Marketing Aptitude: Wholesale

The wholesaling, jobbing or distributing is the sale of goods or merchandise to retailers; to industrial, commercial, institutional, or other professional business users; or to other wholesalers and related subordinated services. A wholesaler is a businessman who specializes in performing wholesale activities. The term “wholesaler” applies to all merchant middlemen who purchase and sell the goods in bulk. They take title of goods and resale the goods at a profit with commission. The term “Wholesalers” has been defined by many eminent scholars as under:

  • American Marketing Association: – “Wholesalers buy and resell merchandise to retailers and other merchants and to industrial institutions, and commercial users, but do not sell in significant amounts to ultimate consumers.”
  • W. Cundiff and R.R. Still: – “Wholesalers buy and sell merchandise to the retailers and other merchants and not to the consumers.”
  • Morris E. Hurley: – “Wholesalers are marketing middlemen who occupy a position midway between retailer and the producer or manufacturer.”
  • Evelyn Thomas: – “A true wholesaler is himself neither a manufacturer nor a retailer but acts as a link between the two.”
  • B. Giles: – “Wholesalers may be said to provide the economic utilities of time, place and possession which may lead to economy in distribution of adequate stock to be available at the right time in a convenient location.”
  • William J. Stanton: – “Wholesaling and wholesaler includes the sale and all activities directly incident to the sale of products or services to those who buy for the purpose of resale for business use.

Characteristics of Wholesaler

  • Position: – Wholesaler occupies the first & very important position in the channel of distribution.
  • Procurement in bulk quantity: -He purchase goods in large quantities from producers and sells in small lots to retailers. It is one of the important characteristics of the wholesaler.
  • Sale to other dealers: – The wholesaler sells goods to retailers. He does not come into direct contract with the ultimate consumers.
  • Buying directly from manufacturer: -Usually, the wholesaler buys directly from the manufacturers or producers.
  • Restriction to one or few goods: – Usually, wholesaler deals in a few types of products or in a limited product line. He specializes in the product line.
  • Personal service: – He operates in a specific area determined by producers. He is a vital link between the producer and the retailer.
  • Transportation & warehousing: – Wholesalers provide ready delivery of goods by having transportation and warehousing facilities.
  • Financial assistance: – The wholesaler purchase goods in cash from manufacturers (or producers) and sell them to retailers on credit.

Classification of Wholesalers

On the basis of specialty, the wholesalers are classified into following ways:

  • General Merchandise Wholesalers: -These are service wholesalers who carry a wide variety of nonperishable items such as dry goods, hardware, furniture, farm implements, electric equipments, sports goods, house-hold appliances, etc.
  • Single-line (or general-line) Wholesalers: – These are those type of wholesalers who offer complete stock in one major line, e.g., stationery goods,  stock of razor blades, soaps, automobile spare parts or may be hardware appliances, etc. They are important distributors of consumer and industrial goods.
  • Specialty Wholesalers: – These are those wholesalers who deal only in specialized goods such as food products, electrical goods, etc. They help those retailers who wish to buy a wide range of goods of the same line. They focus on a particular type of product, and are much better able to answer specific questions about particular products, or to make recommendations based on the needs of your customers. 
  • Rack Jobber: – They deal in the specialized line of products viz. toiletries, house wares, etc. They sell the products on consignment basis to retailers and supermarkets and also provide many special services. The products are supplied to retailers, but rack jobber retains the title to goods till the retailers sell them off. The main thing is that rack space is provided in the retail store for rack jobbers.

On the basis of area covered, the wholesalers are classified into following ways:

  • Local Wholesalers: – They purchase the products from the producers and deliver them to the local retailers.
  • Provincial or State Wholesalers: – They purchase the products and sell them to retailers in a particular district or state. 
  • National Wholesalers: – They are located at strategic places and from there distribute the products goods to the retailers all over the country.

On the basis of operations, the wholesalers are classified into following ways:

  • Industrial Wholesalers: – They deal only in industrial products and sells directly to the industries users rather than to retailers. Such products may be semi-product parts, portable electric tools, hand tools, accessories, small equipments, etc.
  • Agricultural Wholesalers: – They purchase the agricultural products directly from the cultivators or farmers. They deal in fruits, vegetables, spices, tobacco, food grains, etc.
  • Mail order Wholesalers: – They carry their business through mail by conveying to retail, industrial and institutional users about the main features about the product.

On the basis of method of operation, the wholesalers are classified into following ways:

  • Limited Function Wholesalers (or limited service wholesalers): -These are merchant wholesalers who provide only some wholesaling functions to their suppliers and customers.
  • Functional Wholesalers: – These kind of wholesalers falls under the category of agent middlemen. They do not take title to goods which they handle. Their main function is to facilitate selling, although there are some buying functional middlemen. They are classified into following ways:

  • Brokers: – These are those agents who have no direct and physical control over the goods in which they deal. They only arrange transactions between a buyer and a seller for a commission when the deal is executed. Their commission is determined according to custom of the particular trade or by law and is computed commonly either as a fixed percentage of the value of the transaction or on a sliding scale (higher the value, lower the percentage).
  • Drop shipment Wholesalers: – The drop shippers do not physically handle goods they deal. They leave the responsibility of storage and transportation activities to the producers. They simply collect orders from retailers and pass them on the manufacturers who deliver the goods direct to the retailers. . Such wholesalers are found in industrial marketing. For example, coal, timber, heavy equipment, sand, clay, etc.
  • Commission merchants: – They are mostly found in the agricultural marketing field and handle the selling function for large numbers of producers. Such a merchant undertakes to sell the goods in the name and on the sole risk of the principal. Such a merchant may also be employed for the purchase of goods on behalf of the principal.

  • Selling Agents: – The selling agent is an independent middleman, who operates on a contractual basis. He has given an exclusive franchise only for a limited market segment. He performs the functions of independent middlemen taking overall selling activities of a producer. He negotiates sales of merchandise produced by his principal and has full authority and control over the prices and the terms and conditions of the sale. In short, he is the sole selling agent for the line, he represents. The selling agent is prominent in the textile and drugs and pharmaceutical industries, where many small producers have to sell products fast and at the lowest possible cost.
  • Manufactures agent: -These agents work for several non-competing manufacturers and act as sales representatives for them in a territory. Their main job is to call on and sell to wholesalers and industrial buyers. As a rule, the manufacturer’s agent does not handle goods. He sends the orders to the manufacturer, who in turn delivers the products direct to buyers.

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