Before moving towards the importance and various types of wholesalers, it is important to know the wholesaler’s definition. Wholesaling is defined as a set of activities that are carried out to sell a product or service to reselling business or entity.
Wholesalers are involved in carrying out all these wholesaling activities. Most wholesalers purchase products or goods from manufacturers and sell them to industrial consumers, retailers, and other wholesalers. No doubt, today wholesaling has great importance in the success of any business, even for big firms too wholesaling is really important to have.
Below are the importance and different types of wholesalers, which comes under the process of wholesaling.
Types of Wholesalers
There are three main types of Wholesalers, which are as below.
- Merchant Wholesalers
- Broker and Agents
- Producer’s Sales Branches and Offices
1. Merchant Wholesalers
Wholesaling business that works independently and takes the title of products it handles. In different industries, they are known as distributors, jobbers, and mill supply houses.
Merchandise wholesalers are further divided into the following two types.
- Full-Service Wholesalers
- Limited Service Wholesalers
They are involved in the provision of full-line services like
- Carrying Stock
- Maintaining a Sales Force
- Offering Credit
- Making Deliveries
- Providing Management Assistance
They are further classified as under.
- Wholesaler Merchants
- Industrial Distributors
Limited Service Wholesalers
They offer fewer services than full-service wholesalers. They are classified into the following categories.
- Cash & Carry Wholesalers
- Truck Wholesalers
- Drop Shippers
- Rack Jobbers
- Producer Cooperatives
- Mail Order Wholesalers
2. Brokers and Agents
These types of wholesalers do not take the title of products and they only facilitate the buying and selling of products. They obtain a commission on the selling price of the products and are specialized by customer types or product lines.
They are further divided into the following two types.
Brokers are involved in the assistance of negotiation by bringing the seller and buyer closer to each other. The party that hired the broker makes his payment and the broker is not involved in inventory carrying, financing, or risk-taking. Examples of brokers include real estate brokers, food brokers, security brokers, and insurance brokers.
Agents represent either seller or buyer on a much more permanent basis than brokers. They are further classified into the following types.
- Manufacturer Agents
- Selling Agents
- Purchasing Agents
- Commission Merchant
3. Produces Sales Offices and Branches
The activities of wholesaling carried out by the producers or customers themselves are included in this category. The independent wholesalers are not involved under this head and separate offices or branches are dedicated to either the purchase or sales of products.
Sales Offices and Branches
These institutions are set up by the producers to improve the selling, promotion, and Inventory Control. Inventory is carried by the sales branches in industries of lumber and automotive parts & equipment. On the other hand in the industries of dry fruits and notion, inventory is not carried out by the sales offices.
They are part of the purchaser organization and play a role similar to agents and brokers. In major marketing centers, purchasing offices are set up by many retailers.
Some Other Types of Wholesalers
- Merchant Wholesalers
- General Wholesalers
- Specialty Wholesalers
- Specific Product Wholesalers
- Discount wholesalers
- Drop ship wholesalers
- On-line wholesalers
1. Merchant Wholesalers
These are the types of wholesalers, who buy products directly from the manufacturers and then sell out these products to retailers, distributors, and other retailers by obtaining low prices and high-profit margins.
2. General Wholesalers
This type of wholesaler buys large quantities of products from one or more suppliers and later, resells them in small quantities to other retailers, resellers, and distributors. According to the choice of customers, he targets a diversity of different products ranging from different industries and resells them to valuable customers.
3. Specialty Wholesalers
In these types of wholesalers, Wholesalers sell their products to a specific industry or category-wise products, they have to sell. These wholesalers have access to a number of big retailers, who have different sorts of products. These specialty wholesalers tend to have good product knowledge with good pricing options.
4. Specific Product Wholesalers
These Wholesalers sell only one kind of product, but they have several brands of one product category, such as Computers, Clothes, Footwear, etc. This type of wholesaler is often used by manufacturers to distribute one or more of their products in the market.
5. Discount wholesalers
These wholesalers sell their products at discounted rates because the products are discounted lines, refurbished goods, or returned goods.
6. Drop ship wholesalers
It is the types of wholesalers, who sell the product by dispatching from supplier to the customers directly, having not handling the products.
7. On-line wholesalers
These wholesalers sell their products through an online system by offering discounted rates because it reduces other expenses such as rent etc. Such types of wholesalers easily make enough profit margins.
Importance of Wholesalers
The importance of wholesalers is quite significant in the Marketing of goods or services and that is why they connect with almost all manufacturing products. Following are some of the important functions that are played by wholesalers.
1. Selling and Promoting
Wholesalers facilitate the manufacturers in the selling and promotion of their products by using the contacts at a low cost. These buyers are more influenced by famous wholesalers than by distant manufacturers.
2. Buying and Assortment Building
The wholesalers purchase the bulk of different types of products from different manufacturers and prepare proper assortments of these products. In this way, customers are conveniently facilitated by saving time and effort.
3. Bulk Breaking
Wholesalers purchases in large quantities and sell in smaller units and hence break the bulk for the convenience of the customers.
Wholesalers also provide warehousing facilities to reduce Inventory costs and risks for manufacturers and customers.
The wholesalers are much closer to the customers as compared to the manufacturers, so they can provide quick transportation services.
Wholesalers also provide financing to their buyers by allowing them credit. They also make immediate orders and quick bill payments to the manufacturers.
7. Risk Bearing
The damage, theft, and spoilage costs are taken by the wholesaler by absorbing the relative risks associated with products.
8. Market Information
Information about New Products, competitors, and price developments is given by the wholesalers to customers and manufacturers.
Hello everyone! This is Richard Daniels, a full-time passionate researcher & blogger. He holds a Ph.D. degree in Economics. He loves to write about economics, e-commerce, and business-related topics for students to assist them in their studies. That's the sole purpose of Business Study Notes.
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