How The Wholesale Trade Works

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A wholesaler is a company which mediates between the supplier and many retailers that distribute its products. Some wholesalers may integrate the functions of logistics, retail trade, purchasing.

When dealing directly with suppliers, the wholesaler becomes a central purchasing point. The wholesale trade holds a link between producers, retailers, mass merchandisers and other professionals involved in a multitude of functions.

The purpose of this business is to handle large volumes of goods for resale in small quantities. Its challenge is to make a margin between buying wholesale and retail. The aim being to have the appropriate amount depending on demand manifested. In many cases wholesalers do not deal directly with the consumer (even though some have opened up to the concept). It rather serves as a hub to a producer who wishes to address retailers or specialty retailers needs.

There are two main types of wholesalers: volumes wholesale and value-added. They also participate in the marketing of products but participate actively in the market by providing knowledge, pre-sales technical support, training, entertainment marketing, budget development, etc.

They are essential to companies seeking to market a product without engaging in costly campaigns. The value added distributor (VAD) may also provide financial assurance or grant to manufacturers a customer base already buying other products. This type of wholesalers are mainly active in technology related products (stereo, computer, industrial products and highly technical niches).

Wholesalers and retailers take from any manufacturer of consumer goods, the costly task of selling his products directly to individual consumers.
Industries produce their products mostly in large quantities in order to utilize fully their cost reduction potential. The wholesaler buys from one or a few large manufacturers, quantities and customize them according to customer needs for smaller quantities. The customers of the wholesaler can get most of the goods in any amount.

There are several types of food wholesalers and these include independent wholesalers, specialized wholesalers engaged in refrigerated carriage among others.

The wholesale trade is used by manufacturers as a distribution channel, to spread their products or as a procurement channel for the procurement of goods for production (such as materials, supplies, semi-finished products).  

Since the wholesaler is aware of the wishes and expectations of its customers, it can help them organize the right sales or procurement. It supports manufacturers by making them more informed of demand and supply shifts. This information can be included in the product development. This function is more important with the increasing customer demand for customized products and for deliveries.

Sales financing is the sale of goods on account. By granting a credit period (for example, payable within 30 days) the distributor gives customers a credit for the period between the delivery of the goods and the payment date stated on the invoice. Thus, the customers of the wholesaler use the purchased products without having to immediately provide financial resources

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