SALES AND DISTRIBUTION

MANAGEMENT
Chapter-17 Channel Institutions: Wholesaling
Learning Outcomes
LO1: To understand the definitions of wholesaling
LO2: To comparison of wholesaler vs. retailer
LO3: To identify the functions of wholesalers
LO4: To describe the various classes of wholesalers
LO5: To explain the process of selection of wholesalers
LO6: To discuss wholesaling in India
IMPORTANT DEFINITIONS OF WHOLESALING
Wholesaling includes “all the activities in selling goods or services to those who buy for
resale or business use”. -Philip Kotler
Some other definitions of wholesalers include:
“Wholesalers buy and resale merchandise to retailers and other merchants and to
industrial, institutional and commercial users, but do not sell in significant amount to
ultimate consumers”. - Cundiff and Still
“A person or firms that buy merchandise and resell it either to retailers for subsequent
resale to the consumer or to business firm for industrial and business use is called a
wholesaler”. - Mason and Ratch
Wholesalers are defined as “people who sell to retailers or other merchants and industrial,
institutional and commercial users but they do not sell in significant amounts to ultimate
consumers.” - American Marketing Association
FUNCTIONS OF WHOLESALERS
1. Merchant wholesalers- These merchants buy goods in bulk and resell them to consumers
for a profit, firstly, reselling the goods again to someone else and secondly, consuming the
goods in the course of operation of a profit-making enterprise.
2. Service wholesaler- They perform following function:
• Physical possession flow
(i) Delivering goods to customer
(ii) Maintaining stocks of goods in both quantity and variety for supplying to customers on
regular basis
(iii) Maintaining storage facilities
(iv) Taking possession of goods
• Ownership flow
• Promotion
• Negotiation
• Risk taking
• Ordering
• Payment
 SELECTING OF WHOLESALERS
The criteria involve the following steps:
• Identification of two or three prospects for each
appointment based on requirements of the company.
• Checking the background of each candidate that is short
listed.
• Finding out the interest levels by meeting the prospects and
explaining the requirements to them.
• One or two final candidates have to be shortlisted after
getting all the information.
• Final selection is made on quantitative and qualitative
factors. The qualitative factors could be keeping the image of the
company, willingness to abide by rules, willingness to spend time
in the market, confidence in himself and company products.
 Key Tasks of Wholesalers
• Aggregation of goods- The wholesaler is generally very clear at the start of this
task regarding the requirements of his set of customers. He is aware of the quantity and
quality of the goods needed by his customers. Hence, wholesalers can place orders to
their suppliers who can be other wholesalers or producers.
• Warehousing of goods- Protection of goods is the responsibility of the wholesaler
after he has bought them from a distributor. For the quantities the wholesaler buys, he
has to make sure that he has safe and adequate storage space. The warehouse may be
rented or his own. The goods may even be insured depending on the value of the goods.
The distributor must provide good storage facilities when the goods that need to be
stored in temperature-controlled conditions.
• Booking of orders- For selling the goods already bought, the wholesaler has to
book orders regularly from his customers.
• Transporting of goods- Goods are rarely delivered by free-lance wholesalers at the
doorstep of their customers. Usually, they reach the shop for placing orders and
collection of goods.
• Financing of business- For buying the goods that a wholesaler
wants to sell, finance has to be provided. Credit facility is rarely extended
by companies to distributor or wholesaler.
• Bearing of risks- For the stocks that the wholesaler is trying to sell,
he has already paid in advance. While in possession of the stocks, the
wholesaler is responsible for any losses.
• Packing and grading- The wholesaler sells to his customers in small
sizes by breaking the bulk. Some re-packing may have to be done for
this.
• Providing marketing information- He is two-way communicator of
information that is valuable. He informs various types of goods available,
promotions in force and competition to his retail customers.
 CLASSIFICATION OF
1.
WHOLESALERS
Merchant Wholesalers
Ownership of goods that they deal with is taken by merchant wholesalers. Generally, merchant wholesalers are of two
types: Full function and Limited function.
• Full function: These wholesalers are known as jobbers or distributors also. The functions normally associated with
wholesaling like marketing functions are performed by these wholesalers. A broad variety of goods is carried by
them.
• Limited function: Some of the function typically associated with wholesaling are performed by these wholesalers.
The most common limited function wholesalers are as follow-
• Cash and carry wholesalers: No delivery on credit is offered by these wholesalers to their small business
customers. Neither do they provide any managerial assistance to their customers.
•
• Drop shippers: The possession of goods handled by them is not taken by
such wholesalers. Drop shippers generally market commodities like
natural resources for example coal and commodities like grains.
• Truck wholesalers: As their inventories are carried on their trucks so
limited functions are performed by these wholesalers. A high degree of
locational convenience is provided by these wholesalers to their customers.
• Mail order wholesalers: Similar to mail order retailers, these
wholesalers also perform their functions.
• Producer’s and retail cooperatives and rack jobbers: Independent
form producers often band together to market their output jointly and buy
farm supply and implements at a discounted quantity.
 Classification of Wholesalers
2. Agent Wholesalers
Agent wholesalers do not take ownership unlike merchant wholesalers. They market
the products that they take possession of from producers. They are involved in the
selling and buying of services and goods.
3. Manufacturer’s Agents
These are independent firms used in place of manufacturer’s own sales force and
which handle non-competing lines of a variety of manufacturers.
 Strategic Management of Wholesalers
• New Technology- Relations with both suppliers and customers are
strengthened with automation and mechanization. In wholesaling business
new technology has greater significance.
• Proprietary Brands- For maintaining and gaining a sustained competitive
advantage, wholesalers develop strong proprietary brands.
• Niche Marketing- Niche marketing strategies are followed by several
retailers who specialize in unique or limited product categories.
• Profitability
• Effectiveness
 WHOLESALING IN INDIA
• Visiting wholesale mandis is the only option for retailers to
purchase pulses, cereals and food grains and in the process, a lot
of goods are sold by the wholesalers.
• Wholesalers extend credit to their customers which
companies are never able to match.
• There is no organized distribution network in case of
vegetables, fruits and grains.
• To get big sales volumes even big companies need
wholesalers.
• Hundreds of companies depend entirely on wholesalers
and cannot afford their own distribution networks.
• There are coverage limitations for companies which are
made up by wholesalers.
 Rural Markets
The market within 20-25 kilometers of radius of distributor is
expected to be developed by him. Initially these markets
may not be able to be on beat plan but as soon as
salespeople are able to work the markets and business
stabilises, he would look for better territory coverage within
the allotted time. The company salespeople initiate the visits
to these markets. Care must be taken that markets already
on the beat plan of an adjacent distributor must not be
targeted.
Summing Up

Wholesalers buy and resale merchandise to retailers and other merchants and to
industrial, institutional and commercial users, but do not sell in significant amount to
ultimate consumer. There are two main functions of wholesalers based on the following
types: merchant wholesalers and service wholesalers. Based on his performance
evaluation a wholesaler is selected. There are basically three types of wholesale
institutions: Merchant wholesalers, Agent wholesalers and Manufacturer’s agents. The
following major factors are important for the success of a wholesaler’s firm: new
technology, proprietary brands, niche marketing, profitability and effectiveness.
Key terms
1. Merchant wholesalers: “A merchant wholesaler is an institution that
buys goods from manufacturers and resells them to businesses,
government agencies, other wholesalers, or retailers.”
2. Service wholesalers: “Service wholesalers usually handle larger sales
volumes; they may perform a broad range of services for their
customers, such as stocking inventories, operating warehouses,
supplying credit, employing salespeople to assist customers, and
delivering goods to customers.”
3. Niche marketing: “A niche market is the subset of the market on which a
specific product is focused.”
4. Proprietary brands: “It is a brand of product that is privately owned and
controlled.”

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