Wholesaling

It's hard to define what a wholesaler is because there are so many different wholesalers doing different jobs. Some of their activities may even seem like manufacturing. As a result, some wholesalers describe themselves as “manufacturer and dealer.” Some like to identify themselves with such general terms as merchant, jobber, dealer, or distributor. And others just take the name commonly used in their trade — without really thinking about what it means.

Wholesaling is concerned with the activities of those persons or establishments which sell to retailers and other merchants, and/or to industrial, institutional, and commercial users, but who do not sell in large amounts to final consumers.

So wholesalers are firms whose main function is providing wholesaling activities. Producers who just take over some wholesaling activities are not considered wholesalers. However, when producers set up branch warehouses at separate locations, these establishments basically operate as wholesalers.

Wholesalers perform certain functions for both their suppliers and the wholesalers' own customers — in short, for those above and below them in the channel. Wholesaling functions really are variations of the basic marketing functions. Keep in mind that not all wholesalers provide all of the functions.

Wholesalers perform a variety of activities that benefit their customers. They:

1. Regroup goods — to provide the quantity and assortment customers want at the lowest possible cost.

2. Anticipate needs — forecast customers' demands and buy accordingly.

3. Carry stocks — carry inventory so customers don't have to store a large inventory.

4. Deliver goods — provide prompt delivery at low cost.

5. Grant credit — give credit to customers, perhaps supplying their working capital. This financing function may be very important to small customers.

6. Provide information and advisory service — supply price and technical information as well as suggestions on how to sell and service products.

7. Provide part of the buying function — so customers don't have to hunt for supply sources.

8. Own and transfer title to products — help complete a sale and speed the whole buying and selling process.

Wholesalers also benefit producer-suppliers. They provide producers with access to a target market — the wholesalers' customers. A particular wholesaler may be the only one who reaches certain customers. The producer who wants to reach these customers may have no choice but to use that wholesaler. Wholesalers also:

1. Provide part of a producer's selling function — by going to producer-suppliers instead of waiting for their sales reps to call.

2. Store inventory — reduce a producer's need to carry large stocks thus cutting the producer's warehousing expenses.

3. Supply capital — reduce a producer's need for working capital by buying the producer's output and carrying it in inventory until it's sold.

4. Reduce credit risk — by selling to customers the wholesaler knows and taking the loss if these customers don't pay.

5. Provide market information — as an informed buyer and seller closer to the market, the wholesaler reduces the producer's need for market research.