Wholesale & Wholesaler – Definition, Types, & Examples
A manufacturer usually doesn’t sell his goods directly to the customers. He makes use of the different channels of distribution; the most-used channel being manufacturer – wholesaler – retailer.
Now, as a consumer, one has direct contact with the retailer and knows how retail works. But there’s someone who handles how when and how much products are supplied to the retailers. It’s the wholesaler.
But what exactly is wholesale, who is a wholesaler, and how does wholesale work?
Read on to get all your answers.
Wholesale is a channel of distribution where large quantities of goods are sold to the retailers or to industrial, commercial, or other professional businesses which are not the end consumers.
Two key-phrases in this definition that separate wholesale from retail are –
- Large quantities of goods – Unlike retailers, wholesalers deal with large quantities of goods.
- Retailers or businesses which are not the end consumers – The transactions take place with the parties that are not the end consumers.
Wholesaling is the distribution process of wholesaler getting large quantities of goods (either from the manufacturer or the agents) and selling them to the retailers or other professional businesses.
In simple terms, wholesaling is the transaction of large quantities of goods between a wholesaler and the retailer or professional business where the good is bought for the resale purpose.
A wholesaler is a person or a business who sells large quantities of goods to retailers or other professional businesses which are not the end consumers.
- Wholesale is a channel of distribution
- Wholesaling is a business process
- Wholesaler is a business or a person
Importance Of Wholesalers
- Breaks down the bulk: Wholesalers buy in bulk from the manufacturers, breaks it down into comparatively small quantities and sell them to different retailers.
- Provide storage facility: Wholesalers move the burden of storing away from the manufacturers as they also provide storage facilities to store the products.
- Risk Bearing: Wholesalers bears the risk of loss due to fluctuating demand and damaged goods (during storage and transit). They also take the responsibility of attracting retailers to buy the product.
- Maintain the demand-supply stability: Wholesalers always have some stock of the product with them. They make use of it to maintain the demand-supply stability with retailers and end consumers.
- Assembling: A wholesaler buys the products from different manufacturers and keeps them in one place.
- Storage: There is usually a large time gap between the production and consumption of goods. The wholesaler maintains demand-supply stability by storing a stock of goods with them and delivering the required amount to the retailers whenever required.
- Distribution: A wholesaler distributes the assembled and stored goods to a large number of retailers operating in different places.
- Transportation: Wholesalers usually handle the transportation of goods from their warehouses to retail shops.
- Financing: Transactions between wholesalers and retailers are usually made on a credit basis where the wholesaler provides certain credit to maintain good relations with the retailers. He also usually buys the goods on a cash basis from the manufacturer to finance them.
- Risk-Bearing: Wholesalers take the responsibility of damaged goods during transit and storage. Since he stocks a large number of goods, he also bears the risk of loss due to fluctuation demand.
Wholesalers are an integral part of the distribution process. While most of them follow the standard channel of sales: manufacturer-wholesaler-retailer, many have gone out of the channel and started selling directly to the consumers to get more sales. Here are some examples of wholesalers –
- Wholesalers on Alibaba – Alibaba is the world’s largest B2B marketplace where you can find thousands of wholesalers selling goods to retailers all around the world.
- Orangeshine – Orangeshine is one of the fastest growing online (fashion) wholesale companies in the United States.
- DollarDays – It’s an online wholesaler that offers a wide range of items to retailers of different niches.
7 Types Of Wholesalers
Each industry witness different types of wholesale businesses. While some work on the lines of the usual distribution process, some find other profitable lines. Here are 7 wholesaler types that currently exist –
Merchant wholesalers are the most common type of wholesalers who buy all sorts of different and profitable items from different manufacturers, store them, and sell them to the retailers. They don’t have much-specialized knowledge about the products and usually operate in the FMCG industry.
Speciality wholesalers stock items belonging to a specific industry or product category. They are very knowledgeable when it comes to the industry and the product and are usually found in industries where selling efforts are required to create demand among the retailers as well.
These wholesalers operate and conduct transactions using the internet. They usually sell the goods at a discounted price as they save money by having virtual offices and operating warehouses at places that don’t charge much.
Examples of internet wholesalers are wholesalers on Alibaba or Amazon for Business.
Usually found in consumer durables or engineering products industries, these wholesalers provide full service including stocking inventories, operating warehouses, order picking, delivery, training sales associates, supplying credits promotions, etc . to the end retailer.
They handle large sales volume and deal with a narrow line of goods.
Limited Service Wholesalers
These wholesalers offer fewer services to their customers like only stocking, only delivering etc. There are many types of limited-service wholesalers like –
- Cash-and-carry wholesalers – who handle limited line of fast-moving goods, sell to small retailers and don’t deliver goods (retailers have to deliver the goods themselves).
- Truck Wholesalers – Who sell and deliver the goods directly from their vehicles.
These wholesalers deal in discounted stock. Usually, the stock is discounted either because the products are discontinued, refurbished, returned, or going to expire soon.
Dropship wholesalers facilitate the process of dropshipping. They deliver the goods directly to the end consumers when a retailer makes a sale. They sign contracts with several internet-based retailers and act as their warehouse and delivery partner and only charge money whenever a sale is made. That is, even though they are wholesalers, they sell small quantities of goods.
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