wholesaling

1. Channel Institutions-
Wholesaling
Digvijay Maurya
MBA (4th Sem) Marketing
IMS, BHU

2. The Importance of Distribution
• Most producers use intermediaries to bring their products to market.
They try to develop a distribution channel (marketing channel) to do this.
A distribution channel is a set of interdependent organizations that help
make a product available for use or consumption by the consumer or
business user. Channel intermediaries are firms or individuals such as
wholesalers, agents, brokers, or retailers who help move a product from
the producer to the consumer or business user.

3. Definition- Wholesaling
• Wholesaling is all activities involved in selling products to those buying for
resale or business use. Wholesaling intermediaries are firms that handle the flow
of products from the manufacturer to the retailer or business user.
• Wholesaling intermediaries add value by performing one or more of the
following channel functions:
Selling and Promoting
Buying and Assortment Building
Bulk-Breaking
Warehousing
Transportation
Risk Bearing
Market Information – giving information to suppliers and customers about
competitors, new products, and price developments

4. Types of Wholesaling
• The three types of wholesalers are:
I. merchant wholesalers;
II. agents, brokers, and commission merchants; and
III. manufacturers' sales branches and offices.
• MERCHANT WHOLESALERS
Merchant wholesalers are firms engaged primarily in buying, taking title to, storing
(usually), and physically handling products in relatively large quantities and reselling the
products in smaller quantities to retailers, industrial, commercial, or institutional concerns,
and to other wholesalers. They go under many different names, such as wholesaler, jobber,
distributor, industrial distributor, supply house, assembler, importer, exporter, and many
others.

5. • BROKERS
Agents, brokers, and commission merchants are also independent middlemen who
do not (for the most part) take title to the goods in which they deal, but instead
are actively involved in negotiatory functions of buying and selling while acting on
behalf of their clients. They are usually compensated in the form of commissions
on sales or purchases. Some of the more common types go under the names of
manufacturers' agents, commission merchants, brokers, selling agents, and import
and export agents.
• MANUFACTURERS' AGENTS
Manufacturers' sales branches and offices are owned and operated by
manufacturers but are physically separated from manufacturing plants. They are
used primarily for the purpose of distributing the manufacturers' own products at
wholesale. Some have warehousing facilities where inventories are maintained,
while others are merely sales offices. Some of them also wholesale allied and
supplementary products purchased from other manufacturers.

6. Benefits of Wholesaling
• Wholesaling provides an expanded consumer market potential in terms of geographical locations
and consumer purchasing power while at the same time providing a cash flow for the
manufacturer.
• Secondly, for most small producers, an immediate geographic location is typically insufficient to
provide and maintain an on-going customer base for their operations. As a means to sell their
goods, smaller producers must have avenues to develop market segments of potential customers
and must make sure their goods are of the quality customers want at prices they are willing to
pay. The role of wholesalers is to provide links to an expanded market base, i.e., to discover
where customers are located and how best to reach them.
• Finally, wholesalers act as distribution channels and interface with markets and producers within
markets. Whereas wholesaling and retailing provide similar functions in that they receive, store,
and distribute goods, the importance of wholesaling is in its ability to moderate supply and
demand fluctuations and cope with larger transactions with less emphasis on selling techniques
and services and product promotion. Wholesaling has the capability to adjust the distribution of
goods from surplus to deficit areas.

7. Wholesalers are successful only if they are able to serve the needs of their customers, who
may be retailers or other wholesalers. Some of the marketing functions provided by
wholesalers to their buyers are:
providing producer's goods in an appropriate quantity for resale by buyers
providing wider geographical access and diversity in obtaining goods
ensuring and maintaining a quality dimension with the goods that are being obtained
and resold
providing cost-effectiveness by reducing the number of producer contacts needed
providing ready access to a supply of goods
assembling and arranging goods of a compatible nature from a number of producers for
resale
minimizing buyer transportation costs by buying goods in larger quantities and
distributing them in smaller amounts for resale
working with producers to understand and appreciate consumerism in their production
process.

8. OUTLOOK
New technology, global competition, and retail consolidation have been forcing many
wholesalers to modify their business practices in order to remain competitive.
• TECHNOLOGICAL CHANGE
Two general classes of technology have had a major impact on wholesaling: logistics
management technologies and the Internet. Logistics technology is a broad category of devices
and software used to make distribution more efficient and reliable. These include
implementation of sophisticated automatic identification systems for tracking stock, personnel,
and equipment; satellite tracking systems for wholesalers who must manage a fleet of delivery
trucks; and integrated computer systems to manage inventory, distribution, and customer
services. The best of these technologies, although they require substantial investments, help
keep costs down while improving the quality of service. Meanwhile, the Internet is having a
profound effect of giving wholesalers' customers more opportunities to compare prices and
obtain goods from alternative sources, making wholesaling more price competitive and
signalling danger for inefficient wholesalers who may have enjoyed a near monopoly in local
markets.

9. • GLOBAL COMPETITION
Related to the Internet's leveling power are the benefits and drawbacks of
heightened international competition, which is likely to be aided by the Internet.
Again, competition from abroad will tend to add downward pressure on prices and
hurt inefficient and low-margin wholesalers the most. Conversely, however, when
wholesalers are able to expand into new markets while keeping costs under control,
they may be able to at least recoup any loss of sales domestically and possibly
improve sales and profits overall.
• RETAIL CONSOLIDATION
A significant threat to wholesalers has been the rise of large and lean national
retailers in sectors such as supermarkets, home electronics, office supplies, and do-it-
yourself supplies. These large chain stores tend to rely less on wholesalers for their
own inventories, and at any rate are gradually snuffing out the independent retailers
who are more likely to need wholesalers. Wholesalers have little hope of gaining the
big chains as customers because often the chains have cost advantages of both scale
and scope over wholesalers.

10. Thank you 