Everything you need to know about the functions of wholesalers. Wholesaler is an important chain of the channel of distribution because it is an agent between a manufacturer and retailers.
A wholesaler purchases the goods from manufacturer in bulk quantity and re-sells it to retailers in small quantity. Wholesalers occupy a pivotal place in the marketing channel set-up.
In most cases they perform several critical functions invaluable to the smooth flow of goods, ownership, finance, and information.
Wholesalers play an important part in the distribution of goods.
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American Marketing Association defines wholesaler as – A business unit which buys and resells merchandise to retailers and other merchants and/or to industrial, institutional and commercial users but which does not sell insignificant amounts to ultimate consumers.Wholesalers are intermediaries that purchase products from manufacturers and sell them to retailers.
Some of the functions of wholesalers are:
1. Assembling of Goods 2. Breaking in the ‘Bulk’ 3. Warehousing or Storing 4. Transporting 5. Grading 6. Financing 7. Risk-Bearing 8. Pricing 9. Communication of Market Information 10. Packing Facility.
Functions of Wholesalers: Assembling of Goods, Breaking in the ‘Bulk’, Warehousing or Storing and a Few Others
Functions of Wholesalers – Top 10 Functions: Assembling of Goods, Breaking in the ‘Bulk’, Warehousing or Storing, Transporting, Grading, Financing and a Few Others
Function # 1. Assembling of Goods:
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The wholesaler purchases different varieties of goods from different manufacturers, usually much in advance of the demand. He keeps them in stock for sale to the retailers. He also imports goods from foreign countries. In this way, he stores goods of various producers and manufacturers.
Function # 2. Breaking in the ‘Bulk’:
The wholesaler purchases goods in bulk from the producers and sells them in small quantities to the retailers. This is perhaps the main function of the wholesaler. This is beneficial to both producers as well as retailers. It is very difficult for a producer to establish direct contact with the retailers spread throughout the country.
Besides this, the orders of the retailers are small and direct execution of these orders can be highly inconvenient. Wholesaler makes available easy solution to the problem by bulk lifting of stock.
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Generally it is not possible for the retailers to establish contacts directly with the producers to purchase from them, so the wholesaler gets them benefited.
Function # 3. Warehousing or Storing:
Warehousing is an important marketing function performed by the wholesaler. There is a time gap between the production and the consumption of goods. Therefore, to avoid periodic shortages, a wholesaler keeps a large stock of goods for retailers. He ensures that the goods are available to the retailers at all times.
Retailers can replenish their stocks from time to time by purchasing goods from the wholesaler. Wholesalers help to stabilize prices by adjusting supply according to demand. Many wholesalers maintain their own warehouses for storing goods.
Function # 4. Transporting:
Wholesalers provide facilities for the transportation of goods from the producers to his own godown. They also send goods to retailers in far-flung areas. They save costs through bulk transportation of goods. Some wholesalers maintain their own vehicles for this purpose.
Function # 5. Grading:
Many wholesalers sort out goods according to size, shape, quality, etc. They break the goods into small lots, repack them and put their own brand names. In this way, they perform the functions of packing, branding and grading. By grading and standardization, they ensure supply of uniform quality to retailers.
Function # 6. Financing:
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Some wholesalers finance the manufacturer by giving them advance money with order or by purchasing large quantity of goods on cash basis and the retailers by granting credit to them. Thus, they help the producers as well as the retailers to a great extent.
Function # 7. Risk-Bearing:
Wholesalers serve as a shock absorber. They have to bear the risk entailed in the process of distribution of goods. It may arise due to change in demand or damage to goods while in storage. They protect the producers against this risk and also have to bear other losses including the loss through debts etc.
Function # 8. Pricing:
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Wholesalers try to maintain and stabilize prices by regulating supply of goods in accordance with the demand. They foresee market conditions, the demand for the goods, the tastes of the people and keep arrangements ready to meet the demand when it comes up.
Function # 9. Communication of Market Information:
Wholesalers foresee market conditions. They collect information from retailers about changes in the tastes, fashions and buying habits of consumers and pass this information to manufacturers. Some wholesalers also conduct market surveys.
On the basis of their vast knowledge about the goods produced by different manufacturers, wholesalers advise retailers about the goods that will satisfy the needs of consumers in the best way.
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Function # 10. Packing Facility:
Wholesalers also provide packing facility to the retailers. They purchase goods in a bulk and split them into smaller lots and then repack them for the sale to the retailers.
Functions of Wholesalers – 8 Main Functions: Collection, Storage of Products, Distribution, Financing, Risk Taking, Selling, Promoting and a Few Others
Wholesalers usually deal with a specific variety of products and perform various functions, which are as follows:
i. Collection and Storage of Products – It refers to the bulk purchasing of products from manufacturers and keeping the products in warehouses.
ii. Distribution – It sells the products to various retailers located at different places.
iii. Financing – It provides financial support to manufacturers and retailers.
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iv. Risk Taking – It refers to the risk covered by the wholesalers during the possession of products.
v. Selling and Promoting – It refers to an activity conducted by the wholesalers to promote products and persuading customers to buy the products.
vi. Management Services – This helps retailers to improve store layouts and inventory management systems.
vii. Bulk Breaking – It means decreasing the lot size of the products to sell products as per the requirement of retailers.
viii. Market Information – It facilitates manufacturers with the information about customers and market research.
Functions of Wholesalers – 8 Main Functions: Assembling, Buying, Warehousing, Transporting, Financing, Risk Bearing, Providing Market Information and a Few Others
Wholesaler performs a variety of functions such as:
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1. Assembling and Buying – Assembling means bringing together stocks of different manufacturer who produce same line of goods. Buying means selecting the manufacturers and placing order on them. Buying also means making special purchase in case of seasonal products.
2. Warehousing – Warehousing provides the storage function. There is always a gap between the production and consumption of goods. For this period goods have to be stored and preserved. Wholesaler stores the goods in warehouse and thus relieves the producer and retailer from problem of storage.
3. Transporting – Wholesaler undertake to transport the goods from producer to their warehouses and then to the retailers.
4. Financing – Wholesaler provides credit facilities to the retailers and makes advance payment to the producer for their working capital requirement.
5. Risk Bearing – Wholesaler bears various risks associated with the business. Risk related to changes in prices, damage to goods, theft, fire, non-payment, etc. are borne by the wholesaler.
6. Providing Market Information – Wholesaler is the link between the producer and retailer. He provides relevant information to the retailers related to their trade interest. Similarly, they provide relevant market information to the producer which they get from the retailer.
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7. Grading, Packing and Packaging – Wholesaler buy in bulk quantities therefore later they sort out the goods on the basis of size, quality, etc. Smaller lots are prepared and properly packed for the retailers.
8. Dispersing and Selling – The goods purchased from the producers are stored and then dispersed and sold to the retailers. For this they contact the retailers and get the order.
Functions of Wholesalers – Assembling, Dispersion, Warehousing, Transportation, Financing, Grading, Packaging, Pricing and Risk-Assuming
1. Assembling – Wholesaler collects varieties of a product from different manufacturers and keeps them in stock for sale to the retailers. Some wholesalers collect product only from a single producer.
2. Dispersion – Products assembled and kept in stock in the warehouses are distributed to the retailers, thereby dispersing the goods to various locations.
3. Warehousing – Goods bought from manufacturers or producers are safely stored in warehouses pending their sale to the retailers.
4. Transportation – Wholesalers have to move the goods from the place of production to their warehouses and from there to the place of retailers. They arrange and maintain their own vans for the movement of goods.
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5. Financing – Wholesalers sometimes finance the manufacturers and retailers. They purchase goods from the manufacturers in cash or deposit security to assure the purchase of goods. They also supply goods, to the retailers on credit.
6. Grading and Packaging – Wholesaler performs the task of sorting out different grades of products purchased either from one producer or from different producers according to quality and other considerations and packing the goods into smaller lots for retailers.
7. Pricing – Retailer determines the price to be charged from customers on the basis of the price fixed by the wholesaler. Wholesalers have specific information about the product and can also suggest the price to be fixed by the producer.
8. Risk-Assuming – Wholesaler undertakes the risk of manufacturers and retailers. Having purchased the goods from the manufacturers in large quantities, he assumes the risks arising out of changes in demand and spoilage or destruction of goods in his warehouse. He takes the credit-risk by selling the goods to the retailers on credit.
Functions of a Wholesalers – 5 Key Services: To Manufacturers and To Retailers
Wholesalers are intermediaries that purchase products from manufacturers and sell them to retailers.
To Manufacturers:
Wholesalers offer five key services to manufacturers:
(i) Warehousing
(ii) Sales expertise
(iii) Delivery to retailers
(iv) Assumption of credit risk
(v) Information
(i) Warehousing:
Wholesalers purchase products from the manufacturer in bulk and maintain these products at their own warehouses. Thus, manufacturers do not need to use their own space to store the products. In addition, manufacturers can maintain a smaller inventory and therefore do not have to invest as much funds in inventory.
To illustrate how manufacturers can benefit from this warehousing, consider Jandy Industries, which produces equipment for swimming pools. Jandy sells its products in bulk to wholesalers that are willing to maintain an inventory of parts. Jandy focuses on maintaining its own inventory of uncommon parts that are not carried by wholesalers.
(ii) Sales Expertise:
Wholesalers use their sales expertise when selling products to retailers. The retailer’s decision to purchase particular products may be primarily due to the wholesaler’s persuasion. Once a wholesaler persuades retailers to purchase a product, it will periodically contact the retailers to determine whether they need to purchase more of that product.
(iii) Delivery to Retailers:
Wholesalers are responsible for delivering products to various retailers. Therefore, manufacturers do not need to be concerned with numerous deliveries. Instead, they can deliver in bulk to wholesalers.
(iv) Assumption of Credit Risk:
When the wholesaler purchases the products from the manufacturer and sells them to retailers on credit, it normally assumes the credit risk (risk that the bill will not be paid). In this case, the manufacturer does not need to worry about the credit risk of the retailers.
(v) Information:
Wholesalers often receive feedback from retailers and can provide valuable information to manufacturers. For example, they can explain to the manufacturer why sales of the product are lower than expected and can inform the manufacturer about new competing products that are being sold in retail stores.
To Retailers:
Wholesalers offer five key services to retailers:
(i) Warehousing
(ii) Promotion
(iii) Displays
(iv) Credit
(v) Information
(i) Warehousing:
Wholesalers may maintain sufficient inventory so that retailers can order small amounts frequently. Thus, the retailers do not have to maintain a large inventory because the wholesalers have enough inventory to accommodate orders quickly.
(ii) Promotion:
Wholesalers sometimes promote their products, and these efforts may increase the sales of those products by retail stores. The promotional help comes in various forms, including posters or brochures to be displayed in retail stores.
(iii) Displays:
Some wholesalers set up a display of the products for the retailers. The displays are often designed to attract customers’ attention but take up little space. This is important to retailers because they have a limited amount of space.
(iv) Credit:
Wholesalers sometimes offer products to retailers on credit. This provides a form of financing for retailers, who may have to borrow funds if they are required to make payment when receiving the products.
(v) Information:
Wholesalers can inform retailers about policies implemented by other retailers regarding the pricing of products, special sales, or changes in the hours their stores are open. A retailer can use this type of information when it establishes its own related policies.
Functions of a Wholesalers – 8 Important Functions: Assembling, Storage, Grading, Packing, Transplantation, Financing, Risk Bearing and a Few Others
The most important functions of a wholesaler in the marketing of goods are as under:
1. Assembling – The wholesaler buys goods from different manufacturer producing the same streak of goods. He assembles them in his warehouse for the purpose of sale to the retailers.
2. Storage – A wholesaler stores the goods in his warehouse. He makes them available in appropriate and requisite quantities as and when goods are required by retailers.
3. Grading and Packing – A wholesaler sorts out the goods according to their quality, size, shape, content etc. and then packs them carefully to sell them to the retailers.
4. Transplantation – Wholesaler buys goods in bulk from the producers and transports them in his own go-down. The wholesaler also provides the facility of transportation to the retailer shop, which is one of the important functions of wholesale trade.
5. Financing – This is an important function of wholesaler. A wholesaler usually buys goods on cash from the producers and sells on credit to the retailer. In this way, he provides financing facilities to trade transactions.
6. Risk Bearing – The wholesaler bears all the trade and financial risk of the business. Since he buys goods in bulk for making them available to retailer in small quantities, he takes all the risk involved in marketing of goods. He not only assumes the risk of loss arising from a unexpected fall in the prices of goods but also the risk of damage, deterioration in quality, spoilage, etc. in his warehouse.
7. Market Information – One of the most important functions of wholesaler is that he provides important market information to retailer and manufacturer. This information helps the retailers to estimate the demand of consumer. It also helps manufacturer, produce the goods according to the change in the tastes and fashions of the consumer.
8. Distribution of Goods – The wholesaler keeps the goods in warehouse. He sells them to the retailers who are often scattered over a large area. The retailers contact the wholesaler when goods are sold and this process continues over the years. The wholesaler thus helps in the distribution of goods.
Functions of a Wholesalers – Top 7 Functions: Storage, Sales Promotional Work, Transportation, Storage, Financial Help, Risk Taking, Packing and Grading
(a) Storage – They forecast the demand for goods and store different varieties of goods from several manufacturers, either from India or abroad.
(b) Sales Promotional Work – They do their level best to promote the goods and services of the manufacturer.
(c) Transportation – A wholesaler carries goods from producers to his godowns and from there he gives it to the retailers. He keeps a fleet of trucks for this purpose.
(d) Storage – A wholesaler is the warehouse keeper of the market. He stocks large quantities of stock and supplies it to retailers, so that he can stabilize prices by adjusting the supply of goods with the demand.
(e) Financial help to both manufacturers and retailers – A wholesaler buys goods on cash basis from the manufacturer and sells them on credit to retailers. Thus, he provides financial help to the manufacturer and retailer.
(f) Risk Taking – A wholesaler bears the risk of changes in demand, prices, bad debts, spoilage of goods, etc. in the course of transportation and storage. Thus, he undertakes various marketing risks and simplifies the process of distribution.
(g) Packing and Grading- A wholesaler re-packs goods in convenient forms. Sometimes he grades the products into standardized grades also.
Functions of a Wholesalers – 8 Important Functions: Regular Supply, Storage, Marketing Functions, Financial Assistance, Risk Bearing and a Few Others
The process of buying goods in large quantities from the producer for the purpose of resale is known as Wholesale Trade.
The individual who undertakes the activities of wholesale trade is known as a ‘Wholesaler’. Wholesaler is the connecting link between the producer and the retailer and provides valuable service to both.
The functions of a wholesaler are as follows:
i. Regular Supply:
The wholesaler needs to ensure regular supply of goods. The retailers do not have to worry about maintaining a large stock of goods with them. They can directly source the goods from the wholesalers whenever they face shortages.
ii. Storage:
The wholesaler purchases goods in bulk quantity from the manufacturer and stores the same in his warehouse until they are demanded by the retailers. He, thereby, helps in maintaining the quality of goods and also takes measures regarding their safety.
Various marketing functions like advertising, sales promotion, warehousing etc., are undertaken by wholesalers. All these activities benefit both, the manufacturers as well as retailers by creating effective demand for the products.
A wholesaler gives advance payment to the manufacturer against orders placed, makes cash purchases, and at times when required, gives small loans to the manufacturer. A wholesaler also provides credit facilities and discounts to the retailers.
The wholesaler purchases goods from the manufacturer and maintains the stock of goods until they ate demanded by the retailers.
He thus takes responsibility pertaining to:
a. Safe storage of goods
b. Losses occurring on account of change in fashion, spoilage, damage etc.
This helps in reducing the risk associated with the manufacturing and retailing functions.
A wholesaler delivers the goods from the place of production to the place of consumption. Hence, the manufacturer does not have to worry about the distribution of goods to the end consumers and the retailer does not have to worry about the procurement of goods from the manufacturer. This transportation function performed by the wholesaler creates place utility for the goods.
vii. Large Purchases and Stock of Goods:
A wholesaler purchases goods from the manufacturer and stocks the goods with himself for further sale. By doing this, the wholesaler acts on the behalf of manufacturer and helps in increasing the manufacturer’s sales.
viii. Provides Market Information:
The wholesaler is a link between the manufacturer and the retailer. He is constantly in touch with the manufacturer as well as the retailer, and thus serves to be of great help to both the parties. The wholesaler is well aware of the market conditions as he receives updates from the retailers who are in close contact with the consumers.
Hence, a wholesaler is in a position to update the manufacturer with information regarding consumers’ demand, tastes, preferences etc. This helps the manufacturer in designing his products and services accordingly. Also, a wholesaler being fully aware of the new product launches in the market, helps the retailers to plan with what to buy and how much to buy.
Functions of a Wholesalers – Top 8 Functions: Assembling, Bulk Breaking, Product Assortments, Warehousing, Storage, Grading, Packing and a Few Others
The wholesaler, being the important channel member performs all necessary functions, which are supposed to be performed by the channel participants. Wholesaler is responsible for a wider geographical area. To discharge various responsibilities, the wholesalers should have adequate resources, e.g., the financial resources are needed to keep deposits with the producers, for keeping adequate stocks and providing credit to the retailers. Human resources (sales force) are needed to generate more business and support the retailers.
1. Assembling, Bulk Breaking, Product Assortments:
This is an important function of the wholesaler as there is a large gap between the producers’ offerings and the retailers’/consumers’ quantity requirement, e.g., the customer can buy sugar in 1/2/5 or upto 10 Kilograms packs. However, for the producers (sugar factories), it is not convenient and economical to offer the sugar in such small size packs.
Here the stockists/wholesalers bridge this gap between the producers’ offering and individual customer’s requirement. The wholesaler buys different goods from different manufacturers and assembles them in a warehouse for selling it to the retailers.
2. Warehousing and Storage:
After arranging and assembling the products procured from the producers, the wholesaler stores them in a warehouse. The products stored at the warehouse are distributed by the wholesaler as per the market demand in the specific areas. That bridges the time gap between the production of an item and its final consumption. Thus, the wholesaler can hold the stock and make the products available through the retailers, as and when required by the consumers.
3. Grading and Packing:
The wholesaler sorts out the goods according to their quality. Then he packs them in the convenient containers suitable for the retailers and the consumers. Sorting the goods according to their grades is more important in case of export consignment.
4. Transportation:
The wholesaler arranges for the transportation of goods from the warehouses to the retailers’ end. The producers need not do the transportation arrangements to make their goods available to the final consumers, as that is taken care by the wholesaler. Since the wholesalers buy goods in large quantities, it is more economical to them and they can minimize the transportation cost.
5. Financing:
The wholesaler provides a financial support to the retailers by offering credit facilities. Furthermore, the wholesaler also guides and assists the retailers in setting their account system, payment recovery, bad debts management, etc.
6. Ensuring Uninterrupted Flow of Goods:
As the wholesaler acts as an interface between the producer and the retailers, he ensures the smooth and uninterrupted flow of goods to the consumers through the retailers by maintaining adequate inventory to avoid stock-out conditions and consumers’ inconvenience and annoyance.
7. Risk Bearing:
The wholesaler shares the risk associated with holding the inventory. He also takes the risk by possessing the ownership of the goods. Thus, wholesaler bears all the trade and financial risks of the business.
8. Providing Market Information:
The wholesaler has better knowledge of the local market. Wholesaler is well aware of the market trends and competition at the local market. Hence, the wholesaler can provide valuable market information to the producers to design the effective marketing strategy. also The wholesaler helps the producers in Marketing Research activity.
Functions of a Wholesalers – Services to Manufacturers, Services to Retailers and Services to Society
A. Services to Manufacturers:
1. Buys in Bulk and hence helps them concentrate upon large scale and quality production.
2. Provides to manufacturer assured, perpetual and definite customers.
3. Provides information useful in production planning.
4. Advises -manufacturers about Customers’ requirements, fashions etc.
5. Maintains stocks and assures equitable distribution.
6. Storage facility.
7. Advertising of manufacturers’ goods.
8. Grading & standardization as per shape & size.
9. Enhances sales of small manufacturers because with limited resources, they are unable to sell to retailers.
10. Helps manufacturers in demand forecasting.
11. Provides necessary finance through Cash Purchases.
12. Better sales service to customers than what manufacturers can provide.
13. Helps exports.
B. Services to Retailers:
1. Gives knowledge of new products.
2. Saves problem of storage by supplying goods as and when required.
3. Credit facility.
4. Services of gradation & packing.
5. Provides assortments to retailers.
6. Provides counselling services, trains their sales people, helps them in stores lay outs and displays and provides technical services wherever necessary.
7. Keeps the retailer informed about new types of products.
8. Bears considerable risk in marketing.
C. Services to Society:
1. Marketing Services to consumer at lower cost.
2. Helps improved standard of living of people through new fashion and innovated products.
3. Stabilizes supply of goods.
4. Provides employment.