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```````````````````````````````````````````Wholesale trade
deals with the bulk buying of goods from various manufacturerseither locally or from overseas and the breaking down of this bulk into smaller quantities which are then sold to the retailer. Middlemen, be they wholesalemerchants, mercantile agents or wholesalers provide this intermediate link in thechain of distribution before the goods are sold to the retailers.
THE ROLE OF THE WHOLESALER IN THE CHAIN OF DISTRIBUTIONCHANNELS OF DISTRIBUTION
1. There are four main channels of distribution and many 'intermediaries' or middlemen involved before goods can finally reach the consumers as shown inthe following table:2. In reality, the channels used are very varied and often complex, and there ismuch overlapping.
Channel 1: When a manufacturer sells direct to the consumer 
 
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Manufacturer Consumer e.g. Vegetables atproducers’ marketand made-to-order furnitureConsumer e.g. Bread andready madefurnitureConsumer e.g. Fish, locallymanufacturedhouseholditemsConsumer e.g. Imported cars,cosmeticsRetailerRetailer Retailer Wholesaler Sole Agent
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Commerce
–
Students’ GuideDepartment of Business and Computing
1.This occurs when customers
 post orders for 
books
or magazines direct 
to thepublishers who then send them their orders direct as in mail order or e-commerce.This ensures the publisher of selling to as many people as possible, includingthose who live far away. In this way, they increase their sales. Consumers, too,benefit since they are assured of getting the latest issue or publication early.2.It also occurs when
something is made specially 
for a customer such as a suitor made-to-order furniture. Consumers who demand individuality in design for such personal effects normally have to pay more than what they have to pay for the same type of good which is mass-produced.3. It also occurs in the case of 
expensive and highly specialized goods
which arepurchased only occasionally by governments or big private companies. Examplesof these kinds of goods are aero planes, ships, railway rolling stock, and the like.Buyers prefer to go direct to the manufacturers so that they may be able todiscuss their individual requirements as well as the terms of purchase.4. This channel of distribution, however, is not suitable for all kinds of goods.
Channel 2: When a manufacturer sells to the retailers who in turn sell to theconsumers
1. Most of these retailers are large stores that have the financial resources to buyin
bulk 
direct from the manufacturers. The main advantage of bulk buying is thelarge discounts given that enable these retailers to compete successfully with thesmall retailers in terms of ability to offer a greater variety of goods at competitiveprices.2. In many cases, manufacturers open their own
retail shops,
for example, thoseselling footwear and medicine. These manufacturers have resources large enoughto open retail outlets of their own throughout the country.3. Sometimes, the retailers may be 'tied' to the manufacturer. For example, petrolstations sell only one brand of petrol.
Channel 3: When a manufacturer sells to a wholesaler or a wholesale
2Prepared By: Emmanuel George
 
Wholesale Trade
merchant who in turn sells in smaller quantities to retailers (shops), who inturn sell to the consumers
1. This occurs when producers themselves are unable to market the excessgoods themselves because of financial constraints or the lack of access to widelydispersed markets due to a lack of contacts, commercial know-how and the like or owing to the fact that it is just not commercially profitable for the producers to doso themselves. This is true of most
rural produce
like fish, paddy, vegetables,eggs, poultry, etc. which are easily perishable. These are often sold to dealers(wholesalers) who then pack them properly and transport them quickly to the bigtowns and cities either in the same country or overseas, where they are sold tovarious retailers, who in turn sell them to the consumers.2.
Locally manufactured goods
like ordinary household essentials which arestocked by small retailers are often distributed in this way since the retailers buy intoo small a quantity to make it viable for the manufacturer to sell direct to them.3. This method of distribution is especially important where the demand for theproduct is seasonal but production takes place throughout the year, e.g. fireworksand Christmas cards. It is the same if the demand for the product is fairly eventhroughout the year, but output is concentrated during specific periods of the year,e.g. paddy.In such cases, the wholesaler's function of acting like a reservoir in order tobalance demand and supply becomes very important.4. Goods which are sold in this way become
more expensive
because of the costof distribution and profit margins required by the wholesaler and retailer.Moreover, consumers have no direct contact with manufacturers or producers.However, consumers are assured of a
wide variety of goods
produced by manyproducers.5. The producer is free to devote all his attention and resources to the actual workof producing the goods since the
marketing aspect 
of his goods is already in thehands of the wholesaler. At the same time, the producer is assured that his goodsare marketed over a
wide geographical area.
6. The retailer needs
little capital 
as he needs to maintain only a small stock. Hedoes not need to keep large stocks because it is easy for him to get new and,hence, fresher stocks from his supplier (wholesaler) once his stocks are depleted.7.
General wholesalers
normally stock a wide range of goods and need asubstantial amount of capital to finance their large warehouses, stocks and
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