First year intermediate - Principle of commerce - Chapter 10

Wholesale Trade

DEFINITION

Generally speaking trade may be carried on either on retail or wholesales basis. When the goods are purchase in a large quantity by a person to be sold in smaller quantities to retailers it is known as wholesale trade. It may be defined as follow.

“ A wholesale transaction is one in which the purchaser dose no buy for his own private or personnel use but is guided by a profit or business motive if the making of purchase.”

The wholesaler has following characteristics:

1. He deals in a larger quantity of goods which are being purchased from the manufacturer.

2. His business is specialized

3. He sells goods to retailers.

Thus the wholesalers are said to be marketing institution who buy goods and then resell them. They are neither the manufacturers themselves nor the retailers but acts as a link between them.

SERVICE OF WHOLESALER TO MANUFACTURERS:

The wholesaler renders very valuable and important services to the manufacturers which are as follow.

1. By buying in large quantities the wholesaler enables the manufacturer to benefit from the economies of lager scale production. So the wholesaler grants financial assistance to producers.

2. A manufacturer is not expected to be expert seller. He is an expert technician and must pay all his attention to production. The wholesaler enables him to do this by taking upon his shoulder the responsibilities of distribution.

3. The wholesaler relieves the manufacturer of the necessity for carrying larger stock. Thus enabling him either to release his capital for future production or to carry on the business with less capital then would otherwise be necessary.

4. The wholesaler direct the manufacturer as regards the quality and quantity of the goods demanded, new market developments ,coming trends etc as they are in direct contact with the retailer who know the market conditions.

5. The wholesalers often enable the manufacturers to minimize his total distribution cost e.g. The manufacturer of consumer goods would behave to establish and maintain an enouomus sales force in order to reach all outlets in which he would like his product stocked.

6. The manufacturers are already short of funds and cannot afford to allow credit to retailers; however the wholesalers can do so and relieve the manufacturers from credit burden.

7. The wholesalers simplify the marketing process and make fewer transactions necessary. A manufacturer deals only with a selected number of wholesalers rather than hundreds and thousand of retailers.

SERVICE OF WHOLESALERS TO RETAILERS

The wholesalers render very useful services to retailers which are as;

1. Supplying goods according to the demand: the retailers due to smaller capital cannot hold a big stock of any commodity but he the wholesaler by holding large stock of different varieties of goods enables the retailers to make purchase in small quantities at interval and to carry on business with less capital.

2. Facilitating choice of selection: a wholesaler hold large stocks of different varieties of goods and thus enables the retailers to exercise there choice and selection.

3. Credit facility: most wholesaler grant credit. This reduces the capital requirements of the retailers and enables him to maintain huge stocks of goods.

4. The stocks held by wholesalers enable the retailer to obtain supplies more quickly than they can from manufacturer.

5. The wholesaler makes the retailers buying function easier as he needs to deal only with a small number of wholesalers, rather than hundreds of manufacturers.

6. He often enables a retailer to reduce his total buying cost. They are often able to take advantages of volume discounts.

7. He regulates the price by controlling the supply and thus minimizes the risk of retailers.

8. Since they perform a storage service, therefore they absorb a part of retailers’ storage burden. If the retailers were to buy direct from the manufacturer they would have to store the goods themselves.

9. They provide suggestion to retailers in connection with the store display, selling technique, and maintenance of accounts etc.

10. The supply of goods in small quantity enables the retailers in avoiding wastage.