Wholesaling is concerned with the activities of individuals and establishments that sell to retailers and other merchants, or to industrial, institutional, and commercial users, but do not sell in large amounts to ultimate consumers. Wholesaling excludes those engaged in production, farmers growing agricultural products, and retailers. Unlike retailers, wholesalers are not much concerned with promotional activities, store atmospherics, and location because usually, they deal with business buyers rather than ultimate consumers. Wholesalers usually handle large transactions and operate in a larger market area. The wholesaling activities are just variations of marketing activities, such as gathering and providing information, buying and selling, grading, storing, transporting, financing, and risk sharing etc. Wholesalers add value for customers and suppliers.
All through wholesalers have dominated marketing channels in underdeveloped, developing, and developed countries. The factors that favor their importance in distribution channels include distant locations of producers from final customers; most products are manufactured before specific orders from customers, and intermediaries and final consumers demand varying quantities in terms of packages, and forms. According to Harry G. Miller, effective functioning of wholesalers as a part of marketing channel, especially in developing countries contributes directly to the economic potential and growth by providing links to an extended market base. It is a common perception that goods move from producer to a wholesaler, then to retailers where consumers buy them. The process is more complicated in reality. Products c and move through the hands of several manufacturers and wholesalers and may never end up at a retail store because the end user may be in a business and not a consumer.
As producers are becoming larger, many of them bypass the wholesalers. Producers’ sales force is believed to be more effective at selling, but the costs of maintaining a sales force and performing functions normally handled by wholesalers are sometimes higher than benefits derived from firm’s own sales staff. Wholesalers often handle many product lines from different producers and are able to spread sales costs over more products than most producers. Wholesalers also help retail dealers to select the inventory. They often understand market conditions better and experts are at negotiating. They generally offer a wider range of products from different producers to retailers while most producers’ salesperson offer only a few products. As mentioned in the previous chapter, wholesalers buy large quantities and deliver to customers in smaller lots, and undertake physical distribution activities such as transportation, materials handling, inventory planning, warehousing, and communication.
Large retail chains very often take up functions handled by wholesalers. The growing trend of e-commerce is making things easier for consumers and producers as increasingly many businesses in developed and fast developing countries are moving toward this new-age marketing mantra.