Channel Institutions: Wholesaling

Archel Philippe S. Ferrer BSBA Marketing Management

Wholesaling Defined:

Wholesalers buy and resell merchandise to retailers and other merchants and to industrial, institutional and commercial users, but do not sell in significant amounts to ultimate consumers
- Cundiff & Still

Functions:
Sales and promotion of chosen company products Breaking bulk to suit customer requirements Storage and protection of the goods till they are sold out Grading and Packing of goods till they sold out Transportation of the goods to the customers Risk Bearing Collecting and Disseminating market information to suppliers and customers

Classification:
Full Service stocking, selling, offering credit, delivery and any business assistance are all provided. Limited Service the name indicates that the range of services are limited. (Cash and Carry) Merchant Wholesalers independent businesses which include distributors, jobbers, etc. Brokers and agents bring buyers and sellers together, handle the goods, and gets commission. Miscellaneous agricultural produce business, petroleum bulk handlers and auction companies.

Key Tasks:
Assembling or Aggregating the Goods
A Wholesaler should:
a. Know the type, quality, and quantity of the goods his customers needs b. Know the market coverage plan advised by the company (principal) c. Have past history of the buying pattern of the regular customers and able to place accurate orders Distributors orders from the principal

Key Tasks:
Warehousing of the Goods
A Wholesaler must:
a. b. c. d. Protect the goods as his own responsibility Adequate and safe storage place Warehouse may be rented or owned Insurance of the goods

Transfer of Title or Ownership of Product

Key Tasks:
Order Booking and Execution
A Wholesaler should:
a. Book orders on a regular schedule to his customers to sell the purchased goods. b. In case of wholesaler operating out of a shop in the market - customers come to the shop for purchase and set revenue target to be achieved every day, week, or month. c. In case of company distributor - sales staff has to visit each customer and book orders that can be delivered with ready stocks or as scheduled. Selling of Purchased Goods to Retailers, Institutions, etc

Key Tasks:
Transportation of the Goods
A Distributor should:
a. Know the type, quality, and quantity of the goods his customers needs b. Know the market coverage plan advised by the company (principal) c. Have past history of the buying pattern of the regular customers and able to place accurate orders Distributors orders from the principal

Key Tasks:
Financing of the Business
A Distributor should:
a. Provide finance for buying the goods he wants to sell. b. Have extension of credit on purchased goods (Freelance Wholesaler) c. Expect to extend credit to his customers. Trading Terms and availability of funds to cover purchases

Key Tasks:
Risk Bearing
A Distributor should:
a. Be Responsible for safe-keeping of purchased goods. b. Be Responsible for any losses incurred on the stocks while in possession Responsibility and Ownership

Key Tasks:
Grading and Packing
A Distributor should:

a. Break bulk and sell to customers in small lot sizes. b. Repacking and extra care for certain goods and pricing it differently (Agricultural Products)
Providing the goods by breaking the bulk for its customers

Key Tasks:
Providing Market Information
A Distributor should:
a. Inform retail customers about types of goods available, competition, promotions in force and etc. b. Inform suppliers information gathered from retailers about consumer reaction.

Provides intelligence for market strategies and trends

Limitations of Wholesalers
a. May not give accurate information to the manufacturer or the retailers/institutional customers due to product shortages or may not ensure equitable distribution of goods. b. Additional channel network adds to company costs which affects the end consumer. c. Consumers have no say on pricing and quality in a wholesaler dominated system

Strategic Issues in Wholesaling

a. Whom to sell to? b. How to sell to them?

Selecting Target Markets: a. b. c. d. e. Location of the wholesaler Size and composition of the markets The trading are which the wholesaler can look at Purchasing habits of likely customers (is it credit driven?) Nature of competition from other similar wholesalers

Marketing Mix
a. b. c. d. Product What product categories to handle? Is it profitable? Price Working on thin margins (1%-2%). Will it sustain the company? Promotion Best promotion is to give the best prices. Place Who can we service? Can we effectively reach them?

Strategic Issues in Wholesaling

Major Wholesaling Decisions such as: a. Which Markets to Operate in? getting the good distributors. Distributor Margins are also defined by the industry and competition. b. Manpower placing key personnel for specific functions (frontline staffs) c. What Product to Sell? Selling of products can be either by width or depth. Who you cater affects what you sell also. d. Promotional Support passing on the price benefits to customers. e. Credit and Collections necessary for retention of customers. f. Image and Customer Perception importance of best and low prices together with quality. g. Warehouse Location and Design storage places according to goods and passes on the standard design of warehousing. h. Inventory Control Optimal level of stocks and getting the benefits of quantity purchases.

Distributor/Dealers/ Stockists

Distributor wholesaler nominated by a company to re-distribute company products to all retailers and institution in a designated territory. Dealers similar role as to distributor but differs as: a. may not have a clearly defines territory and sells both in the market and from his shop. b. may deal with competitive products also Stockists may be working for one company and may have a pre-designated territory but he does not re-distribute stocks.

Need for a Distributor

a. Entering a new town b. Additional coverage in the same town c. For replacing existing distributor.

Managing damaged stocks

In spite of best handling of the company products and proper stacking, some stocks may get damaged. Occasionally the distributor may have taken back damaged stocks from influential retailers in the market. Also instances of consumer complaint stocks sent back. Effect damaged stocks are a cost to the company and have to be carefully handled by the distributor to reduce losses. Either to destroy or to dispose off at reduced prices after getting the permission of the sales personnel of the company. Then, there will be claim reimbursement of the loss.

Addressing Customer Complaints

In case of customer complaints to the retailer, the retailer will:

a. Judge the genuineness of the complaint b. Ask for a letter of complaint from the customer with address and give a fresh pack c. Address it to the Distributor The Distributor will:
a. Visit retailer and get the written complaint and offending pack (must be immediate). b. Give a fresh pack to replace what has given to the customer. c. Pass the letter of complaint to the company sales person (principal) and claim for the value of the free packs in normal course.