The services provided by wholesalers can be studied under the following heads:-
A. Services to Manufacturers B. Services to Retailers C. Services to the Society D. Services to Consumers E. General Services G. Typical Wholesale Services.
Some of the services rendered by wholesalers are:-
1. Economies of Large Scale 2. Facilitate Distribution of Goods 3. Warehousing and Marketing 4. Financial Assistance 5. Risk Bearer 6. Forecasting of Demand 7. Regulate Production 8. Stabilisation of Prices
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9. Connecting Link 10. Transportation 11. Provides Market Information 12. Price Stability 13. Risk Bearing 14. Marketing Functions 15. Promotion of Goods 16. Demand Analysis and Forecasting 17. Help in Sales Organization and a Few Others.
Services of Wholesalers: Services to Manufacturers, Retailers, Society and Consumers
Services of Wholesaler – Services to Manufacturers and Retailers
Wholesaler renders a number of services to the manufacturer and retailers.
1. Services to Manufacturers:
To the manufacturer, wholesaler provides the following services:
i. Economies of Scale – Since wholesalers buys in bulk quantities, producer has to also manufacture in bulk. This brings the benefits of economies of scale in production.
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ii. Saves Time – Wholesaler saves much of the time of manufacturer, as he on his behalf collects order from various retailers and supplies them goods in smaller quantities.
iii. Better use of Capital – Wholesaler holds the stock of goods; as a result manufacturer is saved from locking too much capital in manufacturing stocks.
iv. Price Stabilisation – Wholesaler helps in price stabilisation by storing the goods in slack season and using them during peak season.
v. Assists in Production – By assembling the raw materials from different locations and providing the inputs to the producer at one place, the wholesaler assists in the process of production.
2. Services to Retailers:
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To the retailers, wholesaler provides the following services:
i. Saves Time – Retailers save much of his time in placing orders with the wholesaler rather than the producer.
ii. Better use of Limited Capital – Stock of different types of goods is held by wholesaler; as a result, retailers get the goods as and when required. He is saved from locking capital in storing the goods.
iii. Quick Delivery – Prompt delivery of goods by the wholesaler to retailer facilitates smooth flow of goods.
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iv. Credit Facilities – Credit facilities are provided by the wholesalers to retailers to maintain uninterrupted supply of goods.
v. Expert Knowledge – Wholesalers have a good knowledge and experience about the changing market conditions. They provide this information to retailers who can capitalise on it.
Services of Wholesalers – Services to the Manufacturers, Services to the Retailers and Services to the Society
The wholesalers are those merchants who act as a link between the manufacturers and the retailers. They render valuable services- to both of them.
These are discussed below in brief:
1. Services to the Manufacturers:
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The services of the following nature are of great significance:
(i) The marketing functions of warehousing, staring, dispatching, etc. are handled by the wholesalers and not by the manufacturers. Thus, the manufacturers are relieved of these functions and can, therefore, concentrate absolutely on the problems of production, the vital aspect to be taken care of by the manufacturers.
(ii) The wholesalers are in constant touch with the retailers and are well-informed about the changes in trends, tastes, fashion, demand, etc. of the market. The manufacturers come to know of such changes through the wholesalers and can, thus, regulate their production schedule.
(iii) The wholesalers, because of their experience and expertise, sell goods even to the new market territories. They can create demand for the products in foreign markets and thus, increase the goodwill of the manufacturers.
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(iv) As the wholesalers purchase goods in bulk, the manufacturers get the benefits of large carders necessary for economic running of a producing unit. Advance orders placed by the wholesalers assist the manufacturers in maintaining an even pace of production during the period of slack demand.
(v) The wholesalers purchase goods in bulk in cash from and make security deposits with the- manufacturers. These services provide financial assistance to the manufacturers.
(vi) Seasonal indication of variations in demand, timely lifting of products from the manufacturers, revenue collection, ready sales network, etc. are a few of the other valuable services that are efficiently rendered by the wholesalers to the manufacturers.
2. Services to the Retailers:
The services that are rendered by the wholesalers to the retailers may be summed up as under:
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(i) A retailer has to deal with a large number of customers and to deal in a large number of products of different manufacturers. He cannot make direct purchases from the manufacturers of such a range and variety. As the wholesalers stock the goods from different manufacturers and provide facilities, the retailers buy their requirements at convenient intervals without much difficulty.
(ii) A retailer generally faces two vital problems, viz., capital necessary to buy the goods in bulk and storage to keep the large quantity of goods, which are important in maintaining the steady supply in the market. The wholesalers assume these responsibilities for the benefit of the retailers who can operate with low inventories.
(iii) A retailer gets the advantages of specialisation acquired by the wholesalers who deal in a few lines of goods and buy the best and cheapest goods from the manufacturers.
(iv) Mast of the retailers buy goods on credit from the wholesalers and make payments when their customers clear their accounts. This eases the financial problems of the retailers.
(v) The retailers being busy in effecting sales in snail lots of different products cannot keep up-to-date information about the new types of products. The wholesalers bring to their knowledge the new types of products which are being manufactured.
(vi) The wholesalers assure many risks involved in marketing such as price fluctuations in the market, spoilage of goods during transit or storage, etc. A retailer is relieved of these risks and his risk is confined to the small stocks held in the shop.
3. Services to the Society:
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The wholesalers are the back bone of the market and are actively engaged in the entire marketing operations. They relieve the manufacturers from much of the marketing problems and thereby assist the manufacturers to concentrate on the production and product planning.
This way, large-scale economies are achieved. Moreover, export marketing activities of the wholesalers widen the market and the consumption, and educate the consumers. This assures the socio-economic awareness and growth.
Services of Wholesaler – Services to Manufacturers or Producers, Retailers and Consumers
The wholesaler renders a number of services to trade, industries and commerce.
The services rendered by the wholesaler may be classified as:
A. Service to Manufacturer or Producers
B. Service to Retailer
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C. Service to Consumer
A. Services to Manufacturers or Producers:
The services provided by the wholesaler to manufacturers or producers are explained as follows:
1. Economies of Large Scale:
A wholesaler buys the goods in large quantities which enable the producers to manufacture goods on a large scale. Economies of Large scale bring down the average cost of production. In other words, production on a big scale helps in reducing the cost of production per unit.
2. Facilitate Distribution of Goods:
Presence of wholesalers in the distribution channel relieves the producers from the hassle of finding out the customers for their products. A wholesaler facilitates the producers to reach out to their target market by buying goods in bulk from the producer for distribution and making them accessible to the consumers via the retailers located in different areas.
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3. Warehousing and Marketing:
There is a time lag between production and consumption. The wholesalers purchase the goods from the producers instantly after production and store the goods in their private warehousing facility. Thus, the producers are absolved from the burden of storing their produce. The wholesalers do the grading and packing of goods for further selling to retailers.
4. Financial Assistance:
A wholesaler places bulk orders for the producer’s goods. He either pays for the goods in advance or makes the settlement within a short period of time after making the purchase. Once the goods are produced, the wholesaler promptly buys them from the producer. In this way, the manufacturer does not have to block his working capital in maintaining a huge stock, and thus, can carry out production activities on a regular basis.
5. Risk Bearer:
As the wholesaler places advance orders for the goods, the producer gets a ready market for their produce. The wholesaler relieves the producer from the risk of loss due to the variations in demand and storage of goods; also cutting down risk by matching seasonal demand and supply.
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6. Forecasting of Demand:
The wholesalers provide helpful information to the manufacturers regarding the needs and wants of the consumers. They collect the information from the retailers about the nature and scope of demand and share it with the producers. Thus, the wholesaler assists the producers to manufacture the goods which are in tune with the fashion, taste and needs of the market.
7. Regulate Production:
The wholesalers are the medium of exchange of information between the producer and the retailer. They gather dated information about the market trends, demand and taste of consumer and pass it on to the producers. With the help of this information, the producers produce the right quantity and quality of goods.
8. Stabilisation of Prices:
Wholesalers diminish fluctuations in the prices of products. When the prices of commodities fall in the market, the wholesalers begin buying large quantities of goods to prevent further declines in the prices. Alternatively, in the event of price rise, the wholesalers start selling the goods stored by them in the warehouses. These measures help in checking price fluctuations.
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9. Link:
A wholesaler plays the part of a vital link between the producers and the retailers. They make the job of both the producers and retailers easier by facilitating regular procurement (producers) and supply of goods (retailers).
B. Services to Retailers:
The services made available by the wholesaler to the retailers are numerous.
They are described as under:
1. Convenient Buying:
Retailers have to deal with different kinds of customers. It is, therefore, important for retailers to stock a wide range of goods at their outlet. However, they cannot afford to source the stock from so many producers directly. But, wholesalers store the stock of goods procured from different producers at their warehousing facility and provide the facility to the retailers to buy the stock in desired quantity at convenient time. Thus, wholesalers make it easy for the retailers to buy goods for sale.
2. Risk Taking:
A wholesaler assumes a lot of risks of packing, transporting, storing and marketing the goods. For example, by warehousing the goods at his or her own facility, the wholesaler takes the risk of market fluctuations in prices or wastage of goods in warehouses due to pests, natural calamities, etc. In this way, the retailer is saved from such risks.
3. Knowledge about New Product:
The wholesalers use the salesmen employed by them to introduce the retailers to the new kinds of products which are going to be launched in future. The wholesaler also uses trade circulars, newspaper advertisements and showroom visits to pass on this information. Retailers can place the order in advance for the new products and thus receive attractive discounts.
4. Benefit of Specialisation:
The wholesalers generally prefer to excel in a few varieties of products. They purchase at a bargain from manufacturers that produce high quality goods. Retailers derive the advantage of this specialisation by buying the best products from the wholesalers’ stock for their own shopping outlet.
5. Grading:
Grading can be defined as the process of dividing the goods into lots which are similar in terms of shape, size, weight, quality, performance, etc. The wholesaler performs the process of grading the products of different qualities and / or of similar features by separating them into different lots or packages. With everything sorted or graded systematically, it becomes easier for the retailer to sell the goods.
6. Stabilisation of Prices:
The wholesaler keeps the price line intact by maintaining the balance of demand and supply. They enable the distribution and sale of goods when there is scarcity in the market, and store them in warehouses when they are not in demand. Thus, the retailers are saved from the risks resulting from the rise and fall of prices.
7. Financial Aid:
Wholesalers finance the retail trade by providing goods on credit. Owing to low capital in hand, the retailers buy goods on credit from the wholesaler and repay the debts when they are able to collect enough money from the sale of goods to the consumers. Hence, the wholesaler makes it easy for the retailers to trade with limited capital.
8. Transport Services:
Wholesalers provide transport facility to the retailers by sending goods to their doorsteps as and when required. Some wholesalers maintain their own vehicles for the distribution of goods to the retailers.
9. Consultancy Services:
The wholesalers provide valuable advice to the retailers on a number of marketing activities such as displaying goods on the shop window, etc. They also provide the advertisement material to the retailers which describe and promote the qualities of the product.
C. Services to Consumers:
The services rendered by the wholesalers to the consumers are as follows:
1. Ready Supply:
The wholesalers enable the consumer to buy the desired quantity and quality of goods at the convenient time and place because they supply goods regularly to the retailers. Hence, the consumer does not have to wait for the stock to arrive at the retailer’s shop.
2. Fair-Priced Goods:
Since the Wholesaler buys the goods from manufacturers in bulk and allows him to reap the benefit of economies of large scale production thereby bringing down the cost per unit, which ultimately benefits the customers.
3. Stabilisation of Price:
The wholesaler is in a better position to stabilise prices of the products by adjusting demand and supply. The consumers are benefited to a great extent due to the stabilisation of prices.
4. Matching Consumer Demand:
The wholesalers supply the goods as per the requirement and demands of the consumers. Thus, consumers get to choose from a diverse range in accordance to their demand.
5. Advertising the Goods:
Wholesalers advertise their goods extensively to enlighten the consumer about its uses, types and qualities and availability. The consumers get knowledge about the goods and are in a better position to make their buying decisions.
6. Market Research:
Some wholesalers carry out market research frequently to identify any improvement areas in the existing products and scope for development of new products. Further, they help the producers to stay updated with the dynamic market trends and consumer tastes by sharing useful information gathered through their market research. Consequently, the consumer gets quality products at a reasonable rate. Thus, the wholesaler is a valuable link between the producer (manufacturer), the retailer and the consumer in the channels of distribution.
Services of Wholesalers: To Manufacturers and Retailers
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’.
The various services of wholesaler –
Wholesaler is the connecting link between the producer and the retailer and provides valuable service to both.
These services can be explained in detail as follows:
1. Services to Manufacturers:
i. Large Purchases:
A wholesaler accepts small orders of the retailers and orders in bulk from the manufacturer. This helps the manufacturer to undertake large scale production of goods, thereby reducing his cost of production per unit.
The wholesaler purchases goods in large quantities from the manufacturer and stores the same in his warehouse. Hence, the manufacturer is relieved from the responsibility of holding surplus stock of products as the responsibility of safe storage of goods is taken over by the wholesaler. This also helps in filling the time gap between the production and consumption of goods.
iii. Transportation:
A wholesaler delivers the goods from the production place to the consumption place. This function creates place utility for the goods.
A wholesaler makes advance payments to the manufacturers against orders placed. He makes cash payments for the purchases made. At times when required, he also gives loans to the manufacturers. This ensures that the manufacturer has enough cash to carry on its day-to-day production activities.
v. Provides Market Information:
Wholesalers serve as a vital link between the producers and the retailers. They collect market information from the retailers and advise the producers accordingly. This information may pertain to – Market conditions; Consumers’ demand; Consumers’ likes and dislikes; Extent of competition in the market, etc.
The wholesaler holds on to the stock of goods in the slack season and increases the supply of goods when the demand is high. This helps in maintaining price stability in the market.
Wholesalers purchase goods from the manufacturer. Thus, the title/ownership in the goods is effectively transferred from the manufacturer to the wholesaler. Along with the transfer of title in the goods, the risks associated with the goods are also transferred on to the wholesaler.
Wholesalers perform various marketing functions like warehousing, advertising, sales promotion etc., on behalf of the manufacturers. This reduces the burden of the manufacturer.
2. Services to Retailers:
i. Risk Bearing:
The wholesaler buys goods from the manufacturer and holds the stock of goods until they are required by the retailers. He bears the risks arising on account of fluctuating prices, demand, fashion etc. This ensures that the retailer is more or less free from various risk factors.
ii. Stock of Varied Goods:
Wholesalers purchase large quantities of goods from various manufacturers and have a large variety of goods. Hence, the retailers need not worry about maintaining a large stock of goods. Whenever retailers are in need of the goods, they can directly source it from the wholesaler.
iii. Regular Supply:
A wholesaler always buys in bulk from the manufacturer and holds a stock of the goods. The retailers can hence be sure that they will have regular supply of goods from the wholesaler and they will not have to face the risk of shortage of goods.
Wholesaler shares market information about the various products with the retailer. He helps the retailers plan their purchases in terms of what to buy and how much to buy.
v. Sales Promotion:
A wholesaler advertises and promotes the goods that are available with him. These activities are performed by him to increase the demand for his products. These promotional activities benefit the retailer too as he gets a ready demand for the products supplied by the wholesaler.
Wholesaler generally gives credit facilities and discounts to the retailers. He also gives them financial assistance, if required. This assistance increases the effect of the working capital of the retailers.
Services of Wholesaler – Wholesaler — Producer/Manufacturer, Wholesaler — Retailer and Wholesaler — Consumer
The wholesaler acts as an interface between the producers and the retailers. The wholesaler gives different services and perform different roles for the producer, the retailer and the consumer. However, there has to be two-way communication between all these members.
1. Wholesaler — Producer/Manufacturer:
(a) The wholesaler buys in bulk from the producers and sales in the smaller quantities to the retailers. As the wholesaler buys in bulk, it is possible for the producers to go for the large-scale manufacturing. Thus, the producer can enjoy benefits of economies of mass production.
(b) The wholesaler holds the large inventory. He arranges for the warehousing and maintenance of this stock. He is also responsible for the transportation of goods from the godown/depot to the retailer/market places. Thus, he reduces administrative and financial burden of the producers by bearing above costs.
(c) The wholesaler deals with many retailers and he tries to develop the large market for the producer. Thus, with less resources and risk, the producer can expand his business in a wide geographical area with the help of the wholesalers.
(d) The wholesaler has better knowledge, idea about the market position, consumer’s demand as he gets this information from the retailers, who have direct and regular interactions with the consumers. Thus, the wholesaler gives valuable information, which can be used in the strategic planning by the producer.
(e) As the wholesaler maintains the adequate stock, it can be made available to the consumers through the retailers as and when needed by the consumers. Thus, it avoids stock-out situation and probable shift of the consumers to other substitute or the competitor’s products.
2. Wholesaler — Retailer:
(a) The retailers with the limited financial capacity cannot buy in bulk from the producers directly. Also, they are interested in keeping larger variety instead of the large quantities of a few products. On the other hand, the producer prefers to sell in bulk. This gap between the producer’s offerings and retailers’ expectations is bridged by the wholesaler.
(b) The wholesaler provides all necessary support to the retailers in setting and expanding their business.
(c) The wholesaler ensures smooth and uninterrupted flow of goods to the retailers. Hence, the retailer need not keep the large stock as well as there is no fear of losing the customers because of stock out. Thus, the risk and the investment at the retailer level are substantially reduced.
(d) The wholesaler helps the retailers by providing POP (point-of- purchase) material, suggesting different ideas of merchandising, promotional schemes, guidance over shelf and counter displays, store layout and ambience, etc. All this results in more sale and building the unique and favourable image of the retailer.
3. Wholesaler — Consumer:
(a) The consumers can get more variety of products. They get a wider choice to buy as per their taste, interest and quantity requirement from the retailer, which is possible only because of support from the wholesaler to the retailer.
(b) The wholesaler keeps adequate stock that meets emergency needs of the consumers without charging the extra price. Uninterrupted supply of goods to the retailers ultimately facilitates the consumers. Thus, the consumers are benefited through the price stability.
(c) Adequate training and market information provided by the wholesaler to the retailers, actually benefits the consumers as they get familiar with the products and comparison, the decision-making becomes easier and they get better products.
Services of Wholesalers – Services to the Manufacturers, Services to the Retailers and Services to the Consumers
Wholesalers are vital link between manufacturers and retailers. They purchase the goods from different manufacturers and sell these goods to the retailers. Thus, wholesalers render very important services both to the manufacturers and retailers.
Some of the important services rendered by manufacturers are divided into three parts:
(I) Services to the manufacturers,
(II) Services to the retailers.
(III) Service to the consumers.
The details in this regard are as follows:
(I) Services to the Manufacturers:
The wholesalers render following services to the manufacturers:
(1) Facilities of Distribution – Wholesalers take over the liability of manufacturers to distribute the goods produced by them. Thus, they relieve manufacturers from this liability.
(2) Helpful in Concentrating upon Production – As most of the liabilities of manufacturers are taken over by wholesalers, manufacturers can concentrate upon production. They have not to bother about distribution.
(3) Helpful in Large-Scale Production – Wholesalers help in increasing the sales of goods. They purchase the goods from manufacturers in large quantities. It enables the manufacturers to produce at large-scale. Large-scale production help the manufacturers in reducing the cost of production considerably.
(4) Helpful in Expanding the Market – Wholesalers distribute the goods produced by the manufacturers in different segments of the market. They try to sell these goods in new market also. It is the wholesaler who makes the goods produced by a manufacturer available in all parts of the country. Thus wholesalers help in expanding the market for products.
(5) Benefit of Advertisement – Generally, the wholesalers advertise on their own expenses. It helps manufacturers in increasing the sales of their products, it re-doubles the effect of advertisement.
(6) Helpful in Standardisation and Grading – Some of the wholesalers sort out the products into different grades. These grades are developed on the basis of common characteristics or quality or nature of products. It helps manufacturers to adopt the policy of standardisation and grading.
(7) Helpful in Price Determination – As wholesalers are in close touch with the retailers they can be of great help in determining the price of products.
(8) Facility of Raw-Materials – Wholesalers provides the facility of raw-materials also to the manufacturers. Different type of raw-materials are collected by wholesalers from different manufacturers and sold to the manufacturers of consumer goods.
(9) Financial Help – Wholesalers provide financial help also to the manufacturers because they purchase goods in large quantities and generally on cash payment. Some wholesalers make advance payment also while placing their orders.
(10) Facility of Storage – Wholesalers take over the liability of manufacturers of storing goods also. They store the goods manufactured by manufacturers in their own godowns and thus, the manufacturers are relieved from the liability of storing the products.
(II) Services to the Retailers:
Wholesalers provide some very important and useful services to the retailers.
These services may be explained as under:
(1) Financial Assistance – Financial resources of retailers are generally limited. Wholesalers provide valuable financial assistance to them by selling the goods to them on credit. It helps the retailers in maintaining rotation of their working capital.
(2) Benefit of Advertisement – Wholesalers generally advertise for the products dealt with by them. Such advertisement is very helpful to the retailers because they get direct benefit from it. It increases their sales and profits.
(3) Valuable Consultation – Wholesalers advise retailers on their marketing problems for time to time. Advice of wholesalers is very useful for the retailers in solving their marketing problems and in increasing their sales.
(4) Helpful in Making Selection – A wholesaler generally maintains large variety of a product. It helps retailers in making the selection of variety.
(5) Helpful in Purchasing the Goods According to Needs – As the goods are purchased by wholesalers in large quantities and sold to the retailers in small quantities, the retailers get the facility of purchasing the goods in the quantity of their need.
(6) Stability in Prices – Wholesalers purchases the goods in large quantities and sell them to the retailers in small quantities. Thus, the risk of fluctuations in price is borne by the wholesalers themselves. This helps retailers in stabilising their prices.
(7) Facility of Packaging – The goods are packed generally by the wholesalers. They pack the goods in different sizes according to the specifications suggested by retailers. It helps retailers in selling these goods to the consumers in different size or quantities.
(8) Facility of Sorting, Grading and Standardisation – The activities of sorting, grading and standardisaton are performed by the wholesalers. It relieves the retailers from this liability.
(9) Facility of Transportation – Generally, the wholesalers provide goods to the retailers at their shops. It relieves the retailers from the liability of transportation.
(10) Benefits of Specialisation – Generally, the wholesalers deal with the product of a particular product line or a particular producer. In this manner, the wholesalers are generally the specialists of their line. Retailers get the advantage of their ability, efficiency and experience.
(III) Services to the Consumers:
Though the wholesalers are not in direct touch with the consumers, yet they offer some valuable services to the consumers.
Some of the services provided by wholesalers to the consumer are as under:
(i) Wholesalers provide necessary information to the consumers about new products introduced in the market. They do so by their advertisement programmes.
(ii) Wholesalers distribute the goods to the retailers according to the needs, wants and requirements of consumers.
(iii) Wholesalers maintain large variety of a product. Therefore, the wholesalers help in increasing the variety to be maintained by retailers and thus, the consumers get full range of a product.
(iv) Wholesalers undertake market research also. This is also beneficial to the consumers.
(v) Wholesalers maintain equilibrium in the demand and supply of products.
(vi) Wholesalers help in stabilising the prices of products in the market.
(vii) Wholesalers help the manufacturers in production. It provides the goods to the consumers at most reasonable prices.
Services of Wholesaler
The entity which is involved in wholesale trade is known as wholesaler. A wholesaler provides various services to producers, retailers and consumers.
These services are as follows:
Services to Producers:
A wholesaler provides the following services to producers:
1. Facilitating Large-Scale Production:
A wholesaler facilitates large-scale production because various wholesalers procure the entire production volume of a producer. This helps the producer to undertake large- scale production as he concentrates on production. Large-scale production leads to economy of scale for the producer.
2. Responsibility of Distribution:
A wholesaler undertakes responsibility of distribution of goods. He also has close contacts with retailers in the area of his operations. Because of this, the producers save their time, efforts and money in the process of distributing goods produced by them.
3. Providing Market Information:
A wholesaler keeps watch on the demand and supply pattern of goods in the market through retailers who directly interact with consumers. This enables the wholesaler to collect information about demand-supply pattern and pass it to the producers which is quite beneficial to them.
4. Assumption of Risk:
A wholesaler assumes risk in the process of storing the goods. Sometimes, this period may be quite long. During this period, there may be adverse price fluctuations but the producer is not required to bear the risk.
5. Financial Assistance:
A wholesaler provides financial assistance to the producers as he deposits some money with the producers as security. This money may be used by the producers to finance their working capital requirements to a great extent.
6. Transportation and Warehousing:
A wholesaler undertakes transportation and warehousing activities. He makes arrangements for transportation of goods from the producers’ sites and stores these in his own warehouses. This saves the producers from undertaking transportation and warehousing of the goods.
7. Promotion of Goods:
A wholesaler keeps regular contact with retailers and can influence their opinion about the desirability of goods by presenting positive features. This works as a means of promotion of goods. This method is very effective as there is a personal touch.
8. Useful Link:
A wholesaler is an important link between producers and retailers. Through this link, useful information generated from producers is passed on to retailers and information generated from retailers is passed on to producers. This exchange of information helps the producers to modify the features of goods being produced and introduce new goods required by the market.
Services to Retailers:
A wholesaler provides the following services to retailers:
1. Ready Supply of Goods:
A retailer offers a variety of goods to his consumers. These goods are produced by a number of producers who are geographically dispersed. Procuring goods from these producers is almost impossible for the retailer as he purchases goods in much smaller quantities. The wholesalers relieve the retailer by offering goods of various producers.
2. Regularity of Supply:
A wholesaler maintains regularity of supply of goods as he stores these goods in bulk. Thus, even in the case of fluctuations in production pattern, there is regularity of supply of goods. This is more important in the case of seasonal production, for example, fruits, foodgrains, etc.
3. Facility of Small Lots:
A wholesaler purchases goods in bulk but supplies these in small lots to retailers. Thus, retailers may work even with much lower investment by storing goods of different varieties in small lots and saving warehousing cost.
4. Credit Facility:
Most of the wholesalers provide credit facility to retailers. The usual pattern of giving credit to a retailer is, pay for last purchase and make the fresh purchase on credit. Through this pattern, retailers reduce working capital requirements.
5. Advice to the Retailers:
A wholesaler provides advice to retailers based on his specialised knowledge about the business pattern. Thus, the wholesaler passes relevant information about new product launch, its utility, expected demand pattern, price, profit margin, etc. This information is quite beneficial to the retailers.
6. Assumption of Risk:
A wholesaler assumes risk even on behalf of the retailers because the wholesaler stores goods bought from the producers at a given price. However, he supplies these goods to retailers at the price prevailing in the market at the time of selling these goods, which may be lower. Thus, retailers become risk-free.
7. Transportation Facility:
In many cases, the wholesaler provides transportation facility to retailers. The usual process is this, a representative of the wholesaler visits various retailers in a locality and collects orders from them. These orders are executed by the wholesaler by making the goods available to the retailers at their own sites. Thus, the retailers are free from botheration of transporting goods purchased by them.
Services to Consumers:
A wholesaler provides the following services to consumers (the ultimate customers who buy a product for their own use):
1. Ready Supply – A wholesaler keeps ready supply of goods which reach the consumers through retailers at a time when consumers need these.
2. Regularity of Supply – A wholesaler maintains regularity of supply of goods irrespective of the production pattern. Thus, the consumers get even off-season goods.
3. Wide Choice of Goods – Because of wholesaling, a consumer gets a wide range of goods at a retail store located near him. Thus, he may buy goods of his own choice.
4. Stability in Price – A wholesaler brings stability in prices of goods as he stores these goods in bulk and sells them when demanded by the market. This helps in maintaining stability in prices of goods even with fluctuating production and demand pattern.
5. Market Research – Most of the wholesalers undertake market research, though on an informal basis, in the form of their interaction with a number of retailers who directly interact with consumers. Therefore, they induce the producers to produce those goods which meet the consumer requirements the most. Through this mechanism, the consumers get goods with better features. In many cases, the wholesalers meet the consumers’ demands by importing goods based on this market research.
Services of Wholesaler – To Manufacturers and Retailers
1. Services of Wholesaler to Manufacturers:
(i) Benefits of Delegation:
Producer delegates the marketing function to the wholesaler and concentrates his efforts on issues related to production.
(ii) Large Scale Orders:
Manufacturer gets the benefit of large orders for goods through the wholesalers. The wholesalers either purchase goods in bulk from the manufacturers for resale or collect orders from the retailers and pass them on to the manufacturers. Thus wholesalers enable the manufacturers to produce goods on large scale.
(iii) Distribution Facilities:
Wholesaler is a vital link between manufacturers and consumers. The manufacturer does not have to take the trouble of collecting small orders and supplying them to a large number of retailers scattered widely.
(iv) Demand Analysis and Forecasting:
Manufacturers can regulate their production and estimate their sale or demand according to the changes in the direction and pattern of demand, indicated well in time by the orders placed by the wholesalers. Wholesalers remain in touch with the consumers through retailers and keep themselves informed about the changes in fashion and demand.
(v) Financing:
Wholesalers provide financial assistance to the manufacturers by purchasing the goods in bulk in cash and by depositing security with the manufacturers.
(vi) Warehousing:
Manufacturer is saved from the problem of warehousing large stocks of finished goods as the wholesalers purchase the goods in bulk as soon as they are ready and stock them till they are sold to the retailers in smaller lots.
(vii) Help in Sales Organization:
Wholesaler also helps the manufacturer by having his own efficient sales organization and saves the producer the burden of maintaining his own sales team.
(viii) Help in Price Determination:
Wholesalers who are in constant touch with buyers through retailers know the needs and reactions of the customers and also what the customer can pay. Hence, they can suggest the manufacturer the best price he can fetch in the market for his goods.
(ix) Advertisement:
Generally dealing in one or two items, the wholesalers advertise for the goods they deal in. the manufacturers are also benefited by this activity of wholesaler because their product draws more attention of buyers.
(x) Grading and Standardisation of Goods:
Where the manufacturer produces unstandardised goods, the wholesalers purchase them in lots and grade them according to their quality.
(xi) Widening of Market:
Wholesalers widen the markets for the goods of the producers. They sell their goods in new markets through their own sales organization. They create demand of the product in foreign markets and thus increase the goodwill of the producers.
2. Services of Wholesalers to Retailers:
(i) Purchasing Facilities:
A retailer has a large number of customers to deal with and has to keep a wide variety of products in store to cater their individual needs. Wholesalers stock the goods from different manufacturers and provide the facility to retailers to buy as per their requirements at convenient intervals without much difficulty.
(ii) No Need to Maintain High Inventory Level:
Retailers generally suffer from the dearth of capital and storage facilities. It is not possible for them to purchase goods in bulk and store them to maintain the steady supply in the market. The wholesaler warehouses the goods and releases them in smaller lots to the retailers who maintain low inventory.
(iii) Risk Taking:
Wholesalers assume most of the risks in marketing the goods. As it is the wholesaler who warehouses the goods, the risks of market fluctuations in prices or spoilage of goods in warehouses due to pests and natural calamities fall upon him.
(iv) Financial Assistance:
Wholesalers finance the bulk of retail trade by supplying goods on credit. Due to small capital, most of the retailers buy goods on credit from wholesalers and pay them only after they collect the money by selling the goods to the ultimate customers. Thus, the wholesalers enable the retailers to trade without much working capital.
(v) Information about New Product:
Wholesaler employs personnel for providing the retailers information about the new types of goods which are being manufactured. Trade circulars, advertisement in papers and showroom also help in this function.
(vi) Benefits of Specialisation:
Wholesalers generally specialise in a few lines of goods and buy from the manufacturers who produce the best and the cheapest goods. The advantage of such specialisation is automatically passed on to retailers who purchase their goods from them.
(vii) Advantage of Advertisement:
Wholesalers advertise their goods very extensively and create the demand in the market which is ultimately met by the retailers. Thus retailers need not advertise. They are directly benefited from the advertisement by wholesalers.
(viii) Consultancy Services:
Wholesalers provide consultation or advice to the retailers on various marketing activities such as displaying of goods on the shop, etc. they also supply advertising materials to retailers.
(ix) Transport Facilities:
Wholesalers generally have their own transport to supply the goods to the retailers according to their requirements. Thus, they save the retailers the transport charges,
(x) Stability in Prices:
wholesalers hold the price line by maintaining the demand and supply equilibrium. They release the goods when they are in short supply and stock them when they are not in demand. This saves the retailers from the risk caused by fluctuations in prices. Thus, the wholesaler is a valuable link between the producer and the consumer in the channels of distribution.
Services of Wholesaler – Classified into 2 Sections: General Services and Typical Wholesale Services
We may classify this functions and services into two sections:
A. General Services:
(1) Connecting Link:
In the channel of distribution in home trade, wholesaler acts as a connecting link between the supplier of goods (producer or importer) and retailers. When goods are manufactured, produced or imported, the supplies are distributed to the retailers through the agency of wholesaler under normal circumstances.
(2) Market Warehouse-Keeper:
Wholesalers act as the warehouse-keeper of the market and all surplus stock is stored by him for a lean time thus creating time utility. By regulating the market supplies with changing market demand (buying when demand is low and selling when it is high) he can bring about stabilisation of prices. Seasonal supplies from place to place and from time to time are levelled out in the interest of all the parties concerned including the community of consumers.
(3) Risk-Bearing:
Risk-bearing function of the wholesaler is the most important service rendered by him. As he makes bulk purchase and maintains large stock of commodities, he relieves the manufacturer and also the retailer from the bearing of risk of loss on account of changes in supply and demand and consequent changes in prices.
(4) Relief to Both Parties:
As an intermediary, he gives concrete relief to the manufacturer and the retailer. The manufacturer is relieved from the botheration of collection of innumerable small and scattered orders of retailers and distribution of the supplies to them. Retailer is relieved from the worry of maintenance of large stock of varied articles as he draws upon the wholesaler as and when he desires to replenish the stock in his shop.
(5) Marketing Functions:
As the wholesaler operates on the central market and as he is the warehouse-keeper of the market, he can perform many important marketing functions such as assembling of goods, grading, packaging and labeling, warehousing, transporting, providing market information, etc. He may offer such specialised services on the central markets.
B. Typical Wholesale Services:
A middleman in distribution is a specialist in concentration, equalisation, and dispersion. Wholesalers specialise in these three vital functions in the process of marketing. Wholesalers offer typical services as middlemen between producers and retailers in the central market – 1. Maintenance of sales force, 2. Storage, 3. Delivery to retailers, 4. Financial help to both manufacturer and retailer, 5. Merchandising, i.e., preparations for sale (packing, grading, branding, etc.), 6. Sales promotional work, 7. Product servicing, 8. Marketing information, and 9. Risk-bearing.
I. Services to the Manufacturer or Producer:
1. Order Collector:
Retailers are usually scattered, their orders are small and they are too many in number. The wholesaler acts as order collecting and marketing agency for the manufacturer. The manufacturer can, therefore, concentrate on production and need not worry about distribution.
2. Risk Transfer:
A wholesaler usually places huge advance orders on the manufacturer. Thus, the manufacturer is insured for sale or disposal. He need not carry large stocks and can concentrate fully on manufacturing goods as per order of the wholesaler. The manufacturer is, therefore, free from bearing of risk of loss.
3. Concrete Relief:
The wholesaler’s organisation can be used by the manufacturer for disposal of his goods. The manufacturer need not maintain huge sales organisation for collection of numerous order and dispatching many small parcels of goods to scattered retailers. The manufacturer need not grant credit to retailers.
Wholesalers do not demand credit from the manufacturer and sometimes they make advance payment to small manufacturers. Thus, the manufacturer enjoys financial relief and employs his capital for more productive purposes, viz., expansion of his manufacturing activities.
4. Expert Advice:
The wholesaler knows the pulse of the market. He can secure first-hand information of consumer’s wants through the retailer’s order. The wholesaler’s order on the manufacturer can act as an indicator of trend of demand or of public taste. The manufacturer can regulate his production activity in the light of this trend and can bring about necessary modifications in his product so that it will give the desired satisfaction to the consumer.
II. Services to the Retailers:
1. No Need to Hold Large Stocks of Varied Goods:
A retailer has to maintain adequate stocks of varied commodities especially if his turnover is not quick and has relatively large number of customers. He encounters two difficulties in holding large stocks of each type of commodity. One is dearth of capital and the other is lack of space. Hence, he cannot maintain adequate stocks of varied articles.
Under such circumstances, the wholesaler’s warehouse acts as reservoir or a constant source for retailers to draw their supplies as and when they require. Thus, the wholesaler gives a retailer definite assurance to replenish or refill his stocks at frequent intervals. The retailer gets considerable financial relief and need not lock up his capital. He can carry on his business with less amount of capital.
2. Prompt Delivery of Goods:
In absence of the wholesaler, the retailer may have to wait for a long time for the execution of his order or he may have to place advance orders on the manufacturer. When the wholesaler is present, supplies to the retailer will be available more quickly as the goods are in his warehouse almost ready for delivery. Thus, the retailer gets prompt delivery of goods.
3. Benefits of Specialisation:
The wholesaler performs marketing functions for the retailer also. A retailer will buy from the best wholesaler who in turn will secure supplies from the best manufacturer. Some of the advantages of specialisation can be passed on to the retailers. A retailer carries varied stocks, therefore, he cannot claim expert knowledge of market conditions for each article.
The wholesaler specialises in one line of goods and knows the pulse of the market. Therefore, he can advise the retailer when to buy, how much to buy at a time. He can also guide him regarding the quality of the product.
4. Announcement of New Products:
The wholesaler informs the retailer about the arrival of new goods. The new products may be advertised by the manufacturer. They may be kept in the showroom and his travelling salesman may create demand through personal salesmanship. The wholesaler may help the retailer in efficient window display of the new products in his shop.
5. Grant of Credit:
Wholesalers grant credit to their permanent customers. Average size of the retailer’s order is large and the order may be placed on different departments of the wholesaler’s organisation. Secondly, the retailer makes frequent purchases and cash settlement for each purchase may lead to inconveniences and waste of time.
Hence, the wholesaler usually grants monthly or quarterly credit and sends periodical statements of account to the retailers who are granted credit facilities. Such financial help increases in effect the working capital of the retailer. However, he has to forgo cash discount when he accepts credit from the wholesaler.
The wholesaler may grant credit to those retailers whose sales turnover is slow, whose transactions are on credit and who are required to maintain large stocks at a time. Quick sales turnover and cash sales do not require large stocking of goods. Hence, the wholesaler may not grant credit to such retailers.