Wholesalers are people who buy goods in large quantities from the manufacturers and then sell them in small quantities to the retailers to cater the wants of the consumers. They act as intermediaries between the retailers and producers. They are the first intermediaries in the channel of distribution. Their distribution work should be conducted in such a manner as to produce maximum efficiency with minimum troubles.
Services rendered by wholesalers
Wholesalers render their services to commerce, industries and trade. Their services can be classified as:
Service to manufacturers
They provide useful info to the manufacturers regarding the requirement and needs of the consumers. They offer finance to manufacturers at the time of need. They help the manufactures to determine the quantity and quality of goods to produce as they are in contact with the retailers.
Services to the retailers
They relive the retailers from holding huge stock of goods as they fill up their stock regularly. They offer finance as well as credit facilities to the retailers. They offer advice to retailers regarding new product as well as market condition.
Services to the consumers
They enable the consumers to buy the required quantities of goods at the right time as they supply goods to the retailers regularly. They offer goods at lower price because they facilitate large scale production. They stabilize prices for consumers as they control supply and demand.
Types of wholesalers
There are seven types of wholesalers:
Merchant wholesaler – a merchant wholesaler own and produce a service or good and then resell it to a reseller, distributor, retailers and other wholesalers.
General wholesaler – a general wholesaler buys good in large quantities from the manufacturer and then resell them in smaller quantities to retailers, resellers and distributors.
Speciality wholesaler – speciality wholesaler sell goods from a specific company or product category. He often has good knowledge of the product due to specialization.
Specific product wholesaler – specific product wholesaler supply only one type of a product, for instance, computer or footwear.
Discount wholesaler – discount wholesaler supply special discounted products. The product is often discounted because its line has been discontinued or it is a refurbished good.
Drop ship wholesaler – drop ship wholesaler complete the sale of a good but will not handle it. The product will be dispatched directly to the customer from the manufacturer.
Online wholesaler – online wholesaler sell his product online and often provide a discount as he can reduce his overheads such as rates and rent of physical stores.
Are wholesalers useful?
Wholesalers improve efficiency in product distribution as they encourage competition, facilitate transparent pricing and enhance easier access to market info for different actors. Multiple equilibrium prices can occur if there are no wholesalers in the market because the price would be undermined and the transaction costs would rise. Under these conditions, retailers would need to handle large number of customers, thus lose any value from scale of economies. Wholesalers therefore play a vital role in the distribution of goods as they equate supply with demand thus forming equilibrium in the market.