Selling goods to different persons or an organization as a whole except the end consumer is known as wholesaling. Wholesalers are one of the links in the channels of distribution who help in passing the goods into the marketplace. As middle agents, wholesalers enable transportation, storage, and sale of products to the intended consumers. The importance of wholesalers for small retailers is much more than the large retail companies as the latter buy the products directly from the producer and sometimes they have their own mediator warehousing operations.
According to E.W. Cundiff and R.R. Still “wholesalers buy and resell merchandise to retailers and other merchants and to industrial, institutional and commercial users, but not sell in significant amounts to ultimate consumers”.
Marketing function of wholesalers are as follows:
- For obtaining goods, wholesalers provide broader geographical access.
- By minimizing the number of producer contacts, wholesalers provide cost-effectiveness.
- By buying the goods in bulk and distributing them in smaller quantities, they help in minimizing the buyer transportation cost.
- To understand the concept of consumerism in the process of production, wholesalers tend to work with producers.
It is very clear that a wholesaler is an imperative link between the producers and the retailers.
Types of wholesalers:
Merchant wholesalers are considered the most common type of wholesalers. They are engaged in FMCG industries (Fast Moving Consumer Goods), Private label industries and agriculture industries. These wholesalers buy the products straight from the producer and then sell it to the end user. They are free to use any channel and are not bound to sell online or to retail only.
In case of any damage or loss in between the course of buying and selling of the product, it is to be borne solely by the merchant wholesaler.
For example, a wholesaler of vegetables buys the stock from the farm directly and then store it in his warehouse. After that, he sells the produce either to the retailers or the consumers. In case of any loss because of spillage or any other damage, it will be borne by him.
In FMCG industries, many companies sell their products through merchant wholesalers. The reason being they have complete control of the region they are operating in. The companies are benefitted as the wholesalers buy the product in bulk from them and also take the charge of all the risks and loss that they might face.
Retail wholesalers also knew as full- service wholesalers are mostly engaged in Consumers durables and engineering products. They give full service to the retailers. These types of wholesalers mainly function in the retail market. The responsibility for everything except service of the product is on the retails wholesalers.
For example, LG wants to increase its area of operation in region 1 but the problem is non- availability of a sales office in that particular region. In such case, it appoints a distributor who can work in that region. The responsibility of the distributor will be picking, delivery, training of staff members and sales associates, marketing and advertising of the products of LG brand. The distributor will work as a full-service wholesaler.
Though, maintenance and service of the product will not be a part of retail wholesaler’s responsibility.
Limited service wholesalers
The function of limited service wholesalers is to stock the goods of a particular company and then selling it in a limited channel. These wholesalers do not cover all the channels and their turnover is limited.
For example, Company A wants to sell its goods online but the company is well aware that there can be a huge price war if it allows local distributors to sell the products. That’s why the company appoints an online wholesaler. This wholesaler has only limited jobs like to buy the goods, stock them and then to sell it.
Agents and brokers
Agents and brokers are mostly engaged in the real estate sector and in the chemical markets. The broker does not have to suffer any risk on his own. There is a producer on one side of the broker and the buyer on the other side. His only work is to crack the deal and to get a commission.
For example, there is a small lab who has a regular requirement of different lab material and there is a wholesaler in their area who works as a broker for many companies. The lab owner approaches the broker to buy the material. After talking with various manufacturers, the broker struck the deal. He gets the commission of 2% for his work. The work of the broker is to arrange the meetings with the suppliers to earn commissions.
These wholesalers are engaged in wholesale of specialized products.
For example, a wholesaler of used cars who are engaged in selling the used cars to the customers or other dealers. He knows all the ins and outs of selling a second-hand car and renovating the used cars.
Specialized wholesalers are known for the product that they sell.
In the developing economies, as e-commerce tends to rise, the requirement for wholesalers is very less. Though various types of wholesalers are still used in the emerging markets.