Wholesale Trade means buying and selling goods in relatively large quantities or bulk. It is one of the main categories of domestic trade. The traders who are engaged in wholesale trade are called wholesalers. The goods in wholesale trade are not sold to the final consumers directly, but sold to commercial users or other intermediaries.
Wholesalers are one of the important middlemen in the channel of distribution who deal with the goods in large quantities. They buy goods in bulk directly from manufacturers and sell them in small lots to retailers and industrial users. For this, the wholesalers invest a large amount of capital and trade for a low margin of profits on high sales volume.
Services of Wholesalers to Manufacturers
- Link: A wholesaler serves as a useful intermediary or link between the producer and retailers. They purchase goods from manufacturers and sell them to the retailers and collect information regarding the customers’ demands, tastes and preferences, and then provide it to the producers for manufacturing of the goods accordingly.
- Warehouse Facility: Once the manufacturers are done with the production of goods, the wholesaler holds large stocks of the produced goods in their warehouses or godowns. The storage facility provided by the wholesalers diminishes the burden on the manufacturers to store the goods.
- Forecasting of Demand: As wholesaler acts as a link between the retailers and the producers, they collect information from the retailers and industrial users about the demand for goods and pass it to the manufacturers. It allows the firms to predict the market demand for the goods and produce accordingly.
- Publicity of Goods: Many times wholesalers launch an advertising campaign to increase the sale of goods. The manufacturers get the benefit of such publicity. With the publicity done by the wholesalers, the manufacturers have to spend less on advertising.
- Financial Assistance: A wholesaler often makes payments in advance to the manufacturer for the goods purchased by them in bulk quantity. They also help the manufacturers by making payments in cash for the goods purchased, which prevents the producers from blocking their capital in the stocks.
- Risk Bearing: A wholesaler takes the risk of buying goods in bulk and storing them. As they sell the goods in their own name, they face a lot or risks, including spoilage, pilferage, price, economic condition, theft, fire, etc. In this way, the wholesalers reduce the risk of manufacturers to a large extent.
- Facilitate Large Scale Production: The wholesalers sell goods in small quantities to the retailers and purchase goods in bulk from the manufacturers. It allows the manufacturers to produce goods at a large scale. In this way, they can take better advantage of the economies of scale.
- Facilitates Continuity: The wholesalers purchase goods from the producers as and when they are manufactured. It allows the producers to maintain continuity in the production of goods throughout the year.
Services of Wholesaler to Retailers
- Financial Support: Wholesalers provide financial assistance to retailers by selling goods on credit and providing discount facilities. The retailers need not invest large working capital.
- Specialised knowledge to the Retailers: Wholesalers provide advice to retailers regarding quantity, price, and sale of goods. It allows them to purchase goods from the wholesalers accordingly, so that they do not face loss or risk due to changes in any factor affecting the sales or demand of the goods. The wholesalers’ specialization in one line of the product gives a huge benefit to the retailers.
- Warehousing and Transport: Wholesaler provides storage facility for goods as well as transport facility to retailers. This saves warehouse costs and transportation costs of the retailers. The retailers do not have to store goods in bulk quantities and can purchase the goods as and when required.
- Regular Supplies: Wholesalers keep large stocks of goods and assure the regular supply to the retailers. In other words, the wholesalers ensure the availability of goods to the retailers and relieve them from the tension of collecting different goods from the different producers.
- Publicity: Wholesalers advertise goods on a large scale to create demand. This increases retailers’ sales of goods without spending money on advertisements.
- Introduction of a New Product: Wholesalers introduce new product and their uses to the retailers. It helps the retailers to easily sell goods in the market as they can also share the knowledge with the customers and easily attract them towards the goods.
- Risk Sharing: As wholesalers purchase goods in bulk quantities and sell them to the retailers in small quantities, it allows the retailers to avoid any risk possible because of storage, fire, theft, spoilage, pilferage, etc. In this way, the wholesalers share the risk with the retailers.
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