Wholesalers

Wholesaler may be defined as the middlemen who operates between the producers
(from whom they purchase goods) and the retailers (to whom they sell goods).
Wholesaler refers to any individual or business firm selling goods in relatively large
quantities to buyers(retailers) other than the ultimate consumers. Thus the
manufacturers who sell their products directly to retailers may also be regarded as
wholesalers. The specialised knowledge and skill of wholesalers increases the
efficiency of the distribution network. The wholesalers provide important services and
solve the problems of both the manufacturers and the retailers.

Services provided by the wholesalers to the manufacturers:-

They place orders for the product in advance on the basis of expectations regarding the
demand for the product. This enables the manufacturer to plan his production and
secure the economies of scale.

They may also provide transportation facility by carrying goods from producers to
godowns and then to retailers.

They perform advertising and sales promotion activities and also employ expert sales
representatives for the purpose.

They provide financial accommodation to manufacturers in the form of cash payments

for goods purchased from them as well as provide credit to them.

They keep the manufacturers updated on the changes in customers' habits, tastes,
preferences and fashion.

They also play an important role in fixation of the final prices of the goods.

Services provided by the wholesalers to the retailers:-

They act as the retailers 'buying agent' and saves them from the trouble of searching
out and assembling goods from several manufacturers.

They inform the retailers about the new products, its uses and changes in their prices.
They also assist the retailers in advertising and selling of the products.

They provide financial assistance to retailers, sell goods on credit to retailers and thus
help them to operate with small working capital.

A wholesaler being the ware-house keeper of the market, they protect the retailers
from the risk of loss arising from holding large stocks of the product.

They may also sort out different grades of products according to quality and pack the
goods into small lots for the retailers.

Retailers

Retailing refers to all the transactions which involve sale of goods or services to the
ultimate consumers. A retailer is a middleman who procures goods from the
wholesalers and sell it to the final consumers. They form a vital link in the channel of
distribution of products because without him, neither the products would sell to distant
places nor would it be possible for consumers to buy goods of their choice in shops
located nearby. They have a much stronger personal relationship with the consumers
and deal directly with the people of varied tastes and temperaments. They form the last
link in the chain of distribution and give the final selling price to the product. The
retailers provide important services and solve the problems of the manufacturers and
wholesalers on one hand and the consumers on the other hand.

Services provided by the retailers to the wholesalers and manufacturers:-

They provide selling outlets to wholesalers and manufacturers.

They save the manufacturers from the inconvenience and expenses of selling the
goods in small lots to a large number of consumers.

They communicate the needs and desires of consumers to the manufacturers.

They may also arrange for transportation of goods from the wholesalers' godowns to
the ultimate consumers.

They may also perform storage function by keeping stocks of goods.

Services provided by the retailers to the consumers:-

They anticipate the needs of consumers and accordingly assemble goods of different
varieties. Thus they satisfy their demands and provide them a wide choice of goods.

They sort out goods supplied by the wholesalers and keep them in convenient
packages for the benefit of the consumers.

They even act as an advisor and guide to the consumers by bringing new products to
their notice and educating them about its diverse uses.

They keep the consumers informed about the changing trends in the market about the
different varieties of products.

They also provide other services to the consumers such as free home delivery,
aftersale services,credit facility,etc.

Retailers are of different types depending upon their scale of operation and location.
They are broadly classified into two categories:Small-scale retailers:- are those retailers whose scale of operation is restricted to a small
segment of the market and to a narrow range of products. They generally hold small stocks of
the products of regular use. Such retailers are very large in number but account for a small
portion of the total retail business. But,small-scale retailing is a very common, simple and
flexible way of distributing the products to the final consumers. It incurs low operating costs
and is usually owned and operated by a proprietor. The most important feature is that the
small-scale retailers have a direct and personal contact with their customers. This form of
retailing faces the problems of small capital,lack of professionalism and low purchasing
power.
The two prevalent forms of small scale retailing in India are :Itinerants or Mobile traders:- are those retailers who carry on their business by moving
from place to place for selling the products and have no fixed business premises. They change
their place of business according to their convenience and sales prospects. They serve either at
the consumer's doorsteps or on busy places frequently visited by the customers. They do not
have any particular line of business and carry very little stock of those goods. They save time
and efforts of customers in buying articles of ordinary use. The hawkers and pedlars;cheap
jacks; market traders and street sellers fall under this category.
Fixed Shop Retailers:- are those retailers which have fixed business premises and operate
through unit stores or small shops located in residential areas or markets. They mainly
include:- (i) street stalls:- are the small shops on the roadside,street-crossing,bus stops, etc.
They sell a limited variety of products of regular use like stationery, grocery, etc; (ii) dealers
of second hand goods:- are engaged in purchase and sale of used goods like books,clothes,
etc; (iii) general stores or variety stores:- are the shops which deal in all types of general
consumer goods of regular use like bread, butter, paper and pencils,etc.They are set up in

residential areas or busy markets. They provide services like goods on credit and home
delivery to their customers; (iv) speciality shops:- are the shops which deal in only one or two
special types of goods. They are generally located in shopping centres. For example, chemist
shops, grocery shops, readymade garments shop, sweets shop, etc.
Large-scale Retailers :- are those retailers whose scale of operation extends to a large
segment of the market and to a wide range of products. They have a fixed line of business in
which they have invested huge capital. Such retailers are not very large in number. This form
of retailing involves high operating costs and lacks personal contact with the customers. But it
involves more of professionalism in selling the products through the use of various
promotional techniques like advertising, publicity, sales promotion,etc. The various forms of
large scale retailers are:Departmental stores:- are large scale retail establishments comprising of a number of
departments in the same building. All its departments are centrally controlled but each forms a
complete sales unit in itself and specialises in a particular line of product. They offer a wide
choice of products to the customers under one roof. They also provide many amenities for
customer's convenience such as restaurants, car parking, recreation rooms, post and telegraph
offices and so on. Such stores are generally located in central places of big cities so that they
can be easily accessible to the customers.
Supermarkets:- are large scale retail shops operating at lower costs. They sell a wide variety
of consumer goods of regular use such as food items, groceries,etc at one place. They sell
goods at lower prices than the departmental stores. Customers select the goods themselves
without salesman's assistance. It is also called self-service stores. But,they do not provide
additional facilities to their customers.
Multiple Shops or chain stores:- are a group of retail stores of the same type under one
common ownership and centralised management but are located at various locations. All of
them deal in similar range of products and sell the same standardised products at the same
terms and conditions. The goods dealt are generally meant for everyday use and are readily
acceptable to all kinds of customers. They offer goods at lower prices as they enjoy
economies of bulk buying.
Mail order houses:- are those retail trading establishments which receive their orders by mail
and deliver the goods by parcel or post express. The post office is their main channel of

distribution. Orders from customers may be secured by advertising in newspapers or journals

or through telephone contacts. But this type of retailing is non-personal and without any faceto-face contact between buyers and sellers. However, it helps the consumers to get their
requirements at their own place and thus saves their time and expenses.
Consumer cooperative stores:- are the cooperative stores which are owned and operated by
the consumers themselves. They are incorporated as an association under the Cooperative
societies Act. The membership of such stores is voluntary and capital is subscribed by the
members themselves by purchasing shares of a small denomination. They purchase their
requirements of goods in bulk from manufacturers and wholesalers and sell them to its
members at lower prices. The aim of such cooperative stores is to render service to its
members and not to maximise profits.
Hire purchase traders:- is a form of retail trade in which credit is granted to the customers
on the security of a lien on the goods. They supply consumer durable goods to the customers
who agree to pay the price by installment (also called hire charges)at regular intervals. In this
form of retailing, consumers get the advantage of deferred payment as they can purchase
goods on credit and make easy payments in installments while using the products at the same
time. The buyer acquires the ownership of goods only after the total price has been paid. If
there is default in paying installments,the seller has right to recover the goods or sue buyer.
Super Bazars:- are large retail stores organised by cooperative societies. They sell a variety
of products under a single roof. They procure goods at wholesale rates from the manufacturers
and wholesalers and sell them to the consumers at reasonable prices. These may operate either
as self-service stores or as separate counters served by a salesman.
Automatic vending machines:- are a new and complementary form of retailing operated by
inserting coins or tokens into the machine by the buyers. In return, buyers receive a specified
quantity of the product from the machine. These are used to sell prepacked and low cost
products of mass consumptions like beverages,tickets,etc. This form of retailing can sell
goods at places and at times where other types of retailing are not convenient or economical.
For example, mother dairy sells milk through such vending machines.
Advantages / Benefits of Wholesalers
The benefits wholesalers offer to members of the channel can be significant and involve most
of the ones we discussed in the Distribution Decisions tutorial, though specific benefits vary

by type of wholesaler. Yet there are two particular benefits one for suppliers and one for
retailers - that are common to most wholesale operations and are worth further discussion:
Provide Access to Products - Wholesalers are in business to provide products and services to
buyers (e.g., retailers) who either cannot purchase directly from suppliers because their
purchase quantities are too low to meet the suppliers minimum order requirements or, if they
purchase directly from suppliers, will pay higher prices compared to bigger retailers who
obtain better pricing by purchasing in greater quantities. Since wholesalers sell to a large
number of buyers their order quantities may match those of large retailers thus allowing them
to obtain lower prices from suppliers. Wholesalers can then pass these lower prices along to
their buyers, which can enable smaller retailers to remain competitive with larger rivals. In
this way transacting through wholesalers is often the only way certain retailers can stay in
business.
Provide Access to Markets Providing smaller retailers access to products they cannot
acquire without wholesaler help offers a benefit for suppliers as well since it opens additional
market opportunities for suppliers. Namely, suppliers can have their products purchased and
made available for sale across a wide number of retail outlets. More importantly, for a
company offering a new product, convincing a few wholesalers to stock a new product may
make it easier to gain traction in the market as the wholesaler can yield power with the
smaller retailers convincing them to stock the new product. Considering a wholesaler can
serve hundreds of small retail customers, the marketing efforts required to persuade the
wholesaler to adopt a new product may be far more efficient compared to efforts needed to
convince individual store owners to stock the new product.
Disadvantages of Wholesellers
When it comes to business, wholesaling helps a lot of retailers and buyers get a product at a
good price. However, there are major disadvantages that are hard to avoid. Here are some of
them:
1. Capital
In the wholesalers point of view, he should have a big capital to buy the product from the
manufacturer and then have enough logistics to distribute the product to buyers. In this case,
big trucks are needed to contain the large amount of goods to be sold throughout the day.

If the goods were not all sold, most of the time, the wholesalers cannot return the goods to the
manufacturers. One of the examples is wholesale fish, which the wholesaler bought from the
fishmongers. The wholesaler doesnt have a choice but to find means to sell the catch even at
a very low price.
2. Quantity
In the buyers point of view, wholesaling is not good when it comes to quantity. If there is one
or two items that he would like to buy from the wholesaler, he will not be able to do it.
Wholesaling is dependent on quantity, which means that he cant purchase the items that he
wanted alone. The buyer has to buy a minimum number or amount of products dictated by the
wholesaler.
3. Discounts
Asking for discounts is a disadvantage most of the time in the retailers part. People would
think that the retailer has purchased the goods at a very low price since they were from
wholesale.
This is true at times, but buyers fail to consider the retailers expenses on transportation, VAT,
and human labour. Knowing that the goods were bought from wholesale would also decrease
their market value in the perspective of buyers.
4. Competitive pricing
It is hard to set a good price when the good was bought from wholesale. The retailer will have
to compare his goods with other retailer before he can set his own price. This is to avoid over
and under-pricing which would confuse the buyers.
5. Big storage
The need for a big storage is a disadvantage to the wholesaler. The wholesaler should have
enough storage space most especially in cases when the goods werent sold as targeted. This
is much needed particularly for a fish supplier who should make sure that his goods will not
perish.
Advantages of Retailers
Retail outlets provide a safe and traditional shopping option for consumers.

The commercial marketplace has evolved to the point where retail sales no longer
have a monopoly on the consumer world. To elaborate, consumers once relied almost
exclusively on retail outlets for their needed goods, but today you can purchase from

online stores, auction sites, wholesale outlets, liquidation centers, and in some cases,
you can even go straight to the manufacturer. If you sell any kind of merchandise,
there are still advantages to using traditional retail outlets.

In a retail setting, customer rapport benefits both you as a buyer and as a seller. Retail
outlets allow customers to see what they are buying up close and, as opposed to online
stores, they provide instant gratification, because the customer walks away with their
purchases immediately. A friendly and helpful staff also helps to build customer
loyalty, ensuring that customers return again and again. From a business standpoint,
retail outlets allow you to reach a customer base that might be put off by the online
marketplace.

When considering wholesale vs. retail, retail sales provides you with greater inventory
options, because not all merchandise is available on the wholesale market. To provide
a bit of perspective, wholesale goods come straight to the manufacturer to a
wholesaler, usually mass produced at a low cost. The wholesaler may sell to a retailer
or sell to the public directly. But because not all goods can be mass produced at a low
cost, the wholesaler is limited in terms of inventory. By contrast, a retail business can
produce goods for itself, purchase from wholesalers, or directly from manufacturers.

With a retail outlet, you can sell a variety of products and expose customers to items
that they didn't even know they needed. For instance, a customer might enter the outlet
looking for a pair of jeans, but then wind up purchasing jeans, three shirts, a belt and a
tie. By consolidating a variety of merchandise in one central location, you
dramatically increase your sales potential.

If deciding whether to sell in a retail outlet vs. online, consider that a retail outlet
spares you from having to charge shipping costs and from having to deal with lost
packages, tracking codes, customer addresses and complicated online sales databases.
With a retail outlet, you can make each sale with greater confidence and fewer
conflicts.

If you are consumer and are considering reasons to shop at traditional retail outlets, as
opposed to online, consider some of the same benefits. You can save on shipping
costs, receive instant gratification, inspect your items carefully before making your
purchase and not have to worry about packages getting lost in the mail. You also can

have all of your questions answered immediately by helpful staff, rather than having to
rely on email messages and phone calls.
Disadvantages of Retailing
Unpredictable
One of the drawbacks of working in retail is that it is very unpredictable. Sales can plummet
in a business overnight, which can negatively affect your job security. If you work on
commission, you might see your income decrease substantially. In some cases, the retail store
might have to cut back on employees or close down because of the lack of sales. This makes
the retail industry very difficult to count on.
Dealing With Customers
Although many customers will be pleasant and enjoyable to work with, you will inevitably
have to deal with some who are rude and inconsiderate. You will have to deal with these
customers professionally, setting aside your personal feelings and focusing on what is best for
the company. In some cases, you will be extremely busy, and you must be able to handle the
pressure that customers can provide.
Conclusion
Wholesalers and retailers are the two important types of middlemen forming a part of the
distribution channels. They act as an intermediary link between the manufacturers and the
consumers of goods. They specialise in providing a wide range of services for both the
producers as well as the consumers. They reduce the amount of efforts required by the
manufacturer in distributing his product to the final consumers and provide a vast market
coverage to his products. They greatly increase the efficiency of exchange and lead to
reduction in total cost of distribution of products. They provide ready delivery of goods to the
consumers at places convenient and accessible to them. They also provide aftersale services
and handle consumer grievances. They also act as a communication channel by providing
information about the products to the consumers,on one hand, and the consumer feedback to
the producers on the other hand.