Wholesaling

Wholesaling: Importance, Functions and Types of Wholesaling!

Wholesaling is the buying/handling of products and services and their subsequent resale to institutional users and in some cases to final consumers. Wholesaling assumes many functions in a distribution channel, particularly those in the sorting process. Manufacturers and service providers sometimes act as their own wholesalers.

(a) Importance of Wholesaling:

Wholesaling is a significant aspect of distribution because of its impact on the economy, its functions in the distribution channel and its relationship with suppliers and customers. In USA, wholesalers generate almost one-fifth of their total revenues from foreign markets.

Revenues are high since wholesaling involves substantial purchases by institutional consumers. There are larger numbers of retailers because they serve individual, disposed final consumers, and wholesalers handle fewer, larger and more concentrated customers.

From cost prospective, wholesalers have a great impact on prices. Operating costs for wholesalers include inventory charges, sales force salaries, rent charges and costs of advertising etc. Wholesaler costs and profits depend on inventory turnover, money value of products the functions performed and efficiency etc.

(b) Functions of Wholesaling:

Wholesalers carry out tasks ranging from distribution to risk taking.

Following functions are performed by wholesalers:

(i) Enable manufacturers and service providers to distribute locally without making customer contacts.

(ii) Provide a trained sales force.

(iii) Provide marketing and research supports for manufacturers, service providers and retail or institutional consumers.

(iv) Purchase large quantities, thus reducing total physical distribution costs.

(v) Provide warehousing and delivery facilities.

(vi) Provide credit facilities for retail and institutional customers, whenever required.

Types of Wholesaling:

(I) Ma

nufacturer Wholesaling:

In this case a firm has its own sales offices and wholesale activities are done at these offices. Sales office may be conveniently located in a market place. This type of arrangement is preferred when the manufacturer desires more control on marketing and/or customers who may be few in number an

(ii) Merchant Wholesaling:

Merchant wholesalers buy, take title and take possession of products for further resale. Merchant wholesalers may perform full range distribution tasks. They provide credit, store and deliver products, after merchandising and promotion assistance, have a personal sales force, offer research and training support and provide all necessary information to customers and provide installation and after-sales services. This class is very commonly prevalent in durable consumer goods, pharmaceuticals and grocery items etc. Merchant wholesalers demand higher compensation for performing large number of functions.

 Agents and Brokers:

They perform various wholesale tasks, but do not take title of products, unlike merchant wholesalers. Agents and brokers enable a manufacturer to expand sales volume because of their special expertise and experience in the field.

Such agents and brokers may work for many firms and carry non competitive and complementary products in exclusive territories. Agents have little say on marketing and pricing. This class is prevalent in steel, cement, automobile and white goods. Voltas Ltd. works as wholesale agent for many white goods manufacturers.