Wholesalers and Retailers information.doc

8/10/2019 Wholesalers and Retailers information.doc

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Wholesalers

Wholesaler may be defined as the middlemen who operates between the producers

(from whom they purchase goods) and the retailers (to whom they sell goods).

Wholesaler refers to any individual or business firm selling goods in relatively large

quantities to buyers(retailers) other than the ultimate consumers. Thus the

manufacturers who sell their products directly to retailers may also be regarded as

wholesalers. The specialised knowledge and skill of wholesalers increases the

efficiency of the distribution network. The wholesalers provide important services and

solve the problems of both the manufacturers and the retailers.

Services provided by the wholesalers to the manufacturers:-

They place orders for the product in advance on the basis of expectations regarding the

demand for the product. This enables the manufacturer to plan his production and

secure the economies of scale.

They may also provide transportation facility by carrying goods from producers to

godowns and then to retailers.

They perform advertising and sales promotion activities and also employ expert sales

representatives for the purpose.

They provide financial accommodation to manufacturers in the form of cash payments

for goods purchased from them as well as provide credit to them.

They keep the manufacturers updated on the changes in customers' habits tastes

preferences and fashion.

They also play an important role in fixation of the final prices of the goods.

!ervices provided by the wholesalers to the retailers"#

They act as the retailers 'buying agent' and saves them from the trouble of searching

out and assembling goods from several manufacturers.

They inform the retailers about the new products its uses and changes in their prices.

They also assist the retailers in advertising and selling of the products.

They provide financial assistance to retailers sell goods on credit to retailers and thus

help them to operate with small working capital.


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$ wholesaler being the ware#house keeper of the market they protect the retailers

from the risk of loss arising from holding large stocks of the product.

They may also sort out different grades of products according to quality and pack the

goods into small lots for the retailers.

Retailers

%etailing refers to all the transactions which involve sale of goods or services to the

ultimate consumers. $ retailer is a middleman who procures goods from the

wholesalers and sell it to the final consumers. They form a vital link in the channel of

distribution of products because without him neither the products would sell to distant

places nor would it be possible for consumers to buy goods of their choice in shops

located nearby. They have a much stronger personal relationship with the consumers

and deal directly with the people of varied tastes and temperaments. They form the last

link in the chain of distribution and give the final selling price to the product. The

retailers provide important services and solve the problems of the manufacturers and

wholesalers on one hand and the consumers on the other hand.

Services provided by the retailers to the wholesalers and manufacturers:-

They provide selling outlets to wholesalers and manufacturers.

They save the manufacturers from the inconvenience and expenses of selling the

goods in small lots to a large number of consumers.

They communicate the needs and desires of consumers to the manufacturers.

They may also arrange for transportation of goods from the wholesalers' godowns to

the ultimate consumers.

They may also perform storage function by keeping stocks of goods.

!ervices provided by the retailers to the consumers"#

They anticipate the needs of consumers and accordingly assemble goods of different

varieties. Thus they satisfy their demands and provide them a wide choice of goods.

They sort out goods supplied by the wholesalers and keep them in convenient

packages for the benefit of the consumers.

They even act as an advisor and guide to the consumers by bringing new products to

their notice and educating them about its diverse uses.


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They keep the consumers informed about the changing trends in the market about the

different varieties of products.

They also provide other services to the consumers such as free home delivery

aftersale servicescredit facilityetc.

Retailers are of different types depending upon their scale of operation and location.

They are broadly classified into two categories:-

Small-scale retailers:-are those retailers whose scale of operation is restricted to a small

segment of the market and to a narrow range of products. They generally hold small stocks of

the products of regular use. !uch retailers are very large in number but account for a small

portion of the total retail business. &utsmall#scale retailing is a very common simple and

flexible way of distributing the products to the final consumers. t incurs low operating costs

and is usually owned and operated by a proprietor. The most important feature is that the

small#scale retailers have a direct and personal contact with their customers. This form of

retailing faces the problems of small capitallack of professionalism and low purchasing

power.

The two prevalent forms of small scale retailing in ndia are "#

Itinerants or Mobile traders:-are those retailers who carry on their business by moving

from place to place for selling the products and have no fixed business premises. They changetheir place of business according to their convenience and sales prospects. They serve either at

the consumer's doorsteps or on busy places frequently visited by the customers. They do not

have any particular line of business and carry very little stock of those goods. They save time

and efforts of customers in buying articles of ordinary use. The hawkers and pedlarscheap

acks market traders and street sellers fall under this category.

i!ed Shop Retailers:-are those retailers which have fixed business premises and operate

through unit stores or small shops located in residential areas or markets. They mainly

include"# (i) street stalls"# are the small shops on the roadsidestreet#crossingbus stops etc.

They sell a limited variety of products of regular use like stationery grocery etc (ii) dealers

of second hand goods"# are engaged in purchase and sale of used goods like booksclothes

etc (iii) general stores or variety stores"# are the shops which deal in all types of general

consumer goods of regular use like bread butter paper and pencilsetc.They are set up in


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residential areas or busy markets. They provide services like goods on credit and home

delivery to their customers (iv) speciality shops"# are the shops which deal in only one or two

special types of goods. They are generally located in shopping centres. *or example chemist

shops grocery shops readymade garments shop sweets shop etc.

"arge-scale Retailers :- are those retailers whose scale of operation extends to a large

segment of the market and to a wide range of products. They have a fixed line of business in

which they have invested huge capital. !uch retailers are not very large in number. This form

of retailing involves high operating costs and lacks personal contact with the customers. &ut it

involves more of professionalism in selling the products through the use of various

promotional techniques like advertising publicity sales promotionetc. The various forms of

large scale retailers are"#

#epartmental stores:- are large scale retail establishments comprising of a number of

departments in the same building. $ll its departments are centrally controlled but each forms a

complete sales unit in itself and specialises in a particular line of product. They offer a wide

choice of products to the customers under one roof. They also provide many amenities for

customer's convenience such as restaurants car parking recreation rooms post and telegraph

offices and so on. !uch stores are generally located in central places of big cities so that they

can be easily accessible to the customers.

Supermar$ets:-are large scale retail shops operating at lower costs. They sell a wide variety

of consumer goods of regular use such as food items groceriesetc at one place. They sell

goods at lower prices than the departmental stores. +ustomers select the goods themselves

without salesman's assistance. t is also called self#service stores. &utthey do not provide

additional facilities to their customers.

Multiple Shops or chain stores:-are a group of retail stores of the same type under one

common ownership and centralised management but are located at various locations. $ll of

them deal in similar range of products and sell the same standardised products at the same

terms and conditions. The goods dealt are generally meant for everyday use and are readily

acceptable to all kinds of customers. They offer goods at lower prices as they enoy

economies of bulk buying.

Mail order houses:-are those retail trading establishments which receive their orders by mail

and deliver the goods by parcel or post express. The post office is their main channel of


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distribution. ,rders from customers may be secured by advertising in newspapers or ournals

or through telephone contacts. &ut this type of retailing is non#personal and without any face#

to#face contact between buyers and sellers. -owever it helps the consumers to get their

requirements at their own place and thus saves their time and expenses.

%onsumer cooperative stores:-are the cooperative stores which are owned and operated by

the consumers themselves. They are incorporated as an association under the +ooperative

societies $ct. The membership of such stores is voluntary and capital is subscribed by the

members themselves by purchasing shares of a small denomination. They purchase their

requirements of goods in bulk from manufacturers and wholesalers and sell them to its

members at lower prices. The aim of such cooperative stores is to render service to its

members and not to maximise profits.

&ire purchase traders:-is a form of retail trade in which credit is granted to the customers

on the security of a lien on the goods. They supply consumer durable goods to the customers

who agree to pay the price by installment (also called hire charges)at regular intervals. n this

form of retailing consumers get the advantage of deferred payment as they can purchase

goods on credit and make easy payments in installments while using the products at the same

time. The buyer acquires the ownership of goods only after the total price has been paid. f

there is default in paying installmentsthe seller has right to recover the goods or sue buyer.

Super 'a(ars:-are large retail stores organised by cooperative societies. They sell a variety

of products under a single roof. They procure goods at wholesale rates from the manufacturers

and wholesalers and sell them to the consumers at reasonable prices. These may operate either

as self#service stores or as separate counters served by a salesman.

)utomatic vending machines:-are a new and complementary form of retailing operated by

inserting coins or tokens into the machine by the buyers. n return buyers receive a specified

quantity of the product from the machine. These are used to sell prepacked and low cost

products of mass consumptions like beveragesticketsetc. This form of retailing can sell

goods at places and at times where other types of retailing are not convenient or economical.

*or example mother dairy sells milk through such vending machines.

)dvantages * 'enefits of Wholesalers

The benefits wholesalers offer to members of the channel can be significant and involve most

of the ones we discussed in the istribution ecisions tutorial though specific benefits vary


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by type of wholesaler. /et there are two particular benefits 0 one for suppliers and one for

retailers # that are common to most wholesale operations and are worth further discussion"

+rovide )ccess to +roducts -Wholesalers are in business to provide products and services to

buyers (e.g. retailers) who either cannot purchase directly from suppliers because their

purchase quantities are too low to meet the supplier1s minimum order requirements or if they

purchase directly from suppliers will pay higher prices compared to bigger retailers who

obtain better pricing by purchasing in greater quantities. !ince wholesalers sell to a large

number of buyers their order quantities may match those of large retailers thus allowing them

to obtain lower prices from suppliers. Wholesalers can then pass these lower prices along to

their buyers which can enable smaller retailers to remain competitive with larger rivals. n

this way transacting through wholesalers is often the only way certain retailers can stay in

business.

+rovide )ccess to Mar$ets , 2roviding smaller retailers access to products they cannot

acquire without wholesaler help offers a benefit for suppliers as well since it opens additional

market opportunities for suppliers. 3amely suppliers can have their products purchased and

made available for sale across a wide number of retail outlets. 4ore importantly for a

company offering a new product convincing a few wholesalers to stock a new product may

make it easier to gain traction in the market as the wholesaler can yield power with the

smaller retailers convincing them to stock the new product. +onsidering a wholesaler can

serve hundreds of small retail customers the marketing efforts required to persuade the

wholesaler to adopt a new product may be far more efficient compared to efforts needed to

convince individual store owners to stock the new product.

#isadvantages of Wholesellers

When it comes to business wholesaling helps a lot of retailers and buyers get a product at a

good price. -owever there are maor disadvantages that are hard to avoid. -ere are some of

them"

. %apital

n the wholesaler1s point of view he should have a big capital to buy the product from the

manufacturer and then have enough logistics to distribute the product to buyers. n this case

big trucks are needed to contain the large amount of goods to be sold throughout the day.


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f the goods were not all sold most of the time the wholesalers cannot return the goods to the

manufacturers. ,ne of the examples is wholesale fish which the wholesaler bought from the

fishmongers. The wholesaler doesn1t have a choice but to find means to sell the catch even at

a very low price.

. /uantity

n the buyer1s point of view wholesaling is not good when it comes to quantity. f there is one

or two items that he would like to buy from the wholesaler he will not be able to do it.

Wholesaling is dependent on quantity which means that he can1t purchase the items that he

wanted alone. The buyer has to buy a minimum number or amount of products dictated by the

wholesaler.

0. #iscounts

$sking for discounts is a disadvantage most of the time in the retailer1s part. 2eople would

think that the retailer has purchased the goods at a very low price since they were from

wholesale.

This is true at times but buyers fail to consider the retailer1s expenses on transportation 5$T

and human labour. 6nowing that the goods were bought from wholesale would also decrease

their market value in the perspective of buyers.

1. %ompetitive pricing

t is hard to set a good price when the good was bought from wholesale. The retailer will have

to compare his goods with other retailer before he can set his own price. This is to avoid over

and under#pricing which would confuse the buyers.

2. 'ig storage

The need for a big storage is a disadvantage to the wholesaler. The wholesaler should have

enough storage space most especially in cases when the goods weren1t sold as targeted. This

is much needed particularly for a fish supplier who should make sure that his goods will not

perish.

)dvantages of Retailers

%etail outlets provide a safe and traditional shopping option for consumers.

The commercial marketplace has evolved to the point where retail sales no longer

have a monopoly on the consumer world. To elaborate consumers once relied almost

exclusively on retail outlets for their needed goods but today you can purchase from


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online stores auction sites wholesale outlets liquidation centers and in some cases

you can even go straight to the manufacturer. f you sell any kind of merchandise

there are still advantages to using traditional retail outlets.

n a retail setting customer rapport benefits both you as a buyer and as a seller. %etail

outlets allow customers to see what they are buying up close and as opposed to online

stores they provide instant gratification because the customer walks away with their

purchases immediately. $ friendly and helpful staff also helps to build customer

loyalty ensuring that customers return again and again. *rom a business standpoint

retail outlets allow you to reach a customer base that might be put off by the online

marketplace.

When considering wholesale vs. retail retail sales provides you with greater inventory

options because not all merchandise is available on the wholesale market. To provide

a bit of perspective wholesale goods come straight to the manufacturer to a

wholesaler usually mass produced at a low cost. The wholesaler may sell to a retailer

or sell to the public directly. &ut because not all goods can be mass produced at a low

cost the wholesaler is limited in terms of inventory. &y contrast a retail business can

produce goods for itself purchase from wholesalers or directly from manufacturers.

With a retail outlet you can sell a variety of products and expose customers to items

that they didn't even know they needed. *or instance a customer might enter the outlet

looking for a pair of eans but then wind up purchasing eans three shirts a belt and a

tie. &y consolidating a variety of merchandise in one central location you

dramatically increase your sales potential.

f deciding whether to sell in a retail outlet vs. online consider that a retail outlet

spares you from having to charge shipping costs and from having to deal with lost

packages tracking codes customer addresses and complicated online sales databases.

With a retail outlet you can make each sale with greater confidence and fewer

conflicts.

f you are consumer and are considering reasons to shop at traditional retail outlets as

opposed to online consider some of the same benefits. /ou can save on shipping

costs receive instant gratification inspect your items carefully before making your

purchase and not have to worry about packages getting lost in the mail. /ou also can


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have all of your questions answered immediately by helpful staff rather than having to

rely on email messages and phone calls.

#isadvantages of Retailing

3npredictable

,ne of the drawbacks of working in retail is that it is very unpredictable. !ales can plummet

in a business overnight which can negatively affect your ob security. f you work on

commission you might see your income decrease substantially. n some cases the retail store

might have to cut back on employees or close down because of the lack of sales. This makes

the retail industry very difficult to count on.

#ealing With %ustomers

$lthough many customers will be pleasant and enoyable to work with you will inevitably

have to deal with some who are rude and inconsiderate. /ou will have to deal with these

customers professionally setting aside your personal feelings and focusing on what is best for

the company. n some cases you will be extremely busy and you must be able to handle the

pressure that customers can provide.

%onclusion

Wholesalers and retailers are the two important types of middlemen forming a part of the

distribution channels. They act as an intermediary link between the manufacturers and the

consumers of goods. They specialise in providing a wide range of services for both the

producers as well as the consumers. They reduce the amount of efforts required by the

manufacturer in distributing his product to the final consumers and provide a vast market

coverage to his products. They greatly increase the efficiency of exchange and lead to

reduction in total cost of distribution of products. They provide ready delivery of goods to the

consumers at places convenient and accessible to them. They also provide aftersale services

and handle consumer grievances. They also act as a communication channel by providing

information about the products to the consumerson one hand and the consumer feedback to

the producers on the other hand.

Documents

Wholesalers and Retailers information.doc