Wholesale Trade | Meaning, Functions, Retailer, Types, Middlemen

Wholesaling, or wholesale trade, involves the purchase of goods in large quantities from producers or manufacturers, followed by the resale of these goods in smaller quantities to retailers. A wholesaler acts as an intermediary, obtaining products in bulk and facilitating their distribution to retailers.   Functions of the Wholesaler: To the Manufacturer: Providing valuable information […]

Wholesaling, or wholesale trade, involves the purchase of goods in large quantities from producers or manufacturers, followed by the resale of these goods in smaller quantities to retailers. A wholesaler acts as an intermediary, obtaining products in bulk and facilitating their distribution to retailers.

 

Functions of the Wholesaler:

To the Manufacturer:

  1. Providing valuable information and advice to the manufacturer, such as insights into demand levels for goods.
  2. Offering warehouse and storage facilities to accommodate excess goods, aiding manufacturers in maintaining sufficient space for ongoing production.
  3. Preparing commodities for sale, which may include labeling, packaging, blending, or branding before selling.
  4. Undertaking advertising and promotional activities to create awareness and stimulate demand for goods.
  5. Financing manufacturers by paying for goods in advance and providing transport facilities for efficient distribution.
  6. Engaging in bulk buying, encouraging manufacturers to produce more and benefit from economies of scale.
  7. Sharing the risks associated with production and distribution, such as price fluctuations, changes in fashion, or product deterioration.
  8. Conducting quality control, verifying the quality of products before distribution, including grading commodity products like cocoa.

 

To the Retailer:

  1. Breaking bulk by selling goods in smaller quantities to retailers.
  2. Providing financial support to retailers through credit facilities.
  3. Offering advice and information on new goods and market trends.
  4. Stabilizing prices by regulating supply and maintaining a variety of goods for retailers.

 

Types of Wholesalers or Middlemen:

  1. General Wholesalers
  2. Specialist Wholesalers
  3. Cash and Carry Wholesalers
  4. Factors (or Mercantile Agents)
  5. Brokers
  6. Jobbers
  7. Del Credere Agents (Wholesalers)
  8. Auctioneers
  9. Manufacturer Representatives
  10. Commission Agents

 

Channel of Distribution:

The path through which goods move from producers to consumers can take various forms, such as:

  1. Producer to Wholesaler to Retailers to Consumers
  2. Producer to Wholesaler to Consumers
  3. Producer to Retailers to Consumers
  4. Producer to Agent to Retailer to Consumers
  5. Producer to Agent to Consumers

 

Factors to Consider Before Choosing a Channel of Distribution for a Commodity:

  1. Nature of the commodity (perishable or durable).
  2. Geographical considerations.
  3. Existing and potential demand for the commodity.
  4. Regularity of demand.
  5. Number of retail outlets.
  6. Producer’s capital, financial position, organizational ability, and selling skills.
  7. Size of customer orders.
  8. Quantity of goods involved.
  9. Channels used by competitors.
  10. Cost implications.

 

Reasons for Omitting Middlemen from the Distribution Channel:

  1. Large customer orders.
  2. Perishable goods.
  3. Technical nature of goods requiring after-sales services.
  4. Producer-operated retail outlets.
  5. Customer-specific orders.
  6. Mail-order business.
  7. Durable goods with low turnover.
  8. Expensive goods with advance payment.
  9. Introduction of new products.
  10. Maintenance of fixed prices.
  11. Cooperative Consumers’ Association orders.

 

Why Wholesale Prices Are Lower Than Retail Prices:

  1. Bulk purchases at reduced prices.
  2. Direct purchasing from manufacturers.
  3. Prompt or advance payments for goods.
  4. Availability of trade and cash discounts.
  5. Retailers selling in smaller units.

 

Effects or Reasons to Limit the Number of Middlemen in Distribution:

  1. Increased prices of goods.
  2. Artificial scarcity through hoarding.
  3. Price differences in different areas.
  4. Contribution to inflation.
  5. Encouragement of distribution of fake or sub-standard products.

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