Wholesaling: Meaning, and Its Types and Benefits

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In recent years, wholesalers are facing increased competition from new sources, more demanding customers, and new technologies. To manage, they must define their target markets and position themselves accordingly. So they must also make strategic decisions about their product/services, prices, promotions, and locations. To remain competitive, wholesalers are adapting their services to customer needs and using more efficient ways of order processing and shipping which is the basic use of wholesalers.



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Wholesalers must define their target markets and position themselves accordingly. Targeting involves deciding which customer segment or market the firm should be aiming at, such as large retailers or specific types of customers. Positioning is the process of choosing how to present products or services in order to attract potential buyers.


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Definitions


“The wholesaler is one who buys goods on a large scale with the objective of selling them at a profit in smaller quantities. He buys from the producers that is the extractor or manufacturer and sells to the retailers, and is, therefore, the connecting link between these two”. – Carrad and Oliphant

 

“All merchants, agents and assemblers who intervene between producers on one hand and retailers or users on the other, are wholesale traders”. – Census Bureau of U.S.A

 

“A true wholesaler is himself neither a manufacturer nor a retailer, but acts as a link between the two”. – Evelyn Thomas

 

“Wholesaling or wholesale trade includes the sales and all activities direct by incident to the sale of products or services to those who are buying for purposes of resale or for business”.- William J. Stanton

 

“Wholesalers buy and resell merchandise to retailers and other merchants and to industrial, institutional and commercial users, but not sell in significant amounts to ultimate consumers”. – E.W. Cundiff and R.R. Still

 

What is a Wholesaler?

A wholesaler is a company or individual that purchases products in bulk from manufacturers, farmers, and other producers. They store the products in warehouses and sell them to retailers, businesses, and other good merchants. It acts as intermediaries in the supply chain. It’s just bridging the gap between producers and retailers. They buy products at a lower price and sell them at a higher price to make a profit.




How Can a Wholesaler Benefit Your Business?


Lower Cost of Goods

Wholesalers purchase products in bulk, which allows them to negotiate a lower price from producers. So they can sell these products to retailers at a lower price. Then if the retailers were to purchase the products directly from the producer. By purchasing products from a wholesaler, businesses can reduce their cost of goods, which will give it an increase in profit margins.



Convenience

By purchasing products from a wholesaler, businesses can save time and effort in sourcing products from multiple suppliers. They typically carry a wide range of products from different producers. it makes easier for businesses to find the products they need in one place. This can save businesses time & money in transportation costs. As well as reduce the amount of paperwork and administrative work needed to manage multiple suppliers.



Storage and Warehousing

Wholesalers typically have large warehouses to store their products. This can be beneficial to businesses that have limited storage space or that do not want to invest in their own warehousing facilities. So by purchasing products from a wholesaler, businesses can save on storage/warehousing costs, as well as reduce the risk of spoilage or damage.



Market Insights

Wholesalers have a deep understanding of the market and the products they sell. They can provide valuable insights into businesses on consumer trends, product demand, and pricing strategies. So by working with a wholesaler, businesses can leverage this expertise to make more informed decisions and stay ahead of the competition.



Financing

Wholesalers can also provide financing to businesses that need it. They may offer credit terms, such as net-30 or net-60, which can help businesses manage their cash flow and improve their purchasing power. By working with a wholesaler, businesses can access financing. It may not be available to them through traditional banks or lenders.




6 Types of wholesalers

There are 6 types of wholesalers: Merchant, General, Specialty, Specific Product, Discount, and Drop Ship. Each type has different characteristics and ways of reselling products in order to add value to them. Discount wholesalers offer discounted prices, while drop ship wholesalers send products directly from their supplier to their customer. On-line wholesalers are also able to offer discounted prices due to reduced overhead costs.

Following are the different types of Wholesalers are as follows :



Merchant Wholesalers

These are the most common type of wholesalers used in the Fast Moving Consumer Goods (FMCG) industry, agriculture industry or Private label industry. So these wholesalers buy products directly from the manufacturer and store them in their warehouse or storehouse, and then sell them to customers after. They might sell in any quantity, from a single item to large quantities.



General Wholesalers

General merchandise wholesalers are also known as full-line wholesalers. They carry a wide variety of products, including grocery items, clothing, and electronics. These wholesalers offer an extensive selection of products to their customers. So they can easily find everything they need in one place.



Specialty Wholesalers

These are also called limited-line wholesalers. They focus on a specific product category, such as toys or office supplies. Speciality wholesalers offer a more limited selection of products, but they often have a deeper knowledge of the products they sell [3]. This means that they can provide more specialized advice and guidance to their customers.



Specific Product Wholesalers

These wholesalers focus on selling a specific type of product or any particular product. Such as auto parts or medical supplies. They have a deep knowledge of their product category, and they offer a range of products within that category. This means that customers can find a wide selection of products that meet their specific needs of the customers’ requirements.



Discount Wholesalers

These are wholesalers that offer products at a discounted price. They may carry a variety of products, or they may focus on a specific product category. Discount wholesalers are a great option for customers who are looking for good deals/offers on products they need.



Drop Ship Wholesalers

Drop shippers are wholesalers who do not keep any inventory of the products they sell. Instead, they take orders from customers and then ship the products directly from the manufacturer to the customer. This allows drop ship wholesalers to offer a wider variety of products since they don’t have to worry about storing and managing inventory.


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