Wholesale Trade

1st Year POC - Principles of Commerce Notes

Wholesale Trade



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DEFINITION



Generally speaking trade may be carried on either on retail or
wholesales basis. When the goods are purchase in a large quantity by a
person to be sold in smaller quantities to retailers it is known as
wholesale trade. It may be defined as follow.



“ A wholesale transaction is one in which the purchaser dose no buy for
his own private or personnel use but is guided by a profit or business
motive ib the making of purchase.”



The wholesaler has following characteristics:



1. He deals in a larger quantity of goods which are being purchased from the manufacturer.



2. His business is specialized



3. He sells goods to retailers.



Thus the wholesalers are said to be marketing institution who buy goods
and then resell them. They are neither the manufacturers themselves nor
the retailers but acts as a link between them.

SERVICE OF WHOLESALER TO MANUFACTURERS:



The wholesaler render very valuable and important services to the manufacturer which are as follow.



1. By buying in large quantities the wholesaler enables the manufacturer
to benefit from the economies of lager scale production. So the
wholesaler grants financial assistance to producers.





2. A manufacturer is not expected to be expert seller. He is an expert
technician and must pay all hs attention to production. The wholesaler
enables him to do this by taking upon his shoulder the responsibilities
of distribution.





3. The wholesaler relieves the manufacturer of the necessity for
carrying larger stock . thus enabling him either to release his capital
for future production or to carry on the business with less capital then
would otherwise be necessary.





4. The wholesaler direct the manufacturer as regards the quality and
quantity of the goods demanded, new market developments ,coming trends
etc as they are in direct contact with the retailer who know the market
conditions.





5. The wholesalers often enable the manufacturers to minimize his total
distribution cost eg. The manufacturer of consumer goods would behave to
establish and maintain an enouomus sales force in order to reach all
outlets in which he would like his product stocked.





6. The manufacturers are already short of funds and cannot afford to
allow credit to retailers, however the wholesalers can do so and relieve
the manufacturers from credit burden.





7. The wholesalers simplifies the marketing process and makes fewer
transactions necessary. A manufacturer deals only with a selected number
of wholesalers rather than hundreds and thousand of retailers.



SERVICE OF WHOLESALERS TO RETAILERS



The wholesalers render very useful services to retailers which are as;





1. Supplying goods according to the demand: the retailers due to smaller
capital cannot hold a big stock of any commodity but he the wholesaler
by holding large stock of different varieties of goods enables the
retailers to make purchase in small quantities at interval and to carry
on business with less capital.





2. Facilitating choice of selection: a wholesaler hold large stocks of
different varieties of goods and thus enables the retailers to exercise
there choice and selection.





3.Credit facility: most wholesaler grant credit. This reduces the
capital requirements of the retailers and enable him to maintain huge
stocks of goods.





4. The stocks held by wholesalers enable the retailer to obtain supplies more quickly than they can from manufacturer.





5. The wholesaler makes the retailers buying function easier as he needs
to deal only with a small number of wholesalers, rather than hundreds
of manufacturers.





6. He often enable a retailer to reduce his total buying cost . they are often able to take advantages of volume discounts.





7. He regulates the price by controlling the supply and thus minimize the risk of retailers.





8. Since they perform a storage service, therefore they absorb a part of
retailers storage burden. If the retailers were to buy direct from the
manufacturer they would have to store the goods themselves.





9. They provide suggestion to retailers in connection with the store
display, selling technique, and maintenance of accounts etc.





10. The supply of goods in small quantity enables the retailers in avoiding wastage.