Wholesale trade is a form of trade in which goods are purchased and stored in large quantities and sold, in batches to resellers, professional users or groups, but usually, not to final consumers.
Those who engage in wholesale trade are known as the wholesalers.
Wholesaler is a person who buys goods in large quantity or in bulk from the manufactures/ producer and sell in small quantities to the retailers or professional users or group
TYPES OF WHOLESALERS
- Merchant Wholesalers
- Agents, Brokers, and Commission Merchants
- Manufacturers’ Sales Branches and Offices
A. MERCHANT WHOLESALERS
Merchant wholesalers are intermediaries between manufacturers and retailers. Typically, they purchase bulk quantities of goods from manufacturers and resell them to retailers at a profit. They include firms who engage primarily in buying, taking title to, storing, and physically handling products in relatively large quantities and reselling the products in smaller quantities to retailers; industrial, commercial, or institutional concerns; and other wholesalers
Functions of Merchant Wholesalers
- They provide delivery service
- They undertake the storage of goods
- They provide promotional services
- They provide advisory services
- They arrange credit terms.
Types of Merchant Wholesalers
- Specialist Wholesalers
- Cash And Carry Wholesalers
- General Wholesalers
- Rack Jobbers
- Truck Wholesaler
B. AGENTS AND BROKERS
Agents, brokers, and commission merchants are also independent middlemen who usually do not take title to the goods in which they deal, but instead are actively involved in negotiating and other functions of buying and selling while acting on behalf of their clients. Commission merchants typically deal with agricultural goods and commodities like cement, steel, or coal and the like.
C. MANUFACTURERS’ SALES BRANCHES AND OFFICES
Manufacturers’ sales branches and offices are owned and operated by manufacturers but are physically separated from manufacturing plants. They are used primarily for the purpose of distributing the manufacturers’ own products at the wholesale level.
DIFFERENCES BETWEEN A FACTOR AND A BROKER
A factor is an agent who receives and sells goods on commission; He transacts business in his own name and does not disclosing his principal.
A broker is an individual that arranges transactions between a buyer and a seller for a commission when the deal is executed. A broker who also acts as a seller or as a buyer becomes a principal party to the deal.
Below are the differences between a Factor and a Broker
- He has the possession of goods or documents he’s trading.
- He carries out the trade with his name.
- He is liable in respect to the contract of sale.
- He has a lien on the goods he possesses
- He has no possession of the goods which he sells.
- He brings together both the parties to a transaction. The sale is made in the name of the principal.
- He is not liable in respect of such contracts.
- He does not receive payment of the value of the goods from the customer
- He has no lien on goods
FUNCTIONS OF WHOLESALERS TO MANUFACTURER AND RETAILER
- Price stability- Wholesalers help to prevent price fluctuation by stocking the goods until they are needed.
- Storing or Warehousing
- Transporting – Wholesalers purchase in bulk from manufacturers and transport these goods to their own warehouses. Also, they make arrangements for the transportation of goods from their warehouses to the retailers’ shops.
- Grading, Packing and Packaging
- They provide Market Information
- Dispersing and Selling
- Credit facilities – The wholesalers can give credit facilities to the manufacturers by paying in advance for the products they want to buy and as well render credit facilities to the retailer by selling to them on credit and allowing them to pay later for the products.