Are a merchant and a retailer two of the same, or are they in fact different — and if so, how important is it to distinguish them for business activities? Let’s dive in and figure out the Merchant vs Retailer conundrum once and forever.
What is a Merchant?
In general sense, a merchant is a single entrepreneur or company who earns money on reselling goods. Speaking in simplistic terms, you can call a merchant anyone who buys goods and then sells them to other people and businesses.
Note: the term can be used in some specific senses depending on the context. For example, a merchant bank is a bank that provides financial services to merchants. In some countries, a merchant bank is an investment institution for businesses.
Merchant Ecosystem
The merchant is a pretty broad term. To make things clearer, let’s look at the three common merchant types.
| Type | Description | Example |
| Wholesale | Works in the B2B sector: purchases goods in bulk from a manufacturer and resells them to smaller entrepreneurs with a margin. Usually, they have their warehouses where they store all goods for sale. | A company called Global ED purchases electronics — smartphones, laptops, etc. — in bulk. Their customers are local electronic stores that purchase these items in smaller quantities and then sell them to their own clients. |
| Retail | Works in the B2C sector: Purchases goods from a wholesale merchant and resells it to individual customers at a markup price. Retailers usually buy and sell goods in smaller quantities than wholesale merchants. Their job is to position the products on the market in such a way, so that they address the needs of the right target audience. | One of the Global ED clients is Quantum Byte Bazaar, an electronic store specializing in PC components. They purchase processors, graphic cards, motherboards, etc. from Global ED and then put them all in stock in their offline and online stores. |
| Ecommerce | Sells their products online: on their website or via marketplaces. Ecommerce merchants typically market their products, take care of accounting, paperwork, payment processing, and data security. | The online platform Netflix provides subscription services to end-users. |
Some researchers also distinguish a fourth type, an affiliate merchant. It is an individual or a company that helps other businesses sell more products by referring prospects, driving traffic and generating leads. However, this term describes a marketing role that businesses take on when they wish to boost their sales rather than a full-scale business model.
Here is an example: Amazon, one the largest ecommerce players in the world, launched an affiliate program, in which content creators advertise products on sale on Amazon and earn 10% of the resulting sales. Not only does this initiative promote the platform itself, but it also drives traffic to the individual sellers allowing them to get new clients.
What is a Retailer?
As you see from our example above, a retailer is a particular case of a merchant that sells goods to individual customers. A retailer is any shop, drug store, or your favorite marketplace where you purchase goods as an individual client.
Retailer Examples
Now, let’s mention top popular retailers to create a better understanding of this term on real examples.
Supermarkets - Walmart, Kroger, 7-Eleven
Drug stores - Walgreens, CVS
Merchant vs. Retailer: Summing it Up
Both a merchant and a retailer:
- Purchase goods either from wholesalers or manufacturers
- Manage stock and storing.
As for the differences between the two, we’ve summarized them in a simple infographic below.
And, the final important point: today, the e-commerce market is rapidly growing. It means that digital merchants and retailers require new solutions to stay competitive. One of them is NumberX, a service that will take all the financial and accounting part of your business upon itself.
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