Wholesale Trade 1

1. Wholesaler:
 A wholesaler is a person who buys in large quantities from suppliers and sells in small
quantities to the retailers or other businesses.
 All wholesalers are also called intermediaries or middlemen.
 In a home trade wholesaler is a Merchant or wholesale Merchant.
 Merchants are Principals. This means that they trade for themselves.
 There are two types of merchants (i) Import Merchants (ii) Export Merchants

2. Functions and Services of the wholesaler

a) Providing basic raw materials to manufacturers e.g. cotton, wool, oil, wheat etc.
b) Purchasing in bulk from producer for manufacturers or for retailers.
c) Breaking bulk. The wholesaler will split bulk purchases into small quantities for retailer to
purchase.
d) Providing a variety of goods.
e) Clearing production line wholesaler will buy from manufacturers and store the good until
they are sold.
f) The wholesaler can give valuable advice to the retailer.
g) Purchasing in cash from producers and give retailers credit for the goods they buy.
h) Bears the risk:
 Usually buys ahead of demand.
 So he bears the risk of large losses if demand falls.
i) The wholesaler offers trade discount to his customers.
j) Providing Storage of goods in a warehouse.

3. Agents:
 These are intermediaries who act on behalf of other people (the principals).
 They try to find sellers and buyers of goods and bring them together.
 They do not own the goods.
 They earn commission for their services.
 There are two main types of Agents (i) Brokers and (ii) Factors
 Another type of agent is Forwarding Agent (Freight Forwarders)

4. Brokers Vs Factors
Brokers
i. They bring buyers and seller together
ii. They are not responsible for the delivery of
goods
iii. They do not have the possession of the
goods
iv. They cannot arrange contracts in their own
names
v. They are not responsible for the collection
of payment from the buyers.
Factors
i. They sell goods on behalf their principals.
ii. They are responsible for the delivery of
goods.
iii. They have the possession of the goods.
iv. They can deal with the goods as if they are
the owner.
v. If the factor is a del credere agent, he will
guarantee payment to the seller of the good
even if the buyer fails to pay.

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5. Forwarding Agent (Freight Forwarders)

 These agents earn fees for all logistical activities relating to the movement of goods from
seller to buyer, both within a country and particularly oversees.
 For Example: DHL and FedEx.
Functions of Freight Forwarders
 They pack goods safely and may pack them in containers.
 They arrange transport.
 They arrange the insurance of goods.
 They prepare the documents necessary when goods are transported.
 They provide storage while waiting for transport
 They arrange customs clearance.

6. Channels of Distribution:
Channels of distribution are the ways by which goods are transferred from the producer to the
consumer.
i. Channel 1: Producer/Manufacturer to Wholesaler to Retailer to Consumer
 Such as food/household goods, clothing, garden supplies, tools, soft furnishing,
hardware, stationary.
ii. Channel 2: Producer/Manufacturer to Wholesaler to Consumer
 Such as carpets, building materials.
iii. Channel 3: Producer/Manufacturer to Retailer to Consumer
 Such as sweets, chocolate, bread and cakes.
iv. Channel 4: Producer/Manufacturer to Regional distribution Centre to Retail branch
to Consumer
 Such as food for supermarkets/Hypermarkets
v. Channel 5: Producer/Manufacturer to Consumer
 Such as fruit and vegetables, clothing, books from publishers, industrial products
such as machine/tractors/bulldozers.
vi. Channel 6: Producer/Manufacturer to Agent to Consumer
 Such as raw materials and commodities.
vii. Channel 7: Producer/manufacturer to Sole Agent to Retailer to Consumer
 Such as imported cars, cosmetics, electrical goods.

7. Trends in Wholesaling
i. Cash and Carry
 It is a wholesale supermarket, where retailers can buy goods in bulk at low
prices.
 Neither credit nor delivery of goods are provided.
 Generally located in commercial areas.

ii. Voluntary wholesaler

 Wholesalers and retailers enter into a agreement for purposes of mutual
commercial benefits.
 Under this agreement all parties agree to work under a common name and symbol.
 Retailers agree to buy exclusively from specific wholesaler.

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 All are responsible for their own profit and loss.

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