Wholesaling

Wholesaling involves selling products to buyers who are purchasing them for reasons other than personal or family use. Hence, wholesalers buy products from extractors and manufacturers and sell them to other businesses. They do not sell goods directly to consumers. Recent figures show over five and a half million people working in nearly four hundred thousand wholesale businesses nationwide.² Wholesalers can be divided into two broad groups: merchant wholesalers and agents.

Merchant wholesalers

Merchant wholesalers take title to the products they distribute which means that they own them. In other words, they buy and sell products on their own account. There are two types of merchant wholesalers: full-function wholesalers and limited-function wholesalers.

Full-Function Wholesalers. Full-function wholesalers (also called full-service or service wholesalers) are the most common type of merchant wholesaler and perform a wide range of marketing activities. They buy products from many manufacturers or suppliers and store them in warehouses. In so doing they perform a valuable service for their customers (other businesses). For example, supermarkets, hardware stores, drugstores, and auto parts stores carry thousands of items. In fact, they stock so many items that it would be impossible for their managers to contact all the necessary suppliers in order to acquire these products. By bringing together all types of goods from thousands of suppliers, full-function wholesalers offer managers a single source of supply.

Full-function wholesalers sell on credit and provide their customers with information about new products. They have sales representatives who regularly call on customers and deliver goods.

Rack jobbers (a type of full-function wholesaler) place their own display racks in stores and stock them with merchandise. They provide all services for this merchandise. Examples of products that are handled by rack jobbers include housewares or kitchen utensils in drugstores and records or clothing in supermarkets.

Rack jobbers keep their displays neat, clean, and well stocked. The merchandise is often provided to stores on consignment. This means that retailers carry the items without buying them or that the goods are sold with merchandise return privileges. Thus, retailers assume no risk if the products do not sell.

Many full-function wholesalers specialize in a particular line of products such as food items, hardware, medicines, electrical supplies, or dry goods. Some even limit their operations to a narrow range of products such as frozen foods.

Some full-function wholesalers sell only to businesses that use the products in their daily operations and do not resell them in the same form. Examples are wholesalers of dental equipment and supplies, restaurant equipment, office furniture, barbershop and beauty shop equipment, machinery, and industrial chemicals.

Limited-Function Wholesalers. In addition to the full-function wholesaler, there is a second type of merchant wholesaler called a limited-function wholesaler. Limited-function wholesalers provide a narrow range of functions or marketing services for their customers. There are four kinds of limited-function wholesalers: (1) cash-and-carry wholesalers, (2) drop shippers, (3) truck jobbers, and (4) mail-order wholesalers.

Cash-and-Carry Wholesalers. Cash-and-carry wholesalers sell on a cash only basis and do not make deliveries. Their customers typically are businesses that are too small to be serviced by full-function wholesalers. Small grocers, for example, go to the warehouse, select and pay for their goods, and transport them to their stores in their own trucks.

Drop Shippers. Drop shippers (sometimes called desk jobbers) take title to the goods they sell, but they do not take physical possession of these goods. They obtain orders for products from retailers, service organizations, industrial buyers, and other wholesalers. The drop shippers then arrange to have shipments sent directly from extractors or manufacturers to buyers. These wholesalers have offices ‑ hence the name desk jobbers ‑ but do not have warehouses or delivery equipment because they do not perform the storing or transporting functions. Drop shippers are of major importance when bulky goods, such as coal, timber, farm products, or heavy machinery, are involved.

Truck Jobbers. Truck jobbers sell and make deliveries to retailers from stocks they carry in their trucks. They specialize in the sale and delivery of perishable or semiperishable products and are found mainly in the grocery field. Examples of truck jobbers are wholesalers who deliver candy, bread and other bakery items, and potato chips to supermarkets and convenience stores. Unlike full-function wholesalers, truck jobbers do not usually sell on credit.

Mail-Order Wholesalers. Mail-order wholesalers sell through catalogs that are distributed to their customers ‑ mainly small retailers and other businesses in rural areas that are not served by other types of wholesalers. Examples of products that are sold by mail-order wholesalers include sporting goods, jewelry, and hardware. Mail-order wholesalers account for only a small part of the nation’s total wholesaling business.