What is Wholesale Trade?

Wholesale Trade Wholesale Trade:

The wholesale trade denotes buying goods in large quantities from the manufacturer selling them in small quantities to the retailers who meet the needs of the consumers.

  Wholesale trade acts as a middleman between the manufacturers and the retailers on the one hand, and between the producers of raw materials and the manufacturers on the other.

Definition of Wholesale Trade:

1. The wholesaler or the wholesale trader is a trader who purchases goods in large quantities from manufacturers and resells to retailers in small quantities.

American Marketing Association defines a wholesaler as “a business unit which buys and resells to retailers, industrial institutions and commercial users but does not sell in significant amounts to ultimate consumers.

2. The wholesaler is one who buys goods on a large scale with the object of selling them at a profit in smaller quantities.

” From the above definitions, it is clear that a wholesaler does not sell goods directly to consumers. He acts as a link between the manufacturer and the retailer.

Film distributor, distributor of consumer goods like clothes, soap, oil, etc., distributor of cement, etc. are some examples of wholesale trade.

Characteristics of Wholesale Trade:

The wholesale trade has the following important features or characteristics:

1. The wholesaler deals in huge quantities of goods.

2. He sells goods in small quantities to retailers.

3. He acts as an intermediary between the manufacturer and the retailers or producers of raw materials.

4. He generally deals in only one commodity.

5. He usually sells goods to retailers on credit.

6. He provides finance to the manufacturers as well as retailers.

7. He deals in a specific area determined by the producers.

8. He does not sell goods to consumers.

Functions of a Wholesaler Wholesale Trade:

The main functions of the wholesaler may be discussed in the following lines:

1. Grading: It is also another important function Of a wholesaler. He classifies the goods in different grades according to the quality, size shape, contents, etc.

2. Branding: Generally, a brand name is given to a product by its producer. However, in the case of agricultural products. The wholesalers may brand them by giving specific marks.

3. packing: After grading and branding the goods, the wholesaler packs them carefully to sell them to the retailers.

4. Storing: This is a very important function of a wholesaler. A wholesaler purchases goods in large quantities from the manufacturers and stores them. Thus, he makes a complete adjustment between production and supply in different seasons.

5. Financing: Manufacturers are interested in the prompt payment of their bills. They want to get back quickly the amount invested by them in the products.

Wholesalers meet this requirement by making immediate payments. Wholesalers also sell goods on credit to the retailers. In this way, they provide financing facilities to trade transactions.

6. Dispersing: The wholesaler makes dispersal of goods to different markets. The wholesaler performs the functions of transporting, insuring, etc. of goods while dispersing them in the markets.

7. Transporting: The wholesaler performs this function both at the time of purchasing goods from the manufacturers and selling them to the retailers. The large-scale buying and selling by him lead to cost reduction.

8. Risk-bearing: Wholesalers also bear the risk of marketing goods. They assume the risk of loss due to falls in prices, damages, deterioration in quantities, pilferage, etc in the warehouse.

9. Pricing: Though the price of goods is determined by the producers, the wholesaler influences in charging the price to the consumers.

10. Market Information: A wholesaler is in a position to provide market information both to the producers as well as retailers regarding the tastes, fashions, buying habits of consumers and arrival of goods in the market.

11. Advertisement: A wholesaler also performs the function of advertising. When the goods are graded and branded by him, it becomes essential for him to advertise the goods.

Services of Wholesalers:

1. Services to the Producers.

2. Services to Retailers.

3. Services to the Society.

Is Wholesaler Indispensable?

Wholesalers act as middlemen between producers and consumers. Apart from the services offered, the cost of their function is an addition to the final price.

The final price is recovered from the ultimate consumers. By eliminating the wholesalers, it is possible for the consumers to get the products at a lower price.

Therefore, some people are of the opinion that wholesalers may be eliminated, leaving the retailers in between producers and consumers.

Attempts are being made by the producers to eliminate the wholesalers from the field of distribution by organizing multiple shops, departmental stores, mail-order houses, etc.

Arguments against wholesalers:

The following arguments are advanced against wholesalers :

1. They make goods costlier: About 35 to 50 percent of the price paid by the consumers goes to the pockets of wholesalers. The cost burden of the wholesalers is charged on consumers and goods become costlier.

2. They do not bear the risk of business: All types of risks arising out of depression and recession, strikes, lockouts, scarcity of raw materials are not shouldered by the wholesalers.

3. They encourage malpractices: The wholesalers enter into black marketing in times of scarcity and emergencies with a view to earning huge profits, by boosting the price.

4. They hinder the relationship between producer and consumer: Wholesalers create hindrance in the free flow of goods towards the market. Their elimination may be useful in reducing the cost and speeding up the movement of goods.

5. They are not necessary for the distribution of all goods: Some goods of Perishable nature such as fruits, fish, eggs, milk, etc. should be consumed within a shorter time. The services of the wholesalers such as holding stocks etc. may not be required for the distribution of such goods.

Arguments in favour of wholesalers:

Following are the Arguments of Wholesale Trade:

 1. Improvement of business: The services of the wholesalers are essential for the improvement of business in a country. There are many functions — assembling, grading, warehousing, transporting, risk-bearing, etc. performed by the wholesalers.

2. Facilitate production: The wholesalers assume the functions of distribution and risk burden and producers are free from such responsibilities. Thus, production will further improve.

3. Analysis of consumer attitude: It is not possible for every producer to analyze the attitude of consumers. Wholesalers can perform this function very efficiently.

4. Difficulty in selling to retailers: If the producers sell to retailers in small quantities, they have to incur heavy selling expenses. The difficulty in the sale will be more when the goods are sold directly to the retailers.

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