Back to Ganoksin | FAQ | Contact

Wholesale vs. retail prices

Dear Mr. Emery:

Regarding wholesale vs. retail prices, I had the picture that a
wholesale price reflected the manufacturer’s cost plus a 50% to 100%
profit margin, and that retail was generally twice the wholesale
price. Based on this, I don’t understand why selling to the public at
wholesale or below would be illegal or even unethical, as long as the
price charged represents the seller’s true wholesale price.

Mind you, I am not passing judgement on the advisability of the
practice- I am just puzzled as to why such a practice would be
considered illegal or unethical as long as there is no
misrepresentation being made to the buyer.

Can you clarify?
Lee Einer

I don’t understand why selling to the public at

whether it is illegal or unethical misses one point, the practice of
selling retail with wholesale prices is just stupid. If a
wholesaler goes to the expense of selling retail and doesn’t charge
more to cover those costs they are losing money, not making money.
As well, if a wholesaler’s price covers the cost to do some retail
selling, it is not a true wholesale price and will not be
competitive in the wholesale market.

Perhaps where the legality and ethics come into play is that you
can’t really call a price a wholesale price if you don’t, or can’t
sell it at that price to someone who will resell it. And if you are
selling something to someone who is not buying for the specific
purpose of reselling it then it cannot really be called "wholesale"
because that is what the term implies. It would be interesting to
do a search of the FTC rules to see what the Unfair Trade Practice
law say about using that term. Though, I remember when I lived in
New England some years ago (I can’t remember it was when I lived in
MA or CT) there was a lawsuit brought by the attorney general
against a store because they used the term wholesale and yet
collected the retail sales tax on the items sold and could not show
that any product was sold for resale at the same price that it sold
to the public.


An artist can sell his work for what ever price his wishes to sell
it for. The problem of pricing becomes a little more complicated
when they sell to the pubic and to stores and galleries. If an
artist sells only to the public his price might be considered a
retail price. If they sell to a store or gallery the price should
be considered a wholesale price. Ethically the artist should not
sell to the public for the same price they sell to a store/gallery.
If they do they are undercutting the store/gallery. A customer who
buys for from a store and then finds the artist selling the same
item for a price much lower than they paid at the gallery will be
very upset.

I some cases the artist will set his price and notify the
store/gallery that he will sell to them for the same price he
charges the public. If the store/gallery buys this arrangement so
be it. This might happen where the artist sells to the public in
one part of the country and to stores/galleries in another part of
the country.

My thoughts Lee

Mr. Einer, Your assumptions about mark-up and pricing have nothing to
do with the terms “wholesale” and “retail”. Nothing. State cod es
define those terms quite clearly and Federal Trade Commisssion
Guidelines exist as well. Those Guidelines MAY be used by a sitting
judge in any jurisdiction in the US as law, so, as a practical
matter, the Guidelines are often seen as law in the courtroom. When
they are NOT, the courts refer to State codes, all of which are
written in accordance with the F TC Guidelines anyway. There are a
few VERY minor exceptions, that have no practical importance.
WHOLESALE means the sale is taking place to someone who is licensed
to re-sell the goods, and the end prupose of the sale is to actually
re-sell the goods to another distributor or the end user. I buy a
diamond from a wholesaler through my b usiness with the intention of
re-selling it. If I’d like to make a profit, I must mark it up, but
the law does not REQUI RE me to mark it up. If I want to lose
money, that’s my own business. If I decide to wear that diamond
instead of re-sel ling it, I must pay the state either the
appropriate sales tax or a use tax because I have taken that diamond
OUT of the wholesale to retail chain and used it for my own
purposes. I have become the end user, and the state considers that
a “r etail sale” and the tax due and collectible.

RETAIL means the sale is to an end user, and the appropriate taxes,
if any, must be collected and forward to the state. Now, obviously,
most business owners BUY from a wholesaler (no sales or use tax is
due), and re-sell to an end user, hope fully marking up the piece in
the process. If I buy a diamond for $50.00 and re-sell it for
$50.00 I owe the state the a ppropriate taxes, because I made a
retail sale. If I sell that diamond to another dealer, for re-sale,
I don’t have to c ollect any tax because the tax is only due when the
goods pass to the END user. No one cares whether I pass it on to the
dealer for $5.00, $50.00 or $500,000.00, it’s still a wholesale
transaction, and the state requires that I have a signed affidavit
on hand from each business entity or person to whom I make a
wholesale sale. That affidavit says that they are not using it for
their personal use, they are re-selling it.

NOW…all states have laws which forbid me making an ad saying
"Wholesale to the Public". It’s misleading and deceptiv e. It has
nothing to do with comparative pricing or how much is charged, it
has to do with the NATURE of the sale, wheth er the state requires
taxes be collected. The “ignorant” (of the law) public thinks the
term “wholesale” means they’re g etting it at true dealer cost, and
that’s obviously not the case. As a seller, you CAN sell the goods
at your actual who lesale cost, losing money in the process, if you
wish, but you won’t be around long. If you calim "Wholesale prices"
and you are challenged, you must show your original invoices and you
better not have sold for a penny more than YOUR actual cost, or
you’ll lose your business, pay hefty fines and maybe spend time in
jail. ESPECIALLY if your competition complai ns to the state.

If you’re violating these laws you are guilty of deceptive
practices, Federal and state. If you cheat the public, you’d cheat
me. I don’t to do business with anybody like that, and neither
should you. Further, these people give an honorable business a bad
reputation, and when I discover someone doing that, I’ll complain to
the proper authorities. Even further, I’ll bet that our benefactor,
Dr. Aspler would not want that business or person on this network.
How’s that for a reply?

Wayne Emery

Lee, If you are selling to the public you are not selling wholesale.
Wholesale, by definition, is selling something to another for resale.
That is the law and it is quite clearly stated and sometimes
enforced in most parts of the country. Since you are selling to the
public you cannot advertise your prices as wholesale prices as there
is always someone who is selling the goods, in some form, to you, and
you are selling to the public–which is not defined as wholesale.
One of the reasons this practice is considered unethical is because
it has been found over a period of time that most of the people who
represent their prices in this way are usually lying and because they
almost always have some source for the goods in which the price (the
real wholesale) is lower. Daniel R. Spirer, GG Spirer Somes Jewelers
1794 Massachusetts Ave Cambridge, MA 02140 617-491-6000

All, Selling to the public is indeed retail. I agree. My post were
to tell all that manufacturers like myself are pushed to the point
that the only market we have left is to sell directly to the public
at the same prices we would sell to Jewelry Store Owners. As far as
losing customers: There is nothing left to lose. You have already
left us. Geller economics, memos, and foreign suppliers have all
filled the Jewelry Store Owners needs. You can shop around wherever
you want and find similar stones at better prices than I can
manufacture. The buying public though is a different story. I can
market directly to them and have a customer base. Call it wholesale
to the public or call it the best stone at the best price. It will
be the exact same thing. You want to stop me, step up and buy. Pay
a little more for a quality cut stone. Buy often and buy a lot. I
will be open for sales at Tucson in the GemMall at G+LW.

Gerry Galarneau

    Regarding wholesale vs. retail prices, I had the picture that
a wholesale price reflected the manufacturer's cost plus a 50% to
100% profit margin, and that retail was generally twice the
wholesale price. 

I wish a manufacturer could make those kind of margins 50 - 100 %…
Normally, Your lucky to make between 8 and 16 % over the course of
the year !!! Remember, A manufacturer has a far higher overhead as
we have usually a lot of employees, larger spaces to rent or own
and the orders are not steady through out the year, so you actually
have a few months that could easily cost you more than what you take
in. If you lay off employees while your slow, you may have problems
re hiring them and then you have to begin training new employees.
Daniel Grandi