Wholesaling involves selling goods in large quantities to traders for resale.
A wholesaler is a trader who buys goods in bulk from producers/manufactures for resale to retailers at a profit.
-There are wholesalers who carry out retailing but that do not make them retailers.
Classification of wholesalers/Types of wholesalers
Wholesalers may be classified depending on a number of factors. These factors include;
a) According to the range of goods they handle
b) According to the geographical area in which they operate
c) According to their method of operation.i) According to the range of goods they handle
Under this classification, wholesalers may be any of the following;
a) General merchandise wholesalers
b) General line wholesalers
c) Specialized wholesalersa) General merchandise wholesalers
The word merchandise means goods.
-The general merchandise wholesalers stock and sell a wide variety of goods e.g. hardware, clothes, cosmetics and foodstuffs. The retailers who buy from these wholesalers are thus able to get a wide variety of goods for resale.
-They are also called general wholesalers or full-line wholesalersb) General line wholesalers
-These are wholesalers who deal in a wide variety of goods within the same line e.g. textbooks, duplicating papers and other types of stationary.c) Specialized wholesalers
-These are wholesalers who deal in a particular good from a given line e.g. in the line of grains, they may specialize in maize only.ii) According to the geographical area in which they operate.
Under this category wholesalers may be;
a) Nationwide wholesalers
b) Regional wholesalers. a) Nationwide wholesalers:
These are wholesalers who supply goods to traders in all parts of the country.
-They establish warehouses or depots in different areas from Kenya National Trading Corporation (KNTC)b) Regional Wholesalers
These are wholesalers who supply goods to certain parts of the country only.
They may cover a county, District, division e.t.ciii) According to their method of operation
Under this classification, wholesalers can be:
a) Cash and carry wholesalers
b) Mobile wholesalers
c) Rack jobbersa) Cash and carry wholesalers:
These wholesalers sell goods on cash and
self-service basis like supermarkets
-They neither offer transport nor credit facilities to their customers.b) Mobile wholesalers/Track distributors:
These are wholesalers who use vehicles to move from place to place supplying goods to retailers e.g. soda distributors, bread distributors, beer distributors e.t.c.c) Rack jobbers
These wholesalers specialize in selling certain/particular products to other
specialized wholesalers. They buy goods from producers or from other countries for reselling.
E.g. some wholesalers buy horticultural products from producers and sell to other wholesalers in urban areas
-Rack jobbers usually stock their goods in shelves or racks from which customers select the goods to buy. Customers may be allowed to pay for the goods after they have sold them.d) Drop shippers
These are wholesalers who make orders for goods from manufactures/producers but do not take them from the producers premises.
look for the buyers for the goods and supply the goods directly from the producers
Alternate classification of wholesalersAn alternative classification of wholesalers is given below:
i) Those who buy goods store them in warehouses and sell them to traders without having added anything to them.
ii) Wholesalers who act as wholesaler’s agents or brokers. These are middlemen who are paid a commission for their work e.g. commission
agentsa) Breaking bulk
- Reducing a commodity into smaller quantities for the convenience of the buyer e.g. buying sugar from the producer in sacks and selling it in packets.b) Packing
-Putting goods in packets and boxes ready for sale.c) Branding
-Giving a product a name by which it will be soldd) Sorting
-Selecting goods to desired sizes, weight, colour and qualitiese) Grading
-Putting goods in groups of similar qualities to make it easier to price themf) Blending
-It involves mixing different grades of a product to achieve qualities like taste and colour.Functions of a wholesaler
These can be discussed as services rendered to producers, retailers and to
consumers.Services of wholesalers to the producers They relieve the producers the problem of distribution by buying goods from them and selling to retailers
They relieve the producers of some risks they would experience e.g. damage, theft, fall in demand e.t.c
Save the producers from the problem of storage by buying goods and keeping in their warehouses
They prepare goods for sale on behalf of the producers
They get feedback from consumers on behalf of producers
vi) They promote products through advertising, displays, trade fairs and exhibitions
They finance producers by buying goods from them and paying in cash
Those who after buying the goods and storing them prepare them for sale. They break bulk, pack, brand, sort, grade and blend the goods
These terms are explained as below:
Services of wholesalers to the Retailers
They stock a wide variety of goods in large quantities relieving the retailer from buying from different producers
They avail goods at places convenient to retailers
They break bulk for the benefit of retailers
They offer transport facilities to retailers
They offer advisory services to retailers regarding market trends
They offer credit facilities to retailers
They engage in product promotion on behalf of retailers
They sort, blend, pack and brand goods saving retailers from having to do it.
Services of wholesalers to consumers
They ensure a steady supply of goods to retailers hence consumers are not faced with shortages
They ensure a stable supply of goods hence there will be stability in market prices
They enable consumers to enjoy a wide variety of goods
They break the bulk of goods thus enabling the consumer through the retailer to get the goods in convenient quantities
They prepare goods for sale e.g. branding, blending and packaging
Pass information to consumers through retailers about the goods e.g. new products, new prices and their use.