maintenance, repair, and construction (MRC) products primarily serving professional customers in the construction industry.– Specialized focus on MRC products – Local and national distribution capabilities – E-commerce platform for easy ordering – Expertise in the construction industry to meet specific needs
DHL Supply ChainDHL Supply Chain is a global logistics and supply chain management company that provides warehousing and distribution services to various industries.– Warehousing and distribution services for various industries – Inventory management and supply chain optimization – Technology-driven solutions for visibility and efficiency – Focus on sustainability and environmental impact
StaplesStaples is a retailer specializing in office supplies, business services, and technology products.– Wide range of office supplies and technology products – E-commerce platform for business customers – Customized procurement solutions for businesses – Focus on sustainability and responsible sourcing
C&S Wholesale GrocersC&S Wholesale Grocers is one of the largest wholesale grocery supply companies in the United States, serving supermarkets and other retailers.– Extensive distribution network for grocery products – Inventory management solutions for retailers – Private-label brands and customization options – Focus on sustainability and reducing environmental impact

Read Next: Wholesale Business Model.

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Connected Case Studies

Read Also: Costco Business Model

How Does Costco Make Money
Costco makes most of its money from selling merchandise products at low cost, yet in bulk, through its warehouses, which act as stores, and a small, yet much higher margin chunk of revenue comes from its memberships. For instance, in 2023, Costco made over $242 billion in revenue, of which $4.58 billion came from membership revenue.

Read Also: Marketplace Business Models

marketplace-business-models
A marketplace is a platform where buyers and sellers interact and transact. The platform acts as a marketplace that will generate revenues in fees from one or all the parties involved in the transaction. Usually, marketplaces can be classified in several ways, like those selling services vs. products or those connecting buyers and sellers at B2B, B2C, or C2C level. And those marketplaces connecting two core players, or more.

Read Also: Food-Delivery Business Models

food-delivery-business-model
In the food delivery business model companies leverage technology to build platforms that enable users to have the food delivered at home. This business model usually is set up as a platform and multi-sided marketplace, where the food delivery company makes money by charging commissions to the restaurant and to the customer.

Connected Business Model Types And Frameworks

What’s A Business Model

fourweekmba-business-model-framework
An effective business model has to focus on two dimensions: the people dimension and the financial dimension. The people dimension will allow you to build a product or service that is 10X better than existing ones and a solid brand. The financial dimension will help you develop proper distribution channels by identifying the people that are willing to pay for your product or service and make it financially sustainable in the long run.

Business Model Innovation

business-model-innovation
Business model innovation is about increasing the success of an organization with existing products and technologies by crafting a compelling value proposition able to propel a new business model to scale up customers and create a lasting competitive advantage. And it all starts by mastering the key customers.

Level of Digitalization

stages-of-digital-transformation
Digital and tech business models can be classified according to four levels of transformation into digitally-enabled, digitally-enhanced, tech or platform business models, and business platforms/ecosystems.

Digital Business Model

digital-business-models
A digital business model might be defined as a model that leverages digital technologies to improve several aspects of an organization. From how the company acquires customers, to what product/service it provides. A digital business model is such when digital technology helps enhance its value proposition.

Tech Business Model

business-model-template
A tech business model is made of four main components: value model (value propositions, mission, vision), technological model (R&D management), distribution model (sales and marketing organizational structure), and financial model (revenue modeling, cost structure, profitability and cash generation/management). Those elements coming together can serve as the basis to build a solid tech business model.

AI Business Model

ai-business-models

Blockchain Business Model

blockchain-business-models
A Blockchain Business Model is made of four main components: Value Model (Core Philosophy, Core Value and Value Propositions for the key stakeholders), Blockchain Model (Protocol Rules, Network Shape and Applications Layer/Ecosystem), Distribution Model (the key channels amplifying the protocol and its communities), and the Economic Model (the dynamics through which protocol players make money). Those elements coming together can serve as the basis to build and analyze a solid Blockchain Business Model.

Asymmetric Business Models

asymmetric-business-models
In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.

Attention Merchant Business Model

attention-business-models-compared
In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus having a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility. This is how attention merchants make monetize their business models.

Open-Core Business Model

open-core
While the term has been coined by Andrew Lampitt, open-core is an evolution of open-source. Where a core part of the software/platform is offered for free, while on top of it are built premium features or add-ons, which get monetized by the corporation who developed the software/platform. An example of the GitLab open core model, where the hosted service is free and open, while the software is closed.

Open Source Business Model

open-source-business-model
Open source is licensed and usually developed and maintained by a community of independent developers. While the freemium is developed in-house. Thus the freemium give the company that developed it, full control over its distribution. In an open-source model, the for-profit company has to distribute its premium version per its open-source licensing model.

Freemium Business Model

freemium-business-model
The freemium – unless the whole organization is aligned around it – is a growth strategy rather than a business model. A free service is provided to a majority of users, while a small percentage of those users convert into paying customers through the sales funnel. Free users will help spread the brand through word of mouth.

Freeterprise Business Model

freeterprise-business-model
A freeterprise is a combination of free and enterprise where free professional accounts are driven into the funnel through the free product. As the opportunity is identified the company assigns the free account to a salesperson within the organization (inside sales or fields sales) to convert that into a B2B/enterprise account.

Marketplace Business Models

marketplace-business-models
A marketplace is a platform where buyers and sellers interact and transact. The platform acts as a marketplace that will generate revenues in fees from one or all the parties involved in the transaction. Usually, marketplaces can be classified in several ways, like those selling services vs. products or those connecting buyers and sellers at B2B, B2C, or C2C level. And those marketplaces connecting two core players, or more.

B2B vs B2C Business Model

b2b-vs-b2c
B2B, which stands for business-to-business, is a process for selling products or services to other businesses. On the other hand, a B2C sells directly to its consumers.

B2B2C Business Model

b2b2c
A B2B2C is a particular kind of business model where a company, rather than accessing the consumer market directly, it does that via another business. Yet the final consumers will recognize the brand or the service provided by the B2B2C. The company offering the service might gain direct access to consumers over time.

D2C Business Model

direct-to-consumer
Direct-to-consumer (D2C) is a business model where companies sell their products directly to the consumer without the assistance of a third-party wholesaler or retailer. In this way, the company can cut through intermediaries and increase its margins. However, to be successful the direct-to-consumers company needs to build its own distribution, which in the short term can be more expensive. Yet in the long-term creates a competitive advantage.

C2C Business Model

C2C-business-model
The C2C business model describes a market environment where one customer purchases from another on a third-party platform that may also handle the transaction. Under the C2C model, both the seller and the buyer are considered consumers. Customer to customer (C2C) is, therefore, a business model where consumers buy and sell directly between themselves. Consumer-to-consumer has become a prevalent business model especially as the web helped disintermediate various industries.

Retail Business Model

retail-business-model
A retail business model follows a direct-to-consumer approach, also called B2C, where the company sells directly to final customers a processed/finished product. This implies a business model that is mostly local-based, it carries higher margins, but also higher costs and distribution risks.

Wholesale Business Model

wholesale-business-model
The wholesale model is a selling model where wholesalers sell their products in bulk to a retailer at a discounted price. The retailer then on-sells the products to consumers at a higher price. In the wholesale model, a wholesaler sells products in bulk to retail outlets for onward sale. Occasionally, the wholesaler sells direct to the consumer, with supermarket giant Costco the most obvious example.

Crowdsourcing Business Model

crowdsourcing
The term “crowdsourcing” was first coined by Wired Magazine editor Jeff Howe in a 2006 article titled Rise of Crowdsourcing. Though the practice has existed in some form or another for centuries, it rose to prominence when eCommerce, social media, and smartphone culture began to emerge. Crowdsourcing is the act of obtaining knowledge, goods, services, or opinions from a group of people. These people submit information via social media, smartphone apps, or dedicated crowdsourcing platforms.

Franchising Business Model

franchained-business-model
In a franchained business model (a short-term chain, long-term franchise) model, the company deliberately launched its operations by keeping tight ownership on the main assets, while those are established, thus choosing a chain model. Once operations are running and established, the company divests its ownership and opts instead for a franchising model.

Brokerage Business Model

brokerage-business
Businesses employing the brokerage business model make money via brokerage services. This means they are involved with the facilitation, negotiation, or arbitration of a transaction between a buyer and a seller. The brokerage business model involves a business connecting buyers with sellers to collect a commission on the resultant transaction. Therefore, acting as a middleman within a transaction.

Dropshipping Business Model

dropshipping-business-model
Dropshipping is a retail business model where the dropshipper externalizes the manufacturing and logistics and focuses only on distribution and customer acquisition. Therefore, the dropshipper collects final customers’ sales orders, sending them over to third-party suppliers, who ship directly to those customers. In this way, through dropshipping, it is possible to run a business without operational costs and logistics management.

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