Definition of Wholesaling According to Philip Kotler, “ Wholesaling consist of the sale and all activities in selling goods or services to those who buy for resale or business use.” According to American Marketing Association “Wholesalers sell to retailer or other merchants and or industrial, institutional and commercial users, but do not sell in significant to ultimate consumers.”
Characteristics of Wholesaling Wholesalers generally buy merchandise direct from the producers in large quantity mainly in cash. They are trading concern having an army of agents and stocks the large quantity of goods, supply or sell goods to the directly or through their agents in small quantities. Wholesalers are financially good health. They purchased goods in cash from the manufacturer and sell to the retailers on credit. Wholesalers profit margins is very small so that they can maximizes their sales volume to earn maximum profit. They deals in limited product line or products. They maintain warehouse and godown at different places in the country to facilitate the trade at minimum transportation charges. They sometimes make the grading of goods under their own name or brand name.
IMPORTANCE OF WHOLESALERS1. Services to the Manufacturers.ii. Stocking.iii. Market Information.iv. Expertise Knowledge.v. Assist in Production.vi. Financingvii. Risk Reduction.
IMPORTANCE OF WHOLESALERS2. Services to Retailers.ii. Convenient Buying.iii.Stocking.iv. Expertise Knowledge.v. Financing.vi. Market information.vii.Risk Reduction.3. Services to the Society.
FUNCTIONS OF WHOLESALERS. Selling and Promoting. Buying and Assortment Building. Bulk Breaking. Warehousing. Transportation. Financing. Risk Bearing. Market Information. Management Services and Counseling.
MAJORS WHOLESALERS TYPES1. Merchant Wholesalers.ii. Full Services Wholesalers. a. Wholesale Merchants. b. Industrial Distributors.4. Limited service Wholesalers.v. Cash and carry Wholesalers.vi. Truck Wholesalers.vii. Drop Shippers.viii. Rack Jobbers.ix. Mail order Wholesalers.
MAJORS WHOLESALERS TYPES3. Merchandising Brokers and Agents.ii. Brokers.iii.Agents. a) Manufacturer Agents. b) Selling Agents. c) Purchasing Agents. d) Commission Agents. 4. Manufacturer and Retailers Branches Offices. 5.Miscellineous Wholesalers.
Major Wholesalers types Merchant Wholesalers - Independently owned businesses that take title to the merchandise they handle. They are called jobbers, distributors, or mill supply houses and fail into two categories, full service and limited services.t Full Service Wholesalers- They perform full range of activity. They assemble the assortment at a given place and provide trade credit, offer promotion assistance , provide personal sales force, passing of information to customers and installation and services. Wholesale Merchants- Wholesale merchant sell primarily to retailers and provide full range of services. General merchandise wholesalers carry several merchandise lines. General line wholesalers carry one or two lines. Specialty wholesalers carry only part of line. Industrial Distributor- Industrial distributor sell to manufacturers rather than to retailers and provide several services – carrying stock, offering credit, and providing delivery.
II. Limited service wholesalers- They do not perform all the functions as the full service wholesalers. They do not do not provide credit, marketing research information and merchandising assistance.s Cash and Carry wholesalers- Have limited line of fast moving goods and sell to small retailers for cash. Truck Wholesalers- Primarily sell and deliver a limited line of semi perishable merchandise to supermarkets, small groceries, hospitals, restaurants, factory cafeterias, and hotels.t Drop Shippers- Operate in bulk industries, such as coal, lumber, and heavy equipments. Upon receiving an order, they select manufacturer, who ships the merchandise directly to the customers on the agreed upon terms and timely delivery. The drop shippers assumes title and the risk from the time the order is accepted to its delivery to the customer.
d) Rack Jobbers – Serve grocery and drug retailers, mostly in non food items. They send delivery trucks to stores, and the delivery people set up displays, price the goods, keep them fresh, set up pint of purchase display and keep the inventory record. Rack jobbers retain titles to the goods and bill retailers only for goods sold to consumers.e) Producers Cooperatives – Assembles farm produce to sell in local markets. Cooperatives profits are distributed to members at the end of years.f) Mail Order Wholesalers – Send catalogs to retail, industrial, and institutional customers featuring jewelry, cosmetics specialty foods and other small items. Main customers are business in small outlaying areas. No sales force is maintained. Orders are filled and sent by mail, truck or other means of transportation.
Merchandising brokers and Agents – They usually perform fewer services than merchant wholesalers. Merchandising agents and brokers do not take little to the product but negotiate sales for the manufacturer they present.l Brokers – Chief function is bringing buyers and sellers together and assisting in negotiation. They are paid by the party who hired them and do not carry inventory, get involved in financing, or assume risk. The most familiar example are food brokers, insurance broker, and security brokers.a Agents – Represents either buyer or seller on a permanent basis. Manufacturer agents – Represents two or more manufacturers of complementary lines. They enter into a formal written agreement with each manufacturer covering pricing policy, territories, order handling procedure, delivery service and warranties and commission rates. Often used in such lines as apparel, furniture and electrical goods. Most manufacturers agents are small business with only a few skilled sales persons.
Selling Agents – Have contractual authority to sell a manufacturer entire output in such product areas as textiles, industrial machinery and equipments, coal and coke, chemicals and metals. Purchasing Agents – Generally have a long term relationship with buyers and make purchases for them, often receiving, inspecting, warehousing and shipping merchandise to buyers. Commission Merchants – Take physical possession of products and negotiates sales. They are used most often in agricultural marketing by farmers who do not want to sell their own output and do not belongs to producers cooperative.
Concern of Wholesalers Disintermediation Facility Location. Transportation costs. Adaption to New Technologies. Offering New Product Assistance.
Disintermediation – The growth of the Internet as a communication and distribution channel has lead many to conclude that wholesaling will lose its importance as manufacturers and final buyer learn to transact directly. This so called disintermediation of marketing channels is real concern to some wholesalers, especially those that do not function as a dominant party within channel of distribution. Facility Location- Wholesalers who are heavily in product shipment may spend considerable time evaluating sites for locating facilities. For organization needing very large facilities, the decision as to where to locate becomes more difficult and more expensive the closer the location is to major metropolitans areas. In fact, land costs in some regions of the world have risen so high that utilizing this space for wholesaling operation may not be feasible. In addition to land costs, facility location is also affected by access to adequate transportation, such as roads, seaports, airports and rail terminals.
Transportation costs. For wholesalers involved in transporting products, the worldwide rise in fuel costs has forced a close examination of how they handle product distribution. Transportation expense can represent a significantly portion of overall distribution costs and these higher costs are often passed on to customers in the form of higher product prices. Adaption to New Technologies. In addition to technologies to lower fuel costs, other technologies that assist the distribution process are offering both advantage and disadvantage to wholesalers. On one hand new technologies, such as radio frequency identification tags (RFID) placed on shipped products allow wholesalers to maintain tighter control over their distribution technologies can be expensive in terms of acquiring and learning to use.
Offering New Product Assistance. Wholesalers are finding that offering products is not the only thing of buyers. Many customers also want wholesalers to offer additional value added services such as employee training, promotional support and assistance in managing their operations.
Trends in Wholesaling Increased Services. Regional Coverage. Productivity and quality. Global Expansion.
Increased Services. Wholesalers have redesigned their services over time to suit customer requirements. A number of wholesale druggists in the US now handle the customer records of retail druggists. This serve to bind the retailer to one wholesaler. In the grocery business Eg. Wholesale have shifted their focus from providing basics services like extension of credit to offering more sophisticated services such as merchandising support, inventory management counseling, conduct profit analysis for the retailers, etc. The aggressiveness of wholesaler in offering increased services is aimed at gaining a competitive advantage.
Regional Coverage. Wholesalers use their subsidiaries to cater to the needs of the local market segments by sorting limited fast moving inventory. These outlets have access to a centralized warehouse to meet their inventory demands. This a common practice among the distributor of plumbing, heating and cooling equipment. Wholesalers are also making use of a leapfrogging strategy that involves implementing backfire tactics. Under this strategy of market penetration, the wholesalers set up branches that are about 1000 miles away from the main office so that spread backward towards the home base.
Productivity and quality. As the technology advancement takes place, new methods of marketing are developed. Wholesalers are adopting new software technologies for efficient distribution management systems. They are using computer systems to receive orders from their customers rather than individually contacting them. Also wholesalers supplying to industrial customers are tailoring their services quality on the basis of their requirements.
Global Expansion The increased deregulation environment in the global markets in which manufacturer operates with the advance technology is making it easy for wholesaler to fallow suit. Wholesalers are now operating in the global environment and are supplying their goods and services to customers across the world. This development in wholesaling has been possible due the changing market dynamics and customer expectations.