Marketing Management and International Trade

Lesson 19. WHOLESALING

Module 5. Elements of marketing mix – III. place

Lesson 19

WHOLESALING

19.1 Introduction

Wholesaling includes all the activities associated with selling goods or services to individuals or organizations for resale or business use. Wholesalers purchased goods generally from producers and sell to retailers, industrial users and other wholesalers. Producers and retailers are not considered as wholesalers. Wholesalers deal with business consumers whereas retailers deal with domestic final consumers. Due to difference in consumers, wholesalers lay less emphasis on promotion, atmosphere and location of outlet then retailers.

19.2 Type of Wholesalers

Wholesalers are divided into following categories

Fig. 19.1 Types of wholesalers

19.2.1 Merchant wholesalers

They are independent businesses. They take title to the goods. They are known by various names like mill supply houses, jobber, and distributors.

19.2.1.1 Full services wholesales

As the name indicates, they offer a full line of service viz. To carry stock of goods, keep sales personnel, provide credit, ensure deliveries, render managerial assistance. They are of two types (i) Whole sale merchants (ii) Industrial Distributors

19.2.1.2 Whole sale merchants

They sell generally to retailers. This merchant’s exhibit variation in terms of product range handled. Some are selling many product lines and are referred to as general merchandise wholesalers. Some are selling one or two product lines in more depth and are referred to as general line wholesalers. Some carry only a part of a line such as dairy food wholesalers.

19.2.1.3 Industrial service wholesalers

They provide only limited services as compared to full service wholesalers. Following table indicate different limited service wholesalers.

Table 19.1 Limited service wholesalers

Cash and Carry Wholesalers	They indulge in only few lines of fast moving goods. They carryout cash sales transactions with small retailers	A fruit store retailer may purchase may fruits from a fruit wholesalers in cash and keep it in his store for sale.
Truck Wholesalers (Truck Jobbers)	They engage in few lines of semi perishable products like (Some dairy products, bakery products)	They sale though mobile vehicles to important selling points like students hostels and restaurants etc.
Drop Shippers	They do not handle the product nor maintain inventory. They take the orders from consumers; select a suitable producer of that product who transports the goods directly to consumers. They assume the title and risk from the time they receive order till the goods reach the consumers	Sales transactions in bulk industries like coal, lumber and heavy equipment is carried out through drop shippers
Rack Jobbers	They set up displays, determine price, keep inventory records. They retain title of goods and charge retailers only for goods sold to final consumer	Serve retailers of grocery engaged in non food items.

19.2.1.4 Producer co-operatives

Producer members combine to sell their produce. They own the organization and run the business by hiring professionals. They are collectively responsible for profit or loss. For example dairy co-operatives.

19.2.1.5 Mail order wholesalers

They do not keep sales force but send catalogs to retail, industrial and other organizational consumers featuring the products they deal in e.g. jewellery, speciality food, cosmetics and other such small items. The orders are filled in and sent by mail or by any transportation mode.

19.2.1.6 Brokers and agents

They act as facilitators in buying and selling process on commission base. They do not take title to goods and specialize by customers’ type or product line.

(a) Brokers

They make contact between sellers and buyers and help both the parties to finalize business deal through negotiation. They do not carry inventory nor assume any risk. They receive payment from the hiring party. For example brokers of real estate, food, insurance, security business.

(b) Agents

They have more permanent association / application with sellers and buyers as compared to brokers. They are of following types: manufacturer's agents, selling agent, purchasing agents, commission merchants.

19.2.1.7 Manufacturer agents

These agents have written agreement with two or more manufacturer of complimentary products. The written agreements cover the aspects of price, geographic territory, order handling, delivery, service, guarantee and warrantee commission etc. Such agents are hired by large manufacturers to expand their business to new geographic locations and by small manufacturers, for whom employing full time sales people is uneconomical. Such agents are generally used for apparel, electric items, and furniture.

19.2.1.8 Selling agents

If the manufacturer is uninterested or lacks capability in sales functions then they enter into contract agreement with selling agent for their complete production output. Such selling agents then work like a sales department for the manufacturer and exhibit substantial control over prices, terms and conditions of such selling agents generally deal in natural materials. (Coal, coke, metals etc), Machines and Equipments, Chemical etc.

19.2.1.9 Purchasing agents

They establish a long lasting relationship with purchasers and do the purchases for them. They receive check, store and transfer the goods to the consumers / purchasers. They supply all the necessary market information to their clients to help them make best decision.

19.2.1.10 Commission merchants

Employed for short time duration. They take possession of product and do negotiation for sale. Generally seen in agricultural products. Those producers who are not members of any producer co-operative and also do not want to perform selling function, engage commission merchants who take all the produce in a vehicle and sale it at best price in a nearby main market. They then deduce their agreed commission and deposit the balance money to producers.

19.2.1.11 Manufacturer's and retailers branches and offices

This involves performance of wholesaling operations by sellers or buyers themselves instead of independent wholesalers. Separate branches and offices can be established for sales or purchase.

19.2.1.12 Sales branches and offices

These are established by manufacturer to have better control over inventory, undertake selling and promotion. Sales offices do not carry inventory and sales branches carry inventory.

19.2.1.13 Purchasing offices

They are integral part of buyer’s organization and carryout function similar to that of brokers or agents.

19.3 Functions of Wholesalers

19.3.1 Sale and promotion

Manufacturer's reach large number of small business customers at low cost through wholesalers. They have more contacts and consumers rely more on them than producers.

19.3.2 Purchasing and assortment building

They Choose items and make assortments according to need of their consumers.

19.3.3 Bulk reduction

They purchase big lot and reduce it into smaller lot by dividing it for the sake of consumers.

19.3.4 Storage

They keep inventories thus reducing / associated inventory consumers on account of their nearness to consumers.

19.3.5 Monetary support

They extend credit to consumers and finance suppliers by early order making and timely payment of bills.

19.3.6 Risk taking

They assume some risk by taking title and withstand cost of products damage, spoilage, theft, etc.

19.3.7 Transportation

They make fast delivery to consumers on account of their nearness to consumer.

19.3.8 Market information

They provide necessary information about competitors activity, new products, price etc to supplier and consumers.

19.3.9 Management support

They extend necessary support to retailers about several management aspects like employee training, store layout & efficient utilization of space etc.