Channel institutions wholesaling Functions of Wholesalers Need for Wholesalers Characteristics of Wholesalers Difference with Retailers Functions of Wholesalers Types of Wholesalers Limitations of Wholesalers Major Wholesaling Decisions Managing Distributors Need for Distributors Expectations from a Distributor Cost of Servicing Dealer Distributor Favourable Factors UnFavourable Factors

1. Channel Institutions:
Wholesaling
Prepared By:
Prof. Nishant Agrawal

2. Learning Objectives
• Understand functions of a wholesaler
• Understand various classes of wholesalers
• Major wholesaling decisions
• Benefits and limitations of wholesalers
• Understand about a – distributor in more detail
• Trends in wholesaling practices

3. Need for Wholesalers
• Widespread economy – consumers can only reached by thousands of
retailers
• Reaching these retailers by a company directly is not possible
• Hence the need for wholesalers in two forms:
– Well established free-lance wholesalers
– Contracted distributors, stockiest and agents

4. Characteristics of Wholesalers
• Operate on large volumes but with chosen group of products
– Food, grocery, pharma or automobile spares etc
• The company itself, contracted parties can operate as wholesalers
• Mostly B2B business – trade and institutions
• Wholesaler could also be a retailer – in rural markets

5. Characteristics of Wholesalers
• Sell physical inputs or products – tangible goods
• Optimize results, maximize service (effectiveness) and minimize
operating costs (efficiency)
• Buy goods for resale, keep inventory, take risks of price changes,
negotiate terms, procure orders, deliver and extend credit.

6. Definition
• Wholesaling is concerned with the activities of those
persons or establishments that sell to retailers and other
merchants and / or industrial, institutional and commercial
users

7. Delivering Value
• Keep goods accessible to customers instantly
• At times, get together to bargain for better terms
• Pass on benefits or incentives to their customers
• Have a wide trading area

8. Difference with Retailers
• Not too worried about location, ambience or promotions – prefer to
be in the main market
• Deal with other businessmen and not consumers
• Deal with a specific group of products only
• Much larger trading area
• Much larger transactions with suppliers and customers
• Believe in low margins but high volumes.

9. Functions of Wholesalers
• Varies in degree between free-lance, company distributors and
stockists / agents
• Sales and promotion of chosen company products
• Buying the variety of goods
• Breaking bulk to suit customer requirements
• Storage and protection of goods till sold

10. Functions of Wholesalers
• Grading and packing of commodities
• Transportation of goods to customers
• Financing the buying of customers
• Bearing the risks associated with the business
• Collecting market information to both suppliers and
customers

11. Types of Wholesalers
• Full service: stocking, selling, offering credit, delivery and business
assistance (company distributors, wholesale merchants)
• Limited service: range of service is limited
• Brokers and agents: bring buyer and seller together – do not take
possession of goods
• Others: agri business, auction companies etc

12. Limitations of Wholesalers
• Some of them do not give complete information to suppliers for
selfish reasons
• At times, do not want company and customers to meet
• Consumers have no say in pricing or quality in a w/s dominated
system

13. Major Wholesaling Decisions
• Which markets to operate in
• Manpower to employ
• What products to sell
• Pricing decisions / Promotional support
• Credit and collections
• Image and customer perception
• Warehouse location and design
• Inventory Control

14. Favourable Factors
• Companies have limitations in market / outlet coverage. Wholesalers are
required to fill the gaps
• Hundreds of small companies who cannot afford to set up distribution
networks – need to depend on wholesalers
• Wholesalers help move goods from farm gate to consumers.
• Big companies also need wholesalers to get big volumes
• Retailers have to visit w/s markets to buy food grains, cereals and pulses –
buy a lot more.

15. Unfavourable Factors
• Companies coverage focus on retailers and institutions through
their distributors
• Using modern retail formats as wholesalers
• More outlets like Metro C&C being encouraged
• Enforcing strict price control so that w/s do not sell below
company prices.

16. Distributor
• Is a wholesaler nominated by a company to exclusively re-distribute
the company products to its customers in a designated territory. He
does not deal in competitor’s products. Does not sell from his
premises. Extends credit selectively.
– A redistribution stockist for HLL
– A distributor for Philips lighting division
– A distributor for L&T engineering division

17. Dealer
• Role similar to a distributor but
– May not have a clearly defined territory and may sell both in the market and
from his shop
– May deal with competitive products also
– Extends credit selectively.
– Dealers in industrial products may have better defined roles.
• Examples:
– Dealer for an edible oil company
– A dealer for garment brands

18. Stockist
• May be working for a company with a designated territory but does
not re-distribute the stocks. Sells from his premises. Extends credit
selectively.
– A stockist for paper products
– A stockist for automobile spares
• Re-distribution is visiting customer premises to sell products

19. Managing Distributors
• The principles are similar across industry verticals. FMCG is the most
complex.
• Has the capacity to maximise sales and market shares.
• Has to ensure buying goods from the company and re-distribution to
the trade

20. Managing Distributors
• Distributor responsibilities include:
– Buying sufficient quantities by Stock Keeping Unit (SKU) for redistribution
– Ensuring full market coverage of all customers in the territory assigned to him
– Help finance the operations – pays for the goods upfront but extends credit to
his customers
– Maintaining inventory of company products adequate at all times to service the
market
– Assist company in its promotional efforts

21. Need for Distributors
• Under three circumstances:
– For entering a new town
– For additional coverage in the same town
– For replacing an existing distributor
• For entering a new town, assess the potential for business to decide:
– If the town can sustain a full fledged distributor
– The number of distributors required
• Starts with a town profile of potential, number of customers to be
serviced and the competition.

22. Cost of Servicing
• Cost benefit of using distributors to be assessed
– Logistics cost of serving the market
– The number of customers to be covered by category –
wholesalers, retailers, institutions
– Frequency of visits to markets and outlets
– Sales revenue estimate from each visit
– Markets to be covered with ready stocks or order booking for later
delivery
– Likely collections during each visit – gives an idea of the credit
requirements

23. Expectations from a Distributor
• To be stated at the start of the relationship
• Helps get the right kind of distributor also
– Achieving sales targets – volume, value and packs
– Financial commitment on inventory and credit
– Investment in infrastructure – space, vehicles
– Manpower – front line and back office
– Distribution effort – market and outlet coverage as per a beat plan
with productive calls
– Developing new markets and new accounts
– Managing key accounts and institutional business

24. Expectations from a Distributor
• Merchandising and displays in the market
• Secondary sales efforts and tracking – critical for FMCG and pharma
(secondary sales is sales from the distributor to the outlets in the
market)
• Effectively handling promotions and schemes initiated by the
company
• Managing damaged stocks

25. Expectations from a Distributor
• Organizing and participation in promotional events
• Assist company in making a success of launching new products and
packs
• Handling consumer quality complaints
• Handling legal requirements on behalf of the company
• Payments promptly to the company

26. Key Learnings
• Wholesalers are required to reach hundreds of customers and
retailers
• Wholesaler business is usually B2B
• Wholesalers can be free-lance or appointed by companies – like
distributors
• Company distributors are bound by strict operating norms
• Future of wholesalers in India still seems favourable

27. End of Session