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Marketing Basics - Kotler Philip


The nature and importance of wholesale

What is wholesale ? We consider wholesale distribution and distribution companies to be wholesalers, but from this point of view, a small retail bakery that sells its rolls, pastries and cakes to a local hotel is also engaged in wholesale trade.

Wholesale trade includes any activity that sells goods or services to those who purchase them for resale or professional use.

In this chapter we will use the terms "wholesaler" and "wholesale" in relation to firms for which this trade is their main activity.

Wholesalers differ from retailers in a number of ways. Firstly, the wholesaler pays less attention to the stimulation, atmosphere and location of his trading company, since he deals mainly with professional customers, and not with end consumers. Secondly, the volume of wholesale transactions is usually larger than the retail, and the wholesaler's trading area is usually larger than that of the retailer. Third, with regard to legal provisions and taxes, the government approaches wholesale and retail traders from different perspectives.

And why are wholesalers needed at all? After all, manufacturers could circumvent them and sell goods directly to retailers or end consumers. The answer lies in the fact that wholesalers ensure the effectiveness of the trading process. Firstly, a small producer with limited financial resources cannot create and maintain direct marketing organizations. Secondly, even having sufficient capital, the producer would rather prefer to direct the means of developing production, rather than organizing wholesale trade. Thirdly, the efficiency of wholesalers will probably be higher due to the scope of operations, a greater number of business contacts in the retail sector and their special ones. knowledge and skills. Fourthly, retailers dealing with a wide range of products often prefer to purchase the whole set of goods from one wholesaler, rather than in parts from different manufacturers.

Thus, both retailers and manufacturers have every reason to resort to the services of wholesalers. Wholesalers are used when they can be used to more efficiently perform one or more of the following functions:

1. Sales and its stimulation. Wholesalers have sales staff who help the manufacturer reach many small customers at relatively low cost. The wholesaler has more business contacts, and often the buyer trusts him more than some distant manufacturer.

2. Purchasing and the formation of a product range. The wholesaler is able to select products and form the necessary product range, thus relieving the client of considerable trouble.

3. Breakdown of large consignments into small ones. Wholesalers provide customers with cost savings by purchasing goods in wagons and breaking large batches into small batches.

4. Warehousing. Wholesalers store inventories, thereby helping to reduce the associated costs of the supplier and consumers.

5. Transportation. Wholesalers provide faster delivery of goods, as they are closer to customers than manufacturers.

6. Financing. Wholesalers finance their customers by giving them credit, and at the same time finance suppliers, issuing orders in advance and paying bills on time.

7. Acceptance of risk. By accepting ownership of the goods and incurring expenses in connection with its theft, damage, deterioration and obsolescence, wholesalers assume a portion of the risk.

8. Providing market information. Wholesalers provide their suppliers and customers with information about competitors, new products, price dynamics, etc.

9. Management and advisory services. A wholesaler often helps retailers improve their performance by educating their salespeople, participating in the design of a store and arranging expositions, as well as organizing accounting and inventory systems.

In recent years, the growth of wholesale trade has contributed to several significant trends in the economy: 1) the growth of mass production at large enterprises, remote from the main users of finished products; 2) increase in production for future use, and not for the implementation of already received specific orders; 3) an increase in the number of levels of intermediate producers and users; and 4) an increase in the need to tailor goods to the needs of intermediate and end users in terms of quantity, packaging, and varieties29.