WHOLESALERS:THEIR SIGNIFICANCE

TO MANUFACTURERS AND RETAILERS

WHOLESALER
 A wholesaler is a company or individual that purchases
great quantity of products from manufacturers, vendors
and sell to the retailers and businesses.

 The wholesaler’s business model is based on being the

intermediary.

 Wholesaler focus on B2B rather than B2C.

 Wholesaler buys in huge quantities – in bulk from producers.

 It sells in smaller batches in hundreds of shops across the

country.
FUNCTIONS OF WHOLESALER
1. Assembling, bulk-breaking, product assortments
2. Warehouse and storage
3. Grading and packing
4. Transportation
5. Financing
6. Ensuring uninterrupted flow of goods
7. Providing market information
8. Dispersing and selling
WHOLESALERS FUNCTIONS FOR
A RETAILER
 STOCKING-
• Carry inventory so that customer can operate with smaller
inventories.
• Help customers buy right quantities.
 MARKET INFORMATION-
• Provide information about producers and their products.
 FINANCING-
• Sell on credit.
 RELATIONSHIP-
• Own and transfer title to the product without customers
having to negotiate with the companies.
• Customers can spend more time on selling than on buying.
CLASSIFICATION OF
WHOLESALERS
 Wholesalers have been classified into various
categories depending on the range of functions
they perform.

 Full Service: Stocking, selling, offering credit, delivery and

other assistance. E.g.- Co. distributors.
 Limited Service: Include cash and carry(Metro type),
truck w/s, drop shippers, rack jobbers, mail order houses.
 Merchant: Independent business which include
distributors, jobbers.
 Brokers & Agent: Bring buyer & seller together and get
commission.
 Miscellaneous: Include agricultural business, petroleum
and auction.
Types of Wholesalers
Limited Service
Cash and Carry Usually stock a limited number of products.
Example: metro cash & carry

Truck Operate rolling warehouses.

Wholesalers Sell a limited line of product.
Mail Order Send catalogue to customers.

Manufacturer’s An independent wholesaling middle man.

Agents Example: speciality foods & furniture
Selling Agents Handles competing product lines, operate
nationally, handles entire range.
Auction Sales made to the highest bidder.
Companies Charge a fixed fee or commission for their
service.
COMPARING THE THREE
Why do
retailers buy
from
wholesalers
when they can
buy from
manufacturers
at a cheaper
price?
There is a reason why the following
supply chain has developed over the
past 150 years…….
Each participant in the supply chain
provides a specific value-adding service.

Value addition is done in form of

a) Focused specialization in systems, equipment
and management
b) Delivering their particular service in the most
efficient and cost effective way.
c) Provide after-sale service for retailers;
 A retailer can skip the participation of
wholesaler and can go directly to
manufacturer……….
But……
That won't negate the work that the wholesaler
performs……...

As Retailer who does not have the wholesaler's specialized

systems, equipment and management expertise…………….

Lack of specialized skills and infrastructure adds a difficulty

that may not be obvious at first to the retailer enticed only
by the cheaper price.
 Here are the increased costs that the specialist
retailer must face, if they go direct to the
manufacturer:
• The manufacturer's business model is built on selling high
volume lots that are usually far greater than a retailer sells in
a reasonable time - increased stock holding and storage
costs is the result and in the most expensive space possible.

• Manufacturing businesses are usually few, large scale and

located remotely, away from typical retail zones, making
lead times longer and delivery more expensive.

• To obtain the same range of goods that a wholesaler

sources from many different manufacturers………which
might not be possible for a retailer as he also has a retail
business to deal with.
• Incurring a hidden opportunity costs due to the lost
revenue from not attending to what you do best -
selling goods to customers.

• Where wholesalers deliver good to a wide range of

retailers via efficient daily small vehicle logistics……….
if retailer pick up the goods from manufacturer it will
be nightmare for the manufacturer's semi-trailer
when trying to deliver to a busy retail area.
SERVICE OF WHOLESALERS TO
MANUFACTURERS

1. Collects order in huge quantity and increase

the reach.
2. Advertising and sales promotion
activities are mostly undertaken by
wholesalers.
3. They store goods in their own godown at
their own risk
4. Provide Financial assistance to
manufacturer.
5. Provide information on latest consumer
trends, features and packaging.
SERVICES OF WHOLESALERS TO
RETAILERS
 Wholesalers keep wide assortment of goods as stock.
So, the retailer can purchase the product of his choice.
Moreover, the retailer need not hold huge stock of
goods. So, his inventory is kept at minimum.
 The wholesalers enjoy the economies of bulk purchase.
Moreover, they purchase at lower prices and store
goods during the period of low demand. Wholesalers
share a part of the benefits with the retailer.
 Wholesalers advise retailers on the matters of vital
interest.

 The wholesalers inform retailers about the new arrival of

goods in the market.
Thankyou…!