A retailer wholesaler is a distributor who purchases a large amount of goods from a factory or manufacturer. In turn, that person then sells the goods, typically in large quantities, to a retailer at a fixed price. The retailer generally owns a store or Internet business, and is the point at which the goods are actually sold to the consumer.

The ability to purchase goods in large quantities, and the presence of several relationships with manufacturers and factories, usually dictates the success of a retailer wholesaler. These relationships allow the distributor to be on a first-call basis with a manufacturer when the manufacturer has excess merchandise that needs to be moved. Some factors that could contribute to this excess include an unusual climate or social event — both of which cannot be controlled. Others reasons can be due to a canceled purchase from a customer, a change in product design, or a change in industry need.

A distributor is generally in the position to purchase the excess merchandise and then make it available to retailers. Business transactions between a manufacturer and a retailer wholesaler are usually with the understanding that the price the retailer wholesaler will pay per item is generally at a significantly reduced price. Despite the reduced rate, the manufacturer benefits by being able to sell the goods for any amount, rather than taking a loss on the entire production run.

Once the distributor purchases the items from the manufacturer, he or she will contact potential buyers at the retail level. The business of retailer wholesaler tends to be relationship-based, as transactions can be expedited quicker with two parties who understand the goals and have an established trust. A retailer wholesaler who understands the business needs of his or her retail customers is also able to offer a service by offering the purchase opportunity on goods that the retailer truly needs.

The retailer who purchases goods from a retailer wholesaler usually does so at a much lower cost than if the goods were purchased direct from a manufacturer's representative. Also, a retailer could benefit in other ways. If he or she has a successful purchase negotiation with the retailer wholesaler, the retailer can pass the savings on to consumers by pricing goods at a reduced rate.