What Are Pay Stubs? A Quick Explanation

ByGoran Dautovic
April 15,2022

While every business owner likes to think that their employees come to work solely to be in the company of a great boss, the truth is that getting paid is their main incentive. Therefore, their payment stub (also called payslip or paycheck stub) is one of their priorities - and must become one of yours too!

Whether using payroll software or the manual method, it’s imperative that you can answer key questions like “what are pay stubs?”, “why are paystubs important”, and “what should be included on an employee pay stub?” as a part of your successful HR scheme. This quick guide will provide all you need to know.

Pay Stubs Explained

Merriam-Webster defines a pay stub as: “a piece of paper that is given to an employee with each paycheck and that shows the amount of money that the employee earned and the amount that was removed for taxes, insurance costs, etc.”, although it can now be an electronic file instead of an actual paper stub.

In essence, it’s an attachment that is connected to the paycheck. It details key information relating to the specific pay period (weekly, biweekly, or monthly) in one column while also specifying the year-to-date (YTD) figures for the tax year. 

Payment stubs are not technically a legal requirement for employers under federal law. However, most states have them factored into their regional legislations. Meanwhile, the Fair Labor Standards Act states that all business owners must record the number of hours worked by each employee.

Why Are Pay Stubs Important?

From a company’s perspective, pay stubs are a key tool for recording employee gross wages and managing tax requirements. Moreover, they can help you quickly rectify any mistakes noticed by an employee or disprove false allegations and disputes.

When used as part of the onboarding process, it encourages optimal organization from the start while also making the individual feel like they belong. Other benefits for all workers, new or otherwise, include:

  • Having a better understanding of their earnings
  • Gaining clear insight into their deductions
  • Knowing that they are fairly treated
  • Seeing how their taxes and 401(k) contributions are handled
  • Proving thier income when applying for mortgages and similar

Pay stubs are a simple yet powerful tool for recording all relevant info for the employee pay period. Statistics show the correlation between happy workers and increased productivity; a defined pay slip strategy will ensure your employees get paid correctly, which is one of the keys to worker satisfaction. All companies across all sectors should take this into consideration.

What’s Included in an Employee Pay Stub?

When using the best payroll and HR software providers, it’s likely that the majority of payslip data will be clear. You simply need to fill in the appropriate fields. In many cases, you need to enter the hourly rate of pay and the number of hours worked. All subsequent calculations relating to taxes and deductions for calculating your paycheck can be automated. Likewise, YTD records can be instantly calculated from the individual's files and previous pay slips.

Many businesses and workers also ask “what kind of paper are paystubs printed on?". While the attachment is often connected to the check with perforation, the type of paper used can be standard - as well as business checks or software-friendly stubs - as there are no specific requirements. Ultimately, all pay stubs should be clear, as the content is far more important than the format.

Employers and employees should know what to look for on a payment stub. Firstly, there will be two separate columns: current pay duration and YTD. As for the items included under each, below is an overview of the key features.

Basic Info 

Every paycheck should contain general information relating to both parties (company and worker) as well as the time frame of the employee pay period. The company name and address will be added, along with the name, address, and Social Security number of the employee. It can be a part of the onboarding process to gather all relevant details right away. Many software packages allow employees to update their info as and when required.

Wages

A gross wages section should be the first main section under the general info. It sets out the gross income earned by the employee during the given period. The employee gross wages will set out the person’s hourly wage as well as the hours worked during this time. Those figures are then multiplied to produce the correct figure. 

Where applicable, overtime pay will also feature under this section. Many employees have a different hourly pay for overtime hours, so it needs to be shown as a separate row. It also ensures that employees have accurate pay slips when applying for credit. Additional earnings and accrued time off will also be listed in this section.

Deductions

Deductions are the next group of items to feature. Voluntary deductions pay stub items and involuntary deductions pay stub elements are covered under this section. All deductions should be listed in an itemized fashion, with clear information for the individual pay period and YTD.

Income tax deductions will include federal tax, state tax withholdings, and local taxes, as well as Social Security, Medicare, and other relevant features. The majority are involuntary deductions. While employees are forced to pay them, it is the employer’s responsibility to withhold them and subsequently pay them on behalf of the employee.

Other deductions can cover employee benefits like health insurance or retirement savings, while charitable contributions fall under the umbrella of voluntary deductions. Wage garnishments for outside issues like child support payments are involuntary.

Employer Contributions

Employer contributions are items that the company has paid in relation to the worker’s employment and taxes. An employer’s portion of the Federal Insurance Contributions Act (FICA) is the most common item to appear in this section. However, other items like matched pension contributions may feature.

Insurance premiums can also be added here. While they are not a form of paycheck stubs taxes or deductions that reduce a person’s overall pay, these items must always be listed. It provides transparency for the employee and ensures that the company’s files and accounts all sync up. It’s another reminder of the support you provide your workers, which could otherwise go unappreciated.

Net Pay Pay Stubs

Finally, the bottom of the employee’s pay check will show the net pay, also known as take-home pay. This figure is the money that they actually receive during the employee pay period after their income tax deductions and other commitments have been taken into account. 

When calculating your paycheck, it’s important to know the gross and net pay, along with all the details of deductions. It’s essential for allowing workers to know exactly what they are paid, how much they will take home, and understand how much they’ve been taxed. In most cases, this is the figure that employees will look at as soon as they receive their paycheck.

Conclusion

The significance of handling payment slips should by no means be overlooked by any employer or HR department due to their role in maintaining a happy workforce. After all, a content and productive team of employees is the greatest asset a company can have.

Now that you can answer key questions like “what are pay stubs?” and “what should be included on a payslip stub?”, there’s no excuse for getting it wrong. Whether using payroll software or not, the results for your business will be excellent.

Frequently Asked Questions
How can I get my pay stubs?

When paid by check, your paycheck will naturally include your pay stubs. If paid through direct deposit, though, employees can request to have their pay stubs printed or emailed. Employers can generate these with ease using their direct deposit details. 

What does a pay stub do?

A pay stub records all relevant data relating to an employee’s pay. This includes their hourly wage, the hours worked, and the deductions (taxes, etc.) made during an employee pay period. It also shows their YTD data.

What if my employer doesn't give me a pay stub?

If an employer doesn't give you a payslip and pays via direct deposit, you can still request the pay stubs for your term of employment. Employers have to keep a record of the hours that you have worked and should find your info within their HR and payroll systems.

How do I get my pay stubs if I have direct deposit?

When you are paid through direct deposit, employers can generate an employee pay stub from the direct deposit info. They can subsequently print them or email a digital copy to you. Alongside giving insight, this info can be used for credit applications like any other stub.

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By Vladana Donevski · April 14,2022
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After all, the average person drinks nearly two cups of coffee per day, meaning there is a considerable opportunity for regular customers. A coffee shop can also sell snacks and become a place for digital nomads to work. With the right interior design, your setting can transform into a bar for the evenings. By working the daytime and evening crowds, you should have an excellent chance of success. However, catering to both audiences will be more costly, as you’ll have to get a liquor license, employ more people, etc. 3. Buying a Franchise Those with more funds at their disposal might consider what franchises in their small towns are for sale. An already established name brand often comes with the advantage of a built-in customer base. Many other aspects of the business will already be settled, too. Over 10% of all companies in America are franchises, and you could become part of this thriving market. 4. Decorating Services Home decorating is incredibly lucrative. As a small-town contractor, you can focus on painting, interior design, assembling furniture, or offer a full-service package for redecorating. If you can help homeowners or landlords get that dream home, or hike up their property prices, respectively, there should be no shortage of work. After all, Americans spend over $400 billion on home renovations each year. You can also look at roofing and double glazing installations as alternative services in this arena. The fact that you don't need a commercial office can save you a lot of money, too. Outside of that, your biggest concerns would be getting all the business permits from your small town’s local licensing office and finding a way to spread the word about your new venture. 5. Accountant People need accountants to handle their personal and business financial matters, particularly their tax returns. It is one of the many service-based businesses that thrive despite the rise of online accounting solutions. Most people prefer a local company and people they can talk to in person to trust with their finances. As long as you provide excellent client support and genuine compassion, this is a phenomenal opportunity to earn big. In fact, the average accountant can expect to earn $70,000+ per year. Of course, this is only possible when you have the necessary skills and qualifications. Nonetheless, if you’ve relocated to a rural area or no longer wish to commute for your current accountancy role, starting a firm of your own can work wonders. You only need a few clients to thrive. 6. Cleaning Company A lot of small-town entrepreneurs may look down on the prospect of opening a cleaning company. However, this industry is expected to show an average CAGR of 6.5% in the following decade. Moreover, it’s a career you can start with minimal experience and without significant expenses. You simply need the cleaning equipment and transportation. Cleaning companies may offer services for home, office, and commercial cleaning, or various other niches. The desire to maintain cleanliness is at an all-time high in the wake of the pandemic, and most clients will require repeat services. Whether it’s a weekly visit to their shop or a monthly visit to a residential property, their value to you will be tremendous. 7. Car Repair Service Every driver loves their vehicle, but they will inevitably face a few maintenance issues from time to time. Small-town businesses in this arena can include mobile mechanic services and local garages. Either way, you can make good money from completing regular repairs or annual servicing. There is also a chance to gain a markup from the spare parts you use. A car mechanic can make around $69,000 per year, while the owner of a larger service may see even bigger returns. A small-town car repair shop could create a monopoly in your local area, especially once the community trusts you to get the job done and not rob them blind. This is the foundation for sustained success. 8. Food Truck Business While restaurants are great, they will tie you to one spot. With the right strategy in place, starting a small-town food truck business may be the better solution. It offers you the chance to participate in local events, move your business to the areas that attract the most foot traffic as the seasons change, and even look for opportunities in surrounding towns. This flexibility can help you overcome many problems. On the other hand, starting a food truck business will require you to master marketing and know your audience. However, if you have a passion for a specific cuisine, it can be your ticket to quick and sustained success. Once you’ve built your reputation in the local area, happy customers will keep coming back for more. 9. Taxi Service Ride-hailing services have been a popular small-business idea for generations, and the digital age has transformed this arena for the better. You can now start a small taxi company in your rural area or look to join an existing service like Uber or Lyft. This gives you multiple options to choose from and allows you to take on as much responsibility as you can handle. The taxi industry market share has grown with a CAGR of 8.8%; this has much to do with the fact that many people want to avoid public transportation in the pandemic world. Your service could include minibus driving for airport transport, company events, or social activities like bachelor and bachelorette nights. 10. Airbnb Operator If your small town attracts many tourists or business visitors, you can take advantage of this with an Airbnb business. If you own an unused property, it is a potentially lucrative environment to break into. The expansion to using two or more properties is straightforward too. The number of domestic vacations booked by Americans is far higher than before. The industry has been stabilizing recently, and you’ll only need to fill the property for a part of the month to cover mortgage and business costs. 11. Beauty Salon Owner Everyone needs some professional hair and beauty time occasionally. Small-town entrepreneurs can open up their own salon or share the space with another local business owner. Alternatively, your business can be mobile - you can visit clients in their homes and render your services there, thus saving plenty in overhead costs for space. This can be particularly beneficial in rural areas. As a hairstylist or beauty technician, you still have to analyze your small-business competition to ensure there is enough demand to accommodate another service or expert. Assuming that there is, you can start earning money immediately. All you need is a toolset, and potentially rental space, and you’ll be good to go. 12. Pet Caretaking People in your small town will be eager to have someone look after their pets. Pet grooming accounts for 42% of all pet care services, so this will naturally be the best place to start. However, you can also look at dog walking, cat sitting, and related services to boost your returns. Even if you live in a small town with just a few thousand residents, there will be hundreds of potential clients for you to reach. If starting a salon is too expensive, you could run the venture from your home or consider a mobile service where you visit clients. If you struggle to create a regular flow of customers in your small town, you can serve people in surrounding towns, too. 13. Grocery Store Owner They say necessity is the mother of all inventions. Therefore, you should ask: “What business does every small town need?” A reliable convenience store is easily one of the top items on the list, as grocery stores comprise over one-third of all brick-and-mortar stores. Of course, your town will already have some. But if there’s a location where adding a grocery store could attract many customers, embrace it. You might be most familiar with 7-11, but independent stores dominate 60% of this market. They are also one of the easiest businesses to start, because you know that there is a market for them - even if there’s one nearby, convenience stores can never be too close to home. When you also sell gas, they can be one of the best rural town business ideas. 14. Personal Trainer A career in personal training can be appealing for many reasons. It is one of several business ideas that help the community, as you would be helping clients live healthy lives. Not to mention that getting paid to stay fit and connect with people is wonderful. The average annual salary of a personal trainer is over $68,000, and you can add to your earnings by becoming a certified nutritionist. As well as targeting your local audience, a strong online presence can open the door to additional services like online training and making exercise programs for apps. 15. Counselor People need help in many aspects of life. With the right education and experience, you can be the person to provide it. As well as being one of the most profitable businesses, beginning a counseling firm allows you to help others. Four in ten Americans (42%) have sought counseling for mental health issues at some point in their lives. However, accessibility is one of the biggest obstacles to getting adequate support for people in small towns and rural areas. On the bright side, this means you can quickly establish yourself as a valuable resource for the people in your area. Your focus can be marriage and relationships, addiction, anxiety and mental health, or even financial coaching. There are as many areas of counseling as there are of life. 16. Photographer/Videographer Photography and videography are incredible skills to possess, and accessibility for amateurs is greater than ever. The stills and videos you take can capture magical events like weddings and birthday parties or be used to help local businesses promote their companies. Either way, perfecting your craft should be the first step toward creating a success story. The average professional wedding photographer can earn over $60k. If you have a monopoly in your small town, though, you may be able to increase those earnings. However, camera and photography equipment - as well as editing tools - won’t come cheap. So, you will need to get some initial funding, and follow tips to save as much as possible in the beginning, while you make a name for yourself. 17. Moving Company People move around less frequently in rural areas than they do in cities. Considering that the population is also much smaller, you may be excused for thinking that moving companies aren’t a great idea. However, every book of entrepreneur tips will teach you that there is always room for success as long as there is an audience. And there is, as people will often want to move away from that town, and into a more populated area. In the same vein, professional movers in rural areas may find that they have a higher number of interstate moves, so individual clients may be worth more. Besides, you can look to complete commercial building relocations and refit services. 18. Real Estate Agency Even if fewer people are buying and selling homes in the area, there are also fewer agents. Roughly two-in-three Americans own property, and the ratio is even higher in rural areas. So, your small-town real estate agency business can still find a fair-sized audience. Depending on your commission, you won’t need to facilitate many sales for a profit. The only real issue you’ll have compared to a city agency is that you may not be in a position to focus on one property type. You may need to deal with houses, apartments, and commercial real estate. Still, people will turn to you when buying a property, and your ability to help them while also aiding the local economy will be a nice bonus. 19. Daycare Working families need daycares for their children, but they can be few and far between in small towns. Childcare is a $58.6 billion industry, though, and you can enjoy a slice of it. When you’re calculating the costs of starting your business, the primary factor in your balance will be whether you operate from home or a rented space. Most will start with the former before moving to the latter once their small-town startups reach the desired level. 20. Catering Service Catering is one of the most flexible industries to get into. Aside from the ability to focus on different cuisines and dietary conditions (e.g., gluten-free recipes), you can target your service at multiple events. Birthday parties, engagements, weddings, funerals, graduations, and other special occasions are all commonplace. Starting a meal-prep business is another form of this idea, and you can integrate it with other small businesses. For example, personal trainers can prepare and deliver healthy meals to help clients with their weight loss or strength-building routines. Catering services can start as micro-businesses, but have excellent growth potential, either by becoming franchises or turning into restaurants. 21. Funeral Director It’s a harsh fact of life that we will all die, and funeral services are never out of place. If your village or rural area doesn’t have a good service for this, it could be the ideal business opportunity. While this may seem a little morbid, it’s one of the business ideas that help the community by supporting families through their most difficult times. Doing your job with compassion is extremely important, too. On a more sobering note, the average funeral costs $7,848. In other words, you won’t need to handle too many of them each month for your small town business to become profitable. 22. Tutoring One of the first things to do in a small town as far as your career is concerned is to think of ways to turn the skills you already have into a business. Tutoring is one of the easiest ways to do this, as it allows you to establish a work-life balance you prefer. Tutoring can include teaching art, music, a secondary language, confidence, or a host of other skills. Again, you can use your online presence to offer your services outside your immediate location. 23. Clothes Store Owner The value of the fashion industry in the US is $409 billion. As well as fashion items, you can look to take advantage of the local climate conditions by selling attire and accessories suited to rural life. As far as good business ideas for a small town are concerned, clothes stores that reach a broad demographic are great. Don’t limit yourself to a specific age range, gender, or size. Keep in mind that a small town will probably benefit more from affordable fashion over luxury lines, so make your clothes reasonably priced, and you’ll be well on your way to profit. 24. Book Store Owner Amazon is the biggest online retailer on the planet, but it started as a bookstore. That alone is evidence of the potential for book stores to thrive. They are some of the most popular small-town shops, especially when managed by an owner who cares about reading and finding just the thing for their audience to read. Over 900 million books are sold in America every year. To give your local store a chance of thriving, you can focus on books relevant to your local area and the bestsellers for customers in your target range. Stationery and craft materials can take your sales to another level, and you could also start a reading club to build excitement. 25. Gardener Like cleaning, gardening is a job that many people simply won’t do. Homeowners may not know where to start or simply feel unmotivated. Meanwhile, business owners probably don’t have the time to take care of landscaping by themselves, too. If you love making outside spaces look beautiful, a gardening service could be one of the best small-town startups for you. In fact, it is one of the few sectors where small-town business owners may have easier opportunities than city workers. The average homeowner in a smaller community boasts more land with their property. Therefore, each client may require more work or a greater level of service. Your earning potential goes up to $50k, on average. 26. Jewelry Maker Making accessories is a chance to be creative while keeping the materials and small-business marketing costs fairly low. As well as making online sales, you can show your wares at your local market, too. There are almost 20,000 jewelry stores in the US, and most consumers actively look for products that come with a high level of customer care. If you can describe the designs, material choices, and other key features with passion, people will appreciate the handmade aspect even more. You can also offer repairs or jewelry cleaning to maximize your earnings. 27. Candlemaking A candle business may not be the first thing you think of if you’re an aspiring entrepreneur, but the market for it is certainly there. After all, seven in 10 households use candles, and they also make inexpensive yet thoughtful gifts. Making candles does not require huge starting capital, and you’ll probably be able to avoid taking out startup bank loans. This is another solution that can begin as a local venture before growing into something larger. You could attend trade events or markets a few towns over, or launch an Etsy store to gain more sales. 28. Marketing Consultant Some of the best small-town business ideas focus on helping other companies. Your town is probably blessed with dozens of small businesses without in-house marketing departments. From creating mobile-friendly websites, to helping them design storefronts and printed materials, marketing expertise can be invaluable. Whether you run a one-person operation or team up with other creatives in the area is your choice. 29. Selling Cars Small-town entrepreneurs who know about cars will discover that selling them is one of the most profitable businesses, especially if you become the primary vehicle vendor in your area. The key is to know the type of vehicles suited to the rural lifestyle and your clients’ preferences. For example, even though the electric vehicle marketplace is growing rapidly, these cars won’t be as appealing to drivers in rural areas, where charging stations are not readily available. As with all business ideas, understanding your customers' pain points will be pivotal to your success. Of course, you can also upsell shoppers on accessories, insurance, and finance. 30. Electronics Repair Waiting for parts deliveries or support for faulty devices is always frustrating. However, it creates a window of opportunity for running an electronics repair store. You can fix anything from smartphones to household appliances, so long as you have the skills - or hire someone who does. The role can be a lot of fun for anyone who enjoys tinkering, not least because each project presents unique challenges. The industry is worth $18.9bn, and your work could save your neighbors a lot of time and money. In turn, this makes you a valuable member of your local community; better yet, it’s probably a service that will never go out of business. The Final Word on Small-Town Business Ideas Many good business ideas for a small town are the same as those in a big city. However, the approach to managing your startup may be different. The key is to be authentic and honest in every aspect of care, while also calculating the costs to keep your venture viable. As long as you focus on something practical, enjoyable, and financially lucrative (at least in theory), nothing can hold you back.
By Julija A. · April 14,2022
When starting a business, the debate of wholesale vs. retail is one of the most significant features of developing your strategy. After all, your decision will influence your approach to branding, selling, and order fulfillment. The overall impact on your bottom line can be huge. There are thousands of success and failure stories in both retail and wholesale. This guide will underline the benefits of either option while also looking at wholesale vs. retail examples in the process. By the end of this article, you should have a much clearer picture of the advantages and disadvantages of both systems. Wholesale vs. Retail: The Definitions There are over 32.5 million businesses in the U.S. right now. While not all of them are in the business of commerce and selling goods, millions of them are. And they all face the same dilemma: go wholesale, retail, or a combination of both. Before deciding which sales approach is right for you, it’s essential to know what they are. The retail definition states that this method of selling revolves around providing goods directly to the consumer or end-user. In most cases, this means selling individual items or products in small quantities. Conversely, wholesale vendors focus on selling products in bulk quantities. While they can also sell products in smaller quantities, it is often done in large volumes. The wholesale trade explanation also states that it involves selling items to outlets and retailers and is rarely focused on selling to the end customer directly. Both the wholesale and retail business models can be used by manufacturers that produce products in-house. Similarly, both models can support brands that focus on acquiring goods from other companies. While not entirely accurate in all cases, wholesale is often used for B2B, while retail focuses more on selling products to customers. Wholesale selling focuses on lower costs because the large volumes mean sellers can afford a lower profit margin per item. Moreover, handling costs and other related expenses are far smaller. Retail companies usually charge more because they are focused on selling smaller quantities per transaction. In many cases, retailers procure their products from wholesalers and subsequently need to add a markup before selling the products on. Wholesale vs. Retail Examples & Statistics Market research is vital in all aspects of business management, especially when looking at the pros and cons of wholesale or retail. Some of the key industry facts you should know include the following: U.S. merchant wholesalers generate $8 trillion of total goods sales per year. U.S. retail sales are over $5 trillion per year and steadily climbing. Around 5.9 million people are employed in the wholesale sector. Small retail business owners in the U.S. can expect to earn around $60-70k per year. Both wholesalers and retailers can make big money if they are supported by a strong business plan and promote the right products to the target audience. When determining the best option for your business, it will be necessary to consider the products you are hoping to sell and whether you are more likely to achieve a large sales volume from retailers or lots of individual sales from end-users. It also makes sense to look at the differences between retail and wholesale methods by analyzing some practical examples. How Retail Works Retailers can range from huge online outlets like Amazon to small local brick-and-mortar businesses. Meanwhile, many large companies like Walmart operate in both digital and physical spaces. In addition to store retailing, companies may look to non-store retailing, covering direct marketing and sales, distance selling, and online sales. Retailing can take many forms, from online fashion stores to department stores or traditional brick-and-mortar stores. However, the fundamentals of business will remain largely the same: The retailer procures products through wholesale purchases, in-house manufacturing, or other methods. It promotes the products to a defined client base of end-users who may be interested in them. Once the products are sold, the retailer fulfills the order. This could mean selling the product in-store, completing an online delivery, or using dropshipping. While running a retail business is complex and involves hundreds of tasks, from hiring sales staff to printing shipping labels, the basic buying and selling model is that you purchase large quantities of a product before selling individual items at a higher price. How Wholesale Works Wholesale involves buying much larger quantities (or manufacturing them yourself) before selling them to retailers. So if you think about the supply chain, wholesalers generally come one step before retailers. There are well over 400,000 wholesale distributors in the U.S. This includes many types, such as those who work exclusively online, some that focus exclusively on dropshipping, numerous discount wholesalers, and more. In general, we can split them into three groups: Merchant wholesalers buy goods and their titles before reselling with a markup to businesses, retailers, and other wholesalers. Agents, brokers, and commission merchants are wholesalers who do not take on the title of the goods. Instead, they serve as a middleman service to negotiate the buying and selling on behalf of their clients. Their payments primarily come through commissions. Manufacturers’ sales offices and branches are wholesale operations that a manufacturer may run to sell bulk orders of their products to other companies and retailers at a discounted price. Whichever route is taken, wholesalers usually serve to bridge the gap between the manufacturer and the retailers who will sell those goods to the end-users. The Pros and Cons of Retail or Wholesale Now that we've given a retail trade explanation and a wholesale definition let’s look at the pros and cons of retail and wholesale distribution. Understanding these should help you determine which arrangement is best for your company. The Pros and Cons of Retail Pros: Higher profit margins. Arguably the biggest benefits of retail revolve around pricing. Wholesalers sell large volumes but only make small profit margins per item. The markups when selling directly to the consumer are far higher. Whether you have manufactured the goods yourself or purchased them from a wholesaler, a 100%+ markup is common. You can utilize multiple sales channels, including online and in-store sales. This means you will see a regular sales flow and serve a much larger customer base than the handful of retailers that typical wholesalers use. Simply put - it creates a more stable business model. Retail offers an opportunity to connect directly with consumers, and stats show that even digitally native firms are now opening more brick-and-mortar stores than ever before. Any entrepreneur that loves the general function of commerce will prefer this route. Aside from deeper connections, modern data analytics will help guide your marketing and customer care efforts. When handled correctly, this may also help you generate more sales and conversions. There is potentially less financial exposure. You won’t need massive warehouse spaces or to purchase large volumes of stock before selling. In fact, dropshipping means that you won’t even need to handle stock or order fulfillments. With internet-based sales, you can even operate from home. There is also more room to offer discounts while still seeing profit margins. You’ll have full control of the brand identity and how products are shown. When relying on department stores and other retailers to sell the goods you’ve produced, their actions could potentially cause a negative impact. Of course, they can have a positive influence too. Still, if you want to enjoy complete control over your sales, retail has an advantage over wholesale. Cons: There is pressure to build a much larger audience base because the average spend of individual customers will be far smaller. This means conducting market research and completing campaigns to reach the right people and find a niche that will bring significant gains. Moreover, retailers will have to continually keep outperforming other online and offline retailers to see sustainably good results. Retailers often face challenges that wholesalers don’t: in-store theft, for example, can contribute to massive losses and happens far more often than large-scale thefts on company warehouses. End-users are also more likely to seek returns, while the operational and staffing costs of brick-and-mortar stores are usually more expensive than what many wholesalers face. Reaching new demographics can be challenging. When your brand identity is focused on a niche, it can be difficult to expand beyond it. Likewise, it will limit which products may be suitable for your retail outlet. If you were to hit a downturn in sales, it might prove tough to find upselling opportunities or new client demographics to rejuvenate your brand. The Pros and Cons of Wholesale Pros: Manufacturers looking to sell their products can significantly improve brand awareness through wholesale distribution agreements. This is because the products will be promoted by a wide range of retailers. As consumers and end-users see your brand more frequently, the likelihood of conversions and an increased company presence on the market will improve. Wholesale opens the door for for entrepreneurs to dropshipping. Retailers will handle the front-end sales and interactions while you deal with the order fulfillment elements following a sale. It allows you to enjoy some of the best features of retail selling without directly reaching out to consumers yourself. Wholesalers can continue to sell bulk quantities to some retailers while dropshipping for others. You can sell internationally with greater ease. The costs of transporting single items to end-users can often make this difficult for retailers, especially when the company is new. Shipping large quantities in one go promotes smoother (though riskier) logistics. This can open the door to working in new territories, especially since the chosen retailer will handle the local sales, and you only have to worry about getting the goods to them. Reduced marketing costs. One of the benefits of wholesale is that you work with retailers who simply want the best product at the best price. They do not need to be sold on a product the same way a consumer would.  Less competition in the wholesale sector.  Most wholesalers work with just a small number of products and manufacturers. Selling in large quantities also offers an opportunity to earn more per client, which is one of the key benefits of wholesale over retail. Cons: Wholesalers often require a significant level of capital and a strong cash flow. If they aren’t the manufacturers, they need to buy massive bulk orders before subsequently selling the smaller packages to retailers. The fact that you need to buy large quantities of stock before making sales while also having to buy and maintain a suite of trucks and delivery vehicles means that you’ll have substantial upfront expenses. The retail vs. wholesale price formula shows that wholesalers often see a markup of around 20% on products. Of course, working with massive quantities means that you can still see large profits overall. Nonetheless, the workload for what is often a small profit margin is one of the significant drawbacks. Meanwhile, damage to a single shipment could seriously harm your ROI, even if the goods are insured. You are still required to complete some marketing aspects, especially if you manufacture the products you are selling. After all, there needs to be consistency across all retailers. This can produce an extra workload without increasing your direct profits. That said, if it helps retailers, you are likely to get larger and more frequent orders. Conclusion As shown above, both retail and wholesale have advantages and disadvantages. In today’s climate, many business owners can combine elements of both selling methods to maximize profits. Setting up two sister websites or brands - one aimed at wholesale and one at retail is a relatively simple task and allows you to enjoy the best of both worlds.  Whether choosing one of the methods or a combination of the two, the most important thing is that you understand how each distribution method will benefit your company and what potential problems each can bring.  When you do, success will be far more likely to follow.
By Vladana Donevski · April 13,2022

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