Understanding Wholesale Business

Wholesaling and Retailing

• Wholesaling encompasses all activities related to selling goods and services to those buying for resale or business use.
• Firms primarily engaged in wholesaling are called wholesalers.
• Wholesalers typically buy from producers and sell to retailers, industrial consumers, or other wholesalers.
• Many large and important wholesalers are largely unknown to consumers.

Characteristics of Wholesalers

• Wholesalers operate on large volumes, often focusing on a select group of products (e.g., food, groceries, pharmaceuticals, auto parts, clothing).
• Companies, contracted parties, or freelancers may operate as wholesalers.
• Wholesalers primarily serve businesses (B2B) and institutions.
• Wholesalers can also function as retailers.

Classifications of Wholesaling

• Full-Service Wholesalers: Provide comprehensive support to retailers, including stocking, selling, offering credit, delivery, and business assistance. This includes wholesalers who are companies, distributors, and wholesale merchants.

  • Example: A Samsung distributor in a region where Samsung has no office. This distributor handles all order processing, delivery, training, promotion, and branding tasks to ensure effective distribution for Samsung in the specific region.

• Limited-Service Wholesalers: Provide a narrower range of services. They may only stock and sell products within a specific channel, and lack a large turnover or may not cover all channels of the company.

  • Example: A company that only handles online sales for an online product so retailers do not need a competing in-person sale.

• Merchant Wholesalers: Independent businesses, including distributors and jobbers. They buy directly from manufacturers, store products, and sell to customers, retailers, or other entities. This kind of wholesaler may sell in any channel and is not limited to retail or online sales.

  • Example: A vegetable wholesaler purchasing from farms, storing produce at a warehouse, and then selling to local stores, or end consumers or restaurants.

Key Tasks of Wholesalers

• Selling and Promoting: Wholesaler sales teams help manufacturers reach numerous small customers at a low cost. Wholesalers often are more trusted by customers than the distant manufacturer.
• Buying and Assortment Building: Wholesalers select and organize items to meet customer needs, saving customers and businesses significant effort and expense.
• Break Bulking: Wholesalers buy in large quantities (e.g., carload lots) and then sell smaller quantities to customers, lowering costs.
• Warehousing: Wholesalers store inventory to reduce costs and risks for producers and customers.
• Transportation: Wholesalers offer quicker delivery to customers than producers.
• Financing: Wholesalers give credit and financial support to both customers and suppliers.
• Risk Bearing: Wholesalers absorb risks associated with products like theft, damage, spoilage, and obsolescence.
• Market Information: Provide information on competitors, new products, and changes in prices to suppliers and customers.
• Management Service and Advice: Assist retailers with staff training, store layout, displays, accounting, and inventory management systems

Retailing

• Retailing is a set of business activities that add value to the products and services sold to consumers for personal or family use.

• Retailers sell products and services to consumers for their personal or family use.

• Retail involves selling products to consumers through various means: shops, internet, mail, telephone, vending machines

• Retailers operate independently of producers.

Characteristics of Retailing

• Key characteristics of direct marketing include privacy protection and customer targeting along with response measurement, testing, higher response, customized offerings and immediate orders.

Classifications of Retail Stores

• Retail stores are classified by the types of products they sell:
  • Food products
  • Soft products (clothing, fabrics)
  • Hard goods (appliances, electronics, furniture)

Classifications of Retail Firms

• Traditional retailers focus on high margins with limited volumes. Such retailers are often located in a specific area.
• Modern retailers focus on large volumes with low margins and cost control

Types of Retailers

• There are numerous types of retailers catering to various needs and product types, including:
  • Food retailers (e.g., supermarkets, convenience stores)
  • General merchandise retailers (e.g., department stores, specialty stores)
  • Non-store retailers (e.g., online stores, catalog retailers, direct sellers)
  • Service retailers

Service Retailing

• Service retailers primarily sell services, not products (e.g., education, financial services, entertainment).
• Service retail is a growing segment of the industry.

Differences between Service and Merchandise Retailers

• Intangibility, Simultaneous production and consumption of service, Perishability (can't be stored), Inconsistency (hard to maintain quality uniformly across all customer experiences)

Major Classifications of Retail Ownership

• Independent single-store establishments
• Corporate retail chains
• Franchisees

Wholesaling vs Retailing (Key Differences)

• Wholesalers primarily deal with other businesses (B2B), while retailers deal with consumers.
• Wholesalers are less concerned with location or ambiance; retailers prioritize these.
• Wholesalers focus on specific product types, while retailers may sell a wider variety of goods.
• Wholesalers operate on larger trading areas.
• Wholesalers handle large transactions with suppliers and customers.
• Wholesalers typically seek lower margins and higher volumes