The previous article covered the structure of retailing that most consumers overlook and so this article will be covering wholesaling in a similar perspective.
The act of wholesaling is to sell to other wholesalers, retailers, and institutions. Wholesaling is usually a hidden role to consumers with some exception and it involves many kinds of service functions. The first function is that they’re the intermediary between the manufacture and retailer. The second function is that they act as inventory carrying and handling being the aforementioned intermediary. The third function is that they introduce financing benefits on the basis of providing more lenient credit terms. The fourth function is that they utilize demand stimulation which means wholesalers allow manufacturers and retailers to focus on their distinct skills; however, this may expand to allow manufactures part of the selling function and retailers part of the buying function. The fifth function is managerial assistance for the manufacturers and retailers. Lastly, the sixth function is that the wholesalers provide market information between the channels of manufacturing and retailing. Wholesaling however overall, is classified as either independent or manufacture controlled.
Independent Wholesalers can be further classified as either Merchant Wholesalers or Agent Wholesaling Middlemen. Merchant Wholesalers purchase the goods they sell taking title of their goods from the manufacturer and make up full service or limited functions. Full service Merchant Wholesalers are usually single line or specialty wholesalers. Limited function Merchant Wholesalers make up Cash & Carry, Drop Shipper, or Rack Jobber services which lack a couple of the six manufacturing functions. Agent Wholesaling connects the manufacturer and retailer by commission basis and is made up of the brokers, commission merchants, and manufacturer’s rep. Like in real estate, the broker can’t bind its principal and they can’t take the offer as the client must decide. Commission merchants can bind its principal and doesn’t need the client’s consent. Manufacturer’s rep represents non-competing manufacturers in a given geographic area. Manufacturer control Wholesalers can also be further classified as either manufacture owned or leased. Manufacture owned can either be a sales brand which holds inventory or a sales office which does not hold inventory. Manufacture leased usually takes the form of temporary trade shows, more permanent merchandise marts, and resale licenses which provides lots of potential customers.
Wholesaling is usually a function of product distribution that takes place in the shadows of retail establishments. I hope this article helped you understand the different functions that Wholesaling provides and the different classifications of Wholesaling that acts as the intermediary between manufacturing and retailing.
