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Definition, Characteristics, Function, Services, Types - Wholesale | 11th Commerce : Chapter 23 : Channels of Distribution

Chapter: 11th Commerce : Chapter 23 : Channels of Distribution


A wholesaler buys goods in bulk directly from manufacturers and sells them in small lots to customers or industrial users.


Wholesale Trade means buying and selling goods in relatively large quantities or in bulk. The traders who are engaged in wholesale trade are called wholesalers.

A wholesaler buys goods in bulk directly from manufacturers and sells them  in small lots to customers or industrial users. A wholesaler is the first intermediary and serves as a link between producers and retailers. Wholesalers place large orders with producers and supply in small quantities to retailers. In this way wholesaler serve both manufacturers and retailers.



According to Cundiff and still “wholesaler buys from the producer and sell merchandise to the retailers and other merchants and not to the consumers”.

According to Evelyn Thomas “a true wholesaler is himself neither a manufacturer nor a retailer but act as a link between the two”.

The Characteristics of Wholesalers

The following are the characteristics of wholesalers;

1.        Wholesalers buy goods directly from producers or manufacturers,

2.        Wholesalers buy goods in large quantities and sell in relatively smaller quantities,

3.        Wholesalers sell different varieties of a particular variety of product,

4.        They employ a number of agents or workers for distribution of products

5.        They need large amount of capital to be invested in his business,

6.        They generally provide credit facility to retailers,

7.        They also provide financial assistance to the producers or manufacturers,

8.        In a city or town, they are normally located in one particular area of the market.


Function of Wholesalers

Following are the functions of wholesalers,

a.        Collection of Goods: Wholesaler collects the goods from manufacturers or producers in bulk.

b.        Storage of Goods: Wholesaler collects and stores them safely in warehouses, till they are sold out. Perishable goods like fruits, vegetables, etc. are stored in cold storage facility.

c.         Distribution: Wholesaler sells goods to different retailers. Thus he performs the function of distribution.

d.        Financing: Wholesalers provide financial support to producers and manufacturers by providing money in advance to them. He also sells goods to retailer on credit. Thus, at both ends wholesaler acts as a financier.

e.         Risk Taking: Wholesaler buys finished goods from the producer and keeps them in the warehouses till the time they are sold and assumes the risk arising from price, spoilage of goods, and changes in demand.

f.          Grading Packing and Packaging: Wholesaler classifies the goods into different categories. He grades the goods on the basis of quality, size and weight etc. He also undertakes packaging of goods and also performs the function of branding.

g.        Providing Information: Wholesalers provide valuable information to retailers and producers. The retailers  are informed about the quality and type of products available in the market for sale. The producers are informed about the changes in taste and fashions of consumers by wholesalers so that they may produce the goods on the basis of tastes and preferences of customers.

h.        Transportation: A wholesaler arranges for the transport of goods from producers to his warehouse and from the warehouse to retailer. Many wholesalers maintain their own trucks, carry goods in bulk and add place utility to the goods.


Services of a Wholesaler

A wholesaler provides valuable  services  to manufacturers, producers, retailers and customers.


Services to Producers or Manufacturers

1.        Economies in Large Scale: A wholesaler buys goods in bulk and, thereby, enables the producers to produce goods on a large scale. Large scale production helps to reduce the cost of production per unit.

2.        Assistance in Distribution: Wholesalers collect orders from a large number of retailers scattered over a wide area and buy goods in bulk from producers. He enables producers to reach customers scattered over different parts of the country by distributing goods through retailers located in different areas. Therefore producer can concentrate only on production.

3.        Warehousing Facility: A wholesaler holds large stock of goods in his private warehouse or in a rented warehouse. In this way he relieves the manufacturer from the function of warehousing.

4.        Forecasting of Demand: A wholesaler collects information from retailers about the nature and extent of demand and passes it onto the producers and enables them to produce goods according to the needs, tastes and fashions prevailing in the market.

5.        Publicity of Goods: Often wholesalers launch advertising campaign to boost the demand for the goods. Producers get  the  benefit  of  such   publicity and thus enabled to spend less on advertising.

6.        Financial Assistance: A wholesaler often makes advance payments to producers. He buys the goods as soon as they are produced. Producers need not lock up their capital in maintaining huge stock of goods.

7.        Risk-bearer: A wholesaler provides ready market to producers by placing advance orders and relieves the manufacturer from the risk of loss due to fluctuation in demand and storage of goods. He also reduces the risk by matching seasonal demand.

8.        Link: A wholesaler serves as a useful intermediary between the producers and retailers.


Services to Retailers

1.        Financial Assistance: Wholesalers provide financial assistance to retailers by selling goods on credit. This is done by allowing credit to retailers purchasing goods from them and makes payment to them after receiving money from their customers. This helps retailers to manage their business with small amount of working capital.

2.        Meeting the Requirements: Due to limited capital and lack of space in his facility a retailer cannothold large variety of products. The wholesaler removes this difficulty by selling goods as and when the retailer requires.

3.        Introduction of New Products: Wholesalers bring new products and their uses to the notice of retailers. Thus retailers get knowledge about innovated products and innovated features.

4.        Price Stability: Wholesalers reduce price fluctuations by adjusting supply and demand and save the retailers from loss arising from price fluctuations.

5.        Economy in Transport: A wholesaler often delivers goods at the door steps of retailers and save their time and cost of transport.

6.        Regular Supply: Wholesalers keep large stock of varieties of goods and provide  a regular supply of goods as per the retailer’s need. Retailers can purchase as much as they like, from time to time and need not maintain a large stock of goods.


Types of Wholesalers


1. Manufacturer wholesaler

Manufacturer wholesaler undertakes manufacturing of goods in addition to wholesale business. He sells not only the goods manufactured by him on wholesale business, but also goods manufactured by other producers.


2. Retail Wholesaler

This type of wholesaler carries on both wholesale and retail trade. He purchases goods in bulk from manufacturers and sells them directly to consumers through his own retail outlets.

Ex. Super Bazaar.


3. Merchant Wholesaler.

A merchant wholesaler neither manufactures goods nor sells them directly consumers. He is the ‘wholesaler proper’ or ‘pure wholesaler’. He buys goods in bulk from manufacturers and sells them in small lots to retailers. Merchant wholesalers can be further classified into three categories on the basis of degree of specialisation.

a.        General merchandise wholesalers.

b.        Single line wholesalers

c.         Speciality wholesalers

a. General Merchandise Wholesalers: This type of wholesaler deals  in  a  wide range of goods such as groceries, electrical equipment, medicines, cloth etc. The importance of this type of wholesaler has heightened due to increasing specialisation in trade.

b. Single Line Wholesalers: This type of wholesaler deals in only one line of goods and distributes different brands and variety of the particular line. For example, a wholesaler may deal in refrigerators produced by different manufacturer.

c. Speciality Wholesalers: This wholesaler specialises in a single product. For example, a wholesaler may deal only in Tata tea and nothing else.


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