Functions of Wholesalers

The wholesaler is a link between producers and retailers. He may be said to provide the economic utilities of time, place, and possession which may lead to economies in distribution. On the one hand, he performs the services to manufacturers on the other retailers.

Functions of Wholesales To Manufacturers

Financial Aid

Wholesalers often supply a more direct form of financial aid to producers. Wholesalers will buy in advance of a season or will accept and store several shipments, paying for them in advance of the time they will be resold to retailers.

Wholesalers also help by generally paying their bills promptly, thus further reducing a manufacturer’s capital requirements.

Market Information

Since the wholesaler is in touch with both retailers and manufacturers, he is in an ideal position to pass back information about what products are selling and what criticisms are being made. This will also be reflected in the wholesaler’s orders to the manufacturer, of course.

Reduction of the Cost of Distribution

As a wholesaler is an intermediary trader between the manufacturers and the retailers, he has two-way traffic in the assembly and disposal of various products. This reduces the cost of transport and storage.

Buying in Advance of Demand

The wholesale trade must anticipate what customers will be buying in the coming months.

Buying ahead also provides a steady market for manufacturers.

Wide Operation

Most manufacturers are small and have financial resources. They can build a good product, but they need someone to sell it. The wholesalers perform this service.

He efforts to sell to small scattered retailers because he represents many manufacturers and can carry many items. Consequently, he can usually get orders large enough to justify his widespread operation.

Function of Wholesalers to Retailers

Ware Housing

Storage is expensive as regard rent and wages. Neither manufacturers nor retailers are equipped to hold large stocks, nor do they want the expense and trouble through their warehousing activities.

If there were no wholesalers and retailers would be forced to carry these stocks with them which would mean so much inventory cost.

Credit Facilities

The wholesaler finances the retailer by grating his credit. He often derivers the merchandise in advance of the season but does not require payment until for his goods with the money he receives for selling them

By granting credit to retailers, the wholesaler is indirectly providing financial help to manufacturers.

Minimum Inventories

The wholesaler consolidates retailers, purchases for them. Generally, he buys and keeps on hand stocks from many manufacturers. The retailer can, therefore, order small quantities of any one of many manufacturer’s products. By so doing shipping costs to retailers are greatly reduced.

Prompt Services

The wholesaler knows his community’s requirements so well that he purchases stocks for future delivery. This enables the retailers and their customers to obtain goods more promptly than would be possible if no wholesale supplies were at hand.

Lower Margin

Wholesalers buy and sell goods taking title to the goods, then deriving lower profit from the marginal difference between the price at which they buy and the price at which they sell.

Break Bulk

Wholesaler assembles different kinds of products in large quantities from several manufacturers. Income trades, he breaks bulk, graders, sorts, packs, or prepares well. He thus sells goods under his own brand name.

Reduction of Marketing Risks

Wholesalers usually guarantee the merchandise they sell and the retailer can thus get immediate satisfaction on claims involving defective merchandise.

Similarly, by taking title to the merchandise, a wholesaler reduces a manufacturer’s risk. If the product deteriorates, goes out of fashion, or for some other reason does not sell, the wholesaler usually bears the burden.

Managerial Services

Some of the managerial services provided by wholesalers today include training or retail sales clerks, advising on, and helping with, store displays and store layout, and establishing better systems for inventory control and accounting.

Whole salvers can supply information regarding new products, competitors, prices, special sales by manufacturers, and other data regarding market conditions.

Delivery

Wholesale firms hold a key position in the delivery of goods to retailers near the retail market. He promotes the adjustment of equilibrium of demand and supply of a particular product. He thus helps to prevent the tendency of fluctuation in the prices of goods.

Methew Harbor

Matthew is a Co-Founder at BusinessFinanceArticles.org. Matthew was a floor manager at a local restaurant in Wales. He lost his job after the pandemic and took initiative to make a team and start the project.