Services to Manufacturers

Wholesalers offer several important services to the producers of goods and services:

• Facilitating large-scale production: Wholesalers collect small orders from many retailers, pool them, and place bulk orders with manufacturers. This lets producers manufacture on a large scale and enjoy the economies of scale.
• Bearing risk: Wholesale merchants deal in goods in their own name, take delivery, and keep large lots in their warehouses. In doing so they carry risks such as a fall in prices, theft, pilferage, spoilage and fire — relieving manufacturers of these risks to that extent.
• Financial assistance: Wholesalers usually make cash payment for the goods they buy, so manufacturers need not block their capital in stock. Sometimes they even advance money to producers against bulk orders.
• Expert advice: Being in direct contact with retailers, wholesalers can advise manufacturers on customers' tastes and preferences, market conditions, competitors' activities and the features buyers prefer. They are an important source of market information.
• Help in the marketing function: Wholesalers handle the distribution of goods to many retailers (who in turn sell to a large number of scattered customers). This frees manufacturers from much of the marketing work so they can concentrate on production. …