7. Wholesale Trade

Starting up

Discuss the following questions:

1. What do wholesalers, distributors, resellers and dealers have in common? Give examples of such companies.

2. Are middlemen considered useful?

3. What are the advantages and disadvantages of wholesalers?

Reading

1. Go through the following vocabulary notes to avoid difficulties in understanding.

induce (v.) - persuade	bulk (n.) - mass
fluctuation (n.) - instability	dispatch (v.) - send
storage space (n.) - warehouse capacity	entail (v.) - cause
insufficient (adj.) - scarce, not enough	split up (v.) - divide
undertake (v.) - launch	dispose (v.) - incline
accumulate (v.) - store, save up	commodities (n.) - goods
smoothly (adv.) - without difficulty

2. Read the text again and decide whether these statements are true (T) or false (F).

1. Manufacturers prefer to sell in large quantities.

2. Retailers prefer to buy in large quantities.

3. Wholesalers reduce transport costs by splitting up goods into smaller units.

4. Producers prefer not to dispose of their output as soon as possible.

5. The wholesaler doesn’t want to help the retailer.

III. Now read the text and check your answers to the statements from ex. II.

The retailer can buy his stock from either the wholesaler or the manufacturer. The fact that he will pay a lower price if he buys from the manufacturer may induce a retailer to buy from this source, but generally it is to his advantage to resist this temptation to buy more cheaply. Manufacturers prefer to sell in large quantities, and since most retailers’ businesses are small this would mean their stocking a large quantity of one line of goods and probably having insufficient capital even if they had the storage space to buy other lines. Only by purchasing his stock from a wholesaler can the retailer buy in quantities to suit his turnover and obtain that variety of stock which is an essential feature of this branch of distribution.

Firms engaged in large-scale retail trade, such as multiple shops, chain shops and departments stores can afford to buy direct from the manufacturer, since their turnover is large enough to make it possible for them to buy in large quantities. What actually happens is that these large concerns undertake their own wholesaling.

The importance of the work of the wholesaler can best be judged from the consideration of his functions as a distributor.

1) The breaking of bulk. The wholesaler buys stock from the manufacturer, in large quantities and sells in small quantities to the retailer. This business of breaking bulk is perhaps the main function of the general wholesaler. If the manufacturer dealt directly with all his retail customers he would have to dispatch a large number of very small parcels, many of which would have to travel long distances, and this would entail a great deal of trouble and expense. The more convenient situation of wholesalers reduces the number of parcels to be sent out by manufacturers, and when these have been split up by wholesalers they have to go only relatively short distances, thereby reducing transport costs.

2) Warehousing. The holding of stocks is another important function of the wholesaler. Producers prefer to dispose of their output as soon as possible, since they do not generally make provision for the storage of large quantities of stock. The production of many commodities, too, is irregular, especially farming products, many of which have only one short harvest period each year. Retailers, on the other hand, have to try to satisfy a steady demand. Someone, therefore, must accumulate large stocks when the commodity is available and release it gradually to the market as demand requires, thereby helping to make the economic system run more smoothly. This is one of the most important functions of a wholesaler. Another important economic consequence of the holding of stocks is that it tends to reduce price fluctuations.

3) The wholesaler as a financier. The holding of stocks costs money, but besides acting in a financial capacity in this connection, the wholesaler also helps to finance the retailer by allowing him credit, for many retailers operate on only a small amount of capital. Thus, the wholesaler who holds stocks requires much more capital than the average retailer.

4) The state of the market. Through the retail customers the wholesaler is in close touch with the market, and he can, therefore, assist the manufacturer by keeping him informed of the demand for his commodity.

5) Expert buying and selling. In the case of imported goods which pass through organized produce markets expert knowledge of the commodities and their market is required as well as the ability to assess their quality. Expert buyers and sellers, therefore, are needed.

6) Preparation of commodity for sale. Sometimes the wholesaler packs, grades or brands the goods he buys before passing them on to the retailer. This, however, is not strictly a wholesale function.

Text Comprehension

4. Answer these questions using the active vocabulary of the text.

1. Where can the retailer buy his stock from?

2. What are the advantages and disadvantages of buying from the manufacturer?

3. Who can afford to buy directly from the manufacturer?

4. What is the main function of the general wholesaler?

5. Why do wholesalers reduce the number of parcels to be sent out by manufacturers?

6. Why do producers prefer to dispose of their output?

7. What do retailers have to try to satisfy?

8. Who must accumulate large stocks?

9. What other economic consequence is concerned with warehousing?

10. How does the wholesaler help the retailer?

11. Who keeps the manufacturer informed of the demand for his commodity?

12. What are the wholesalers for in the market?

13. What function does not strictly belong to a wholesaler?

4. Read the text and find the synonyms of the following words and phrases.