Home Trade: The Wholesale Trade
Wholesale trade deals with the bulk buying of goods from various manufacturers and the breaking down of this bulk into smaller quantities which is then sold to the retailer. Wholesaler is a intermediary distributer.
- Buys in bulk from different producers.
- Looking for a good source of supply.
- Bears the risk, if products are damaged, spoilt or stolen.
- Transportation from the producer to warehouse and from warehouse to the retailer.
- Bulk breaking.
- Purchasing in cash from producer.
- Selling on credit to the customer.
- Link between producer and his market.
- Providing technical help to small scale retailers.
- Maintaining stability in price.
Comparison of Large Scale Retailers and Wholesalers
- Purchase in bulk.
- Purchases directly from the producer.
- Purchase in cash.
- Bulk breaking.
- Risk bearing.
- Large capital.
- Specialist staff.
- Invest in fixed assets.
- Transportation from producer to warehouse.
- Link between customer and producer.
- Work as private and public limited companies.
|Large Scale Retailers||Wholesalers|
|1.||Sell to end customer.||Sells to SSR.|
|2.||Can sell in smaller quantities.||Sell only in large quantities.|
|3.||Sell on cash.||Sell on credit.|
|4.||Normally do not provide home delivery.||Normally provide transportation to SSR.|
|5.||Impersonalized services.||Provide support to SSR.|
|6.||Can perform branding and advertisement.||Do not perform branding but can advertise.|
|SSR= Small Scale Retailers|
Importance of Whole Scale Retailers in Distribution channel
- Producers are relieved of the risks.
- Producers are relieved of storage of products.
- By providing prompt cash, cash flow problem is reduced.
- Due to purchase in bulk, production line are cleared.
- Transportation is provided by wholesalers.
- Feed back of market.
- Variety is provided from different producers.
- Wholesaler provide credit.
- Wholesaler provide transportation.
- Educate SSR on new products, shop layout and advertising.
- Pack and grade before selling to SSR.
- Sell in small quantities.
- Warehousing is done by wholesaler.
To End Customer
- Convenience (products are available to SSR through wholesaler).
- Competitive rates.
- Continuous availability of products.
- Price fluctuations are minimized.
- Customer demand is met.
The role of wholesaler is on decline
- Large scale retailers.
- Branded items advertized and pre packed by producers.
- Banks provide easy loans and thus Large scale retailers.
- Need of one stop shopping.
- Transportation and inventory management has become easy.
Instances where wholesalers are eliminated
- High value items (producers directly to customers).
- Branded items.
- Products are highly technical (training secrets).
- Producers are resourcefully strong (Producers own retail outlets).
- Products are very perishable (for example bakery).
- Customized items.
- Small market.
Instances where wholesalers are still involved
- Standardized items.
- Seasonal production (farm products).
- Unbranded items (farm products).
- Large markets.
- Producers do not have resources.
- Imports and exports.
Recent Trends in Wholesaling
- It is a wholesale supermarket, where retailers can buy goods in bulk at low prices.
- No credit nor delivery of goods are provided.
- Generally located in commercial areas.
- Cheap goods due to self service.
- No restriction on purchase of a minimum quantity.
- Wholesalers and retailers enter into a agreement for purposes of mutual commercial benefits.
- Under this agreement all parties agree to work under a common name and symbol.
- Retailers agree to buy exclusively from specific wholesaler.
- All are responsible for their own profit and loss.
- Advantages to retailer:
- Confirmed source of supply.
- Cheap source of supply.
- Full technical support from wholesaler.
- Advantages to wholesaler:
- Assured amount of turnover.
- Consolidated order.
- Administrative cost becomes low.