Wholesale Trade

3. Wholesale Trade

Wholesale trade is the business of buying goods in large quantities from producers or

manufacturers and selling them in comparatively smaller quantities to retailers, industrial

users, or other merchants — but NOT directly to the final individual consumer. A person or

firm engaged in wholesale trade is called a wholesaler (or wholesale dealer/middleman).

Features of a wholesaler:

• Buys goods directly from producers/manufacturers, usually in very large quantities, and often on more favourable, negotiated terms because of the bulk involved.
• Sells in smaller lots than purchased, but still in bulk compared with a retailer's sale to an individual customer.
• Generally deals in one line of goods or a related group of goods (specialisation), rather than a wide, unrelated assortment.
• Requires substantial capital, since large stocks must be purchased, stored, and financed until sold.
• Operates from a godown/warehouse, not typically from a shop designed to attract walk-in retail customers.
• Acts as the crucial link between the producer and the retailer, absorbing risk and smoothing the flow of goods between the two.

Services rendered by a wholesaler to the producer:

1. Bulk purchase — relieves the producer of the burden of storing and financing the whole output, and of finding thousands of individual retail buyers.
2. Risk-bearing — the wholesaler bears the risk of price fluctuation, spoilage, and unsold stock once goods have been bought from the producer.
3. Financial assistance — wholesalers often pay for goods in advance or on short credit, improving the producer's own cash flow, and may finance retailers in turn.
4. Market information — the wholesaler, being close to the retail trade, feeds back useful information about changing consumer tastes and demand to the producer.
5. Facilitates large-scale production — by guaranteeing a ready market for bulk output, the wholesaler enables the producer to plan and continue large-scale, efficient production.

Services rendered by a wholesaler to the retailer:

1. Availability in smaller lots — breaks bulk into quantities a retailer, with limited capital and storage space, can actually afford to buy and stock.
2. Wide assortment — a wholesaler dealing in a related line of goods lets a retailer buy a varied range of items from one source instead of dealing with many producers. …