What Is Wholesaling?
Wholesale is the process of selling products from manufacturers to other distributors or retailers. Wholesale offers retailers the opportunity to procure a variety of products in different categories in high quantities. Suppliers wishing to purchase large quantities may receive per-item discounts based on wholesalers’ terms of sale and quotas.
Wholesaling allows a product or service to be traded between the manufacturer and the retailer. Wholesalers are one of the most crucial supply chain links, ensuring that a product reaches the final consumers.
There are multiple advantages for retailers distributing consumer goods by wholesale. First, the producers deliver the goods or services that they are offered for sale to the retailers, including services such as transportation and warehousing. The wholesale customer also saves on employee wages and benefits because the wholesaler performs many business items, so both manufacturers and retailers can work with a smaller workforce.
The Role of Wholesalers for Manufacturers
Wholesalers can finance both manufacturers and retailers. Sometimes wholesalers contract with manufacturers. In other words, he can pay in advance for the next season’s crop or the next month’s produce. When the wholesaler places an order with a forward contract or letter of credit, the producer company can obtain financing from banks using this forward contract or letter of credit. In short, wholesalers maintain the continuity of producers in production.
If manufacturers had to sell their products to suppliers, they would have to deal with too many suppliers on small scales and at regular intervals, and the payments they receive would be spread over a while. Due to the physical distance of the retailers, it would not be able to sell to a wide market, or it would try to sell in distant cities and different regions by incurring costs such as shipping, marketing, and advertising.
In particular, both the storage and transportation of agricultural products, food products, and seasonal products would cause extra costs. It would be necessary to provide additional employment for all these operations. Wholesalers take all this burden off the shoulders of the manufacturers and enable them to concentrate only on the production business.
Types of Wholesaling
1. Merchant Wholesaling
a. Full-Service Wholesaling
- Wholesale Merchants
- Industrial Distributors
b. Limited-Service Wholesaling
- Cash and Carry Wholesaling
- Truck Wholesaling
- Drop Shippers
- Rack Jobbers
- Producers’ Cooperatives
- Mail Order Wholesaling
2. Brokers and Agents
- Execute orders
- Facilitate trade for clients
3. Manufacturers’ Sale Branch and Offices
- Sales Branches and offices
- Purchasing offices
Wholesalers in Terms of Suppliers
Wholesalers provide retailers with access to different products in low quantities and with deferred payments. Retail businesses are sales-oriented. Generally, a retail store will want to use the storage area for sale, that is, to keep warehouse areas limited. Wholesalers enable retailers to put various products on their shelves as soon as demand arises, without incurring warehouse and depreciation costs. Wholesalers often also offer to ship. In this case, the retailer will only focus on selling. The B2B way of working makes it possible for retailers to reach more wholesalers worldwide. As e-commerce channels became widespread, the use of B2B sites that brought together buyers and sellers became more widespread, and shipping costs decreased.
Both manufacturers, wholesalers, and retailers can trade with any part of the world through virtual marketplaces. Establishing a distributorship network makes it much easier for a company to open franchises in different cities, states, and even countries.
Communication and transportation costs are cheaper and bureaucratic procedures are much less. Despite all this, wholesale is still effective, and its place and importance in the supply chain do not change.
Wholesale and Sectoral Distribution
The wholesale business is available in almost every sector, depending on the suitability of the product and service group. The traditional supply chain, which operates with many intermediaries in countries such as Japan, still dominates. However, large wholesalers in continental Europe and the USA still dominate sectors such as ready-made food, white goods, electrical appliances, glassware, and food products.
While the telecommunication sector was full of wholesalers who buy long-distance services, Internet access, and teleconference services from large providers and resell these services as their own brands, now we can talk about wholesalers who provide services in addition to classical services such as hotel management and transportation in the service market.
Digital Platforms and E-wholesalers
There are many service groups such as internet-based software, applications, paid social media, forums, blogs, channel memberships, which gained momentum with the emergence of the internet and smartphones.
Many e-commerce companies resell digital products purchased from wholesaler service providers or digital product developers as a different product group.
What is Wholesale Marketing?
Wholesale marketing happens when the manufacturer of a good sells it to a person or company that is aiming to sell it. The merchandise is usually sold under a different brand name. Wholesale networks help connect potential buyers and sellers. This is common in industries dealing with commodity goods such as agriculture and fuel.
Manufacturers market a product line, such as gasoline and diesel fuel, may sell oversupply to third-party dealers. This is what is called wholesale marketing. In this case, it is not only the manufacturer who sells goods under its own brand but also enables other companies to buy their goods and sell them to themselves. Sometimes this occurs in the retail food industry when name-brand manufacturers also produce store brand products.
Many local farmers and medium-sized agricultural producers participate in wholesale marketing. They sell the crops to a few buyers who can represent local or national grocery chains. These companies then sell these products to their own customers. The local agricultural producer may sell some of his own produce locally at a farmer’s market or from a stall he has opened directly on the side of his field facing the road.
Farmers’ markets are a form of wholesale marketing. Sales are predominantly made to wholesalers or distributors in these markets, but some sell directly to consumers. Dealing in such markets creates savings for manufacturers as the added distribution costs and retail markup are avoided. In addition to the farmers’ markets, there are several trade magazines, shopping tv channels, and e-commerce sites that allow businesses to purchase goods directly from the producer.
Companies specializing in wholesale marketing act as intermediaries between manufacturers and retailers. These companies can offer the manufacturer a complete set of services, including packaging, storage, and distribution. A wholesaler often charges additional fees for these activities, which is usually reflected in the product’s final selling price.
Unless they produce their own goods, retailers depend on wholesale marketing. Some products can be delivered directly from the manufacturer; however, most are obtained from wholesale companies. In the case of a large retail chain, its corporate buyers often determine the mix of products that will be offered in their stores. These decisions are usually made by region. Small, privately owned businesses may belong to a national affiliate network to provide them with access to discounts and products that they may not be able to secure and purchase.
What Do Wholesale Distributors Do?
Wholesale distributors act as intermediaries between manufacturers and retailers who sell the product to the end-user. In some cases, wholesalers may sell directly to consumers, but more often than not, their customers will be retailers. The main advantage of wholesalers is the price discounts afforded by a large amount of purchasing power, as they purchase large enough items to meet the needs of many stores or retailers. Such distributors are a standard part of the sales chain in many different industries.
The primary function of wholesale distributors is to act as a gateway between manufacturers and retailers. Manufacturers are companies that produce products. This may involve molding, forming, or particular machining parts such as screws, bolts, trim pieces, or metal sheets. It can also include farmers who produce food products, large farms that grow agricultural products. All kinds of products, from furniture to electronic products, are suitable for distributorship.
Retailers are companies that sell goods and services to consumers or other businesses. This consists of hundreds of types of companies that you come across in markets, shopping malls, or on the street. It also includes virtual companies such as online retailers.