Wholesaling is defined as a set of activities that are carried out to sell a product or service to a reselling business or entity. Wholesalers are involved in carrying out wholesaling activities.
Mostly, wholesalers purchase from manufacturers and sell to industrial consumers, retailers, and other wholesalers.
Importance of Wholesalers:
The importance of wholesalers is quite significant in the marketing of goods or services, and that is why they are connected with almost all manufactured products. The following are some important channel functions performed by wholesalers.
Selling and Promoting:
Wholesalers facilitate manufacturers in the selling and promotion of their products by using their contacts at a low cost. Buyers are more influenced by well-known wholesalers than by distant manufacturers.
Buying and Assortment Building:
Wholesalers purchase bulk quantities of different types of products from various manufacturers and prepare proper assortments of these products. In this way, customers are conveniently facilitated, saving time and effort.
Bulk Breaking:
Wholesalers purchase in large quantities and sell in smaller units, thereby breaking the bulk for the convenience of customers.
Warehousing:
Wholesalers also provide warehousing facilities to reduce the inventory costs and risks of manufacturers and customers.
Transportation:
Wholesalers are much closer to customers compared to manufacturers, so they can provide quicker transportation services.
Financing:
Wholesalers also provide financing to their buyers by allowing credit. They also make immediate orders and quick bill payments to manufacturers.
Risk Bearing:
Damage, theft, and spoilage costs are borne by wholesalers as they absorb the risks associated with products.
Market Information:
Information about new products, competitors, and price developments is provided by wholesalers to customers and manufacturers.
Types of Wholesalers:
Wholesalers are divided into the following types:
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Merchant Wholesalers
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Brokers & Agents
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Producers’ Sales Branches and Offices
Merchant Wholesalers:
Wholesaling businesses that work independently and take the title of the products they handle are called merchant wholesalers. In different industries, they are known as distributors, jobbers, and mill supply houses.
Merchant wholesalers are further divided into the following two types:
a) Full-Service Wholesalers
b) Limited-Service Wholesalers
Full-Service Wholesalers:
They are involved in the provision of full-line services like:
• Carrying stock
• Maintaining a sales force
• Offering credit
• Making deliveries
• Providing management assistance
They are further classified as:
i) Wholesaler Merchants
ii) Industrial Distributors
Limited-Service Wholesalers:
They offer fewer services than full-service wholesalers. They are classified into the following categories:
i) Cash & Carry Wholesalers
ii) Truck Wholesalers
iii) Drop Shippers
iv) Rack Jobbers
v) Producer Cooperatives
vi) Mail-Order Wholesalers
Brokers & Agents:
These types of wholesalers do not take the title of products; they only facilitate the buying and selling of products. They obtain a commission on the selling price of products and specialize by customer type or product line. They are further divided into the following types:
a) Brokers
b) Agents
Brokers:
Brokers assist in negotiations by bringing buyers and sellers closer to each other. The party that hires the broker pays them, and the broker is not involved in inventory carrying, financing, or risk-taking.
Examples of brokers include real estate brokers, food brokers, security brokers, and insurance brokers.
Agents:
Agents represent either sellers or buyers on a more permanent basis than brokers. They are further classified into the following types:
i) Manufacturer Agents
ii) Selling Agents
iii) Purchasing Agents
iv) Commission Merchants
Producers’ Sales Offices and Branches:
Wholesaling activities carried out by producers or customers themselves are included in this category. Independent wholesalers are not involved under this head, and separate offices or branches are dedicated to either the purchase or sale of products.
Sales Offices and Branches:
These institutions are set up by producers to improve selling, promotion, and inventory control.
Inventory is carried by sales branches in industries such as lumber and automotive parts & equipment. On the other hand, in industries like dry fruits and notions, inventory is not carried by sales offices.
Purchasing Offices:
They are part of the purchaser organization and play a role similar to agents and brokers. In major marketing centers, purchasing offices are established by many retailers.
