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Wholesaling and Wholesalers: An Overview

Chapter-15: Wholesaling
Lecture-11

Course: Marketing Channels

(MKT 450)
Faculty: Abdullah Al Faruq (AFq)

Wholesaling is a distribution channel function where one organization

buys products from supplying firms with the primary intention of
redistributing to other organizations.

Wholesale" is the sale without transformation of new and used

goods to people or institutions who sells to the end-users for final
value addition.

Wholesalers frequently physically assemble, sort and grade goods in

large lots, break bulk, repack and redistribute in smaller lots.

North South University (NSU)

A wholesaler is an individual or institutions who performs the task of

wholesaling i.e. ensuring manufacturers are linked up with retailers
and other intermediary partners such that the end-users can be
provided with the products and services for final consumption.

Categories of Wholesalers
-

Some common types of wholesalers available in the industry are:

a. Manufacturers Sales Branches

-

Categories of Wholesalers (Cont.)

-

Some common types of wholesalers available in the industry are:

c.

Specialty Merchandise

These are captive wholesaling operations that are owned and operated

Many wholesalers focus on specific product lines or industries and in doing

by the manufacturers. Separate branches and offices are dedicated by

so supply a narrow assortment of products but within the product lines

the manufacture for the smooth business operation.

offered there is great depth. Additionally, these wholesalers tend to be

highly knowledgeable of the markets they serve.

b. General Merchandise
These wholesalers offer broad but shallow product lines that are mostly
of interest to retailers carrying a wide assortment of products, such as

d Agents,
d.
Agents Brokers and Commission Agents
-

do not take ownership of the products they represent. They are mostly

convenience stores, variety stores etc. Since these wholesalers offer

such a wide range of products, their knowledge of individual products
may not be strong.

These type of wholesaler buy and sell products for commissions or fees but
seen in a service industry.

e. Merchant Wholesaler
-

Independently run business who takes title/ownership of the products and

distributes it to the retailers. They demand the product as their own and
sometimes uses their own brand name.

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Wholesalers Marketing Decision (Cont.)

Services/Functions offered by Wholesaler

-

Wholesalers perform all the eight generic channel flows and they perform

b. Promotional Activities

them effectively and efficiently.

Wholesalers has been considered as a very valuable channel partners

are:

whose contribution can make the overall performance of a marketing

channel successful.

i.

A wholesalers
h l l
has
h to
t undertake
d t k certain
t i marketing
k ti decisions
d i i that
th t affect
ff t

for a suppliers
supplier s products or where the wholesaler is very aggressive in

their overall operation and also helps in categorizations.

finding new customers for their business. Under these arrangements the

The marketing decisions are:

most common promotional activity is personal selling through a sales force,

though advertising may also be used.

a. Products Carried
-

Extensive Promotion The main task over here is to actively locate

buyers. This occurs most often where a wholesaler is hired to find buyers

Wholesalers Marketing Decision

-

A wholesaler from time and time might have to undertake promotional

activities. There are two categories of promotion they may undertake they

A wholesaler has to carry the products of a manufacturer to the retailers

ii. Limited Promotion Nearly all wholesalers engage in some promotional

and so forth. Sometimes they have to carry a broad line of products to

activities and includes the likes of undertaking advertising and promotional

cater to the needs of many again they might have to carry a narrow line of

related activities sometimes funded by the manufacturer or self-financed.

products to cater to the narrow target groups.

Wholesalers Marketing Decision (Cont.)

d. Service Level and Product Ownership
-

Another marketing decisions that a wholesaler has to undertake is decision

in relation to the level of services they would offer to the retailers i.e. the

i.

number and depth of services.

Full-Service

Wholesalers in this category establishes a strong, long-term retailerwholesaler relationship be established.

Wholesalers Marketing Decision (Cont.)

d. Service Level and Product Ownership (Cont.)
iii.

No Service

Some wholesalers follow a business model whose only service is to make

products available for sale and only on a cash basis. In these instances,
the buyer handles their own transportation of the product.

In addition to basic distribution services a wholesalers offers aid to retail

sell. Ownership means that the title (i.e., legal ownership) has passed from

store operations like offering assistance with: in-store merchandising; retail

the party from whom the wholesaler purchased the product (e.g.,

site location decisions (e.g., find best geographic location for a new store);

manufacturer) to the wholesaler. It also means the wholesaler assumes

store design and construction; back-end operations (e.g., payroll services);

ii.

financial support; and many more.

Limited Service

The offering of basic services to make the operation workable and smooth.

The final marketing decisions that a wholesalers has to undertake is to

decide whether they do or do not become the owners of the products they

any risk that may arise with handling the product.

-

There are some wholesaling operation who takes the ownership title and
who does not.

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Type

Products
Carried

Promotional
Activities

Distribution
Method

Service
Product
Level Ownership

Manufacturer's
Sales Branches

Variety

Extensive

Stationary
Not
Accessible

Full/
Limited

General and
Variety

Extensive/
Limited

Stationary
and nonaccessible

Full/
Limited

Extensive

Stationary
and may be
accessible

Trends in Wholesaling
-

Reduction in wholesale distributors due to mergers & acquisitions and

Benefits gained i)Economies of scale ii) Market share iii) Power.

consolidation.

General
Merchandise
Specialty
Merchandise

Specialized

Agents/Brokers/
Specialized
Commission
and General
Agents
Merchant
Wholesalers

Specialized
and Limited

Extensive

Limited

NonStationary
and no
facility
Stationary
and not
accessible

Take title

The Future of Wholesaling

Take title

Emergence of electronic channels paved the way for a wholesaler to target

international customers.

Full

Take title

Limited

Do not
take title

Full/
Limited

Take title

S
Smart
t strategies
t t i and
d tactics
t ti might
i ht lead
l d to
t upward
d or downward
d
d integration
i t
ti
and become a significant member of the channel.

Table: Wholesaling Category according to the marketing Decisions