Wholesaling includes all marketing transactions in wich buyers purchase products that will be sold to other intermediaries or retailers or that will be used in making other products . Wholesalers do not sell products to final consumers . Wholesalers sell to other wholeslers , to manufacturers, and to retailers .
The succes of manufacturers depends on their ability to make products for selected markets , but the succes of wholesalers depends on their ability to serve selected markets . The most significant resource for wholesalers is their intimate knowledge of a products and the service requirments of their customers .
FUNCTIONS OF WHOLESALERS
We know that wholesaling represents a significant amount of business activity in our economy . But what do wholesalers really do ? They perform eight important fuctions : CONTACTING , SORTING, DEMAND STIMULATION , INVENTORY MAINTANCE , INFORMATION TRANSMITTAL , TRANSPORTATION , FINANCING , and MANAGERIAL ASSISTANCE . Let´s look at each of them now:
Contacting
The single most important function of wholesaling is to estabilish links between producers and consumers . We illustrate “contacting” on the following example : In a system of 3 manufacturers , 3 customers , and no wholesalers , a total of nine contacts or exchanges are necessary for each manufacturers to reach each customers . But with a wholesaler , the number of contacts drops to six . Distribution costs decrease as the number of required contacts decreases .
Sorting
Wholesalers perform two sorting tasks . First , they buy goods in large quantities and devide these puchases into smaller quantities for relase to their customers . Second , wholesalers carry produts from manufacturers and rearrange or sort them into more suitable combinations to resale . This can cut down shopping time for wholesalre´s customers .
Demand Stimulation
Wholesalers help manufacturers to sell merchandize . Well costructed advertising and sales promotions are used . Wholesale advertising takes the form of advertisment in trade journals and sales promotion displays used by retailers . Occasionally , wholesalers also provide cooperative advertising grants to retailers for specific products .
Inventory Maintenance
The presence of wholesalers in a distribution system allows inventory levels througout the system to be lower , just as it reduces the number of contacts needed to link producers and final consumers .
Infomation Transmittal
Wholesalers also act as communication links between producers and final consumers . A manufacturer can easily become isolated from customers when several levels of intermediaries are introduced into the distribution channel . If the manufacturer is to make products that continue to satisfy the needs and wants of customers , it must have timely and reliable information about product sales . Wholesalers are closer to consumers and industrial markets , and it is their businnes to know wich products are selling today wich are likely to sell tomorrow . Alert wholesalers pass back this information to manufacturers .
Tranportation
Wholesalers deliver products to industrial and retail customers . They also install purchased equipment and even place merchandise on retailer´s shelves . Many of the products we see on local supermarket shelves were actually put there by wholesalers , not by store personnel . Still the most important transportation function of the wholesaler is to provide rapid merchandise delivery .
Financing
Wholesalers often finance their customer´s purchases . Typically , they extend credit for 30 days with a discont of 1 to 5 percent for early payment . Some wholesalers also will finance inventory to help a promising new customer get estabilished . If it is a good credit risk , the new customer firm may be given up to 120 days t pay . Such a practice creates a great deal of goodwill in the channel .
Managerial assistance
The last important functionis to provide managerial assitance to customers - for example , taking inventory counts , designing promotional strategies , selecting marketable product lines , or developing a computerised inventory-control-and-purchasing system .
TYPES OF WHOLESALERS
In the United states there are 3 groups of wholesalers : manufacturer-owned operations , merchant wholesalers and merchadise agents and brokers .
Manufacturer-Owned Wholesalers
In most cases , manufacturers must generate substantial sales revenues before they are in a position to consider acting as they own wholesalers . When they are in such a position , they can estabilish sales offices or sales brunches to perform the wholesaling functions .
Sales Offices -They not maintain inventory . When a sale is made , the merchandise is delivered directly from the manufacturer to the buyer . A manufacturer-owned sales office might employ only one or two salespeople and a secretary .
Operating a sales office may be more economical than dealing with a private wholesaler . This is not often the case , however , because the wholesaler is able to spread costs over a large number of products supplied by many manufacturers , whereas the sales office is supported entirely by the sales of one organisation . A second reason for estabilishing a sales office is that the manufacturers may not be able to locate a good wholesaler to carry its products . The final and most important reason is that a sales office gives the manufacturer control over how its products are sold . That is , by maintaining a sales force , arranging for financing , and providing technical assitance to the buyer , the manufacturer keeps in touch with the changing needs of market .
Sales Branches- The main difference between a sales branch and a sales office is that the former maintains inventory whereas the latter does not . Therefore a salesperson at a sales branch is able to deliver products more quickly to the customers .
A sales branch is also much larger than a sales office and is able to provide more services to customers . It is not unusual for sales braches to provide sophisticated managerial assistance to their clients as well as to participate in credit evaluations and to collect money on overdue accounts .
Merchant Wholesalers
What distinguishes merchant wholesalers from the intermediaries discussed thus far is that the former are independent bussinesses take title to the product they sell . They buy products from manufacturers for relase to other intermadiaries or to retailers . We will devide the merchant wholesalers into full-service and limited -service merchant wholesalers .
Full Service Merchant Wholesaler- is a firm that takes title to goods that it sells and offers a full line of wholesaling services .
The 4 most important types of full-service wholesalers are described below :
Wholsale Merchants-they do most of their buing and selling within domestic markets
Rack Jobbers-they are specialised in fast-moving, non-food items ; provide and stock POP displays , usually in supermarkets Terminal Grain Operators-They recive grain from local country elevators and sell it to other companies .
Export-Import Merchants-They specialise in selling imported products in domestic markets or in selling domestically produced goods in foreign markets .
Limited Service Merchant Wholesalers-they also take title to merchandise they sell but do not offer a complete line of services to their customers .
Cash and Carry Wholesalers -they act as a supermarket for small retailers
Drop Shippers- they transmit orders from customers to producers,who than ship the orders to the customers .
Truck Wholesalers- they maintain a warehouse of products with wich they daily stock their truck .
Mail Order Wholesalers -They sell their goods througha catalog,tephone by mail .
Merchandise Agents
Their purpose is to bring buyers and sellers together . Their revenues take the form commission and brokerage fees for the services that they provide .
Manufacturer´s Agents- they are agents who normally sell several products lines from noncompeting firms .
Selling Agents -they are agents who handle all of manufacturer ´s output and act as its marketing department .
Brokers -they are agents who bring buyers and sellers together for a transaction but does not have a long term relationship with eihter party .
Commission Agents - they represent farm producers in agricultural markets .
Auction Companies - They are firms that physically brings buyers , sellers , and merchandise together .
Indutrial Wholesalers
Many wholesalers we have discussed in both the industrial and consumer sectors of the economy . However , two wholesalers sell only to industrial accounts : industrial ditributors and mill supply houses .
Industrial Distributors -they perform all of the function of full service merchant wholesalers but does not carry competing mnufacturer´s products .
Mill Supply Houses -they carry a large number of products for specific industries and act as a full service merchant wholesalers.