Wholesaling

Wholesaling is a process when many items are sold by a manufacturer to an individual at once at an extremely low price, which is achieved by means of a discount. Individuals who buy items in such a way are called wholesalers. After that the bought goods are sold one more time, but in smaller numbers at a higher price to retailers. After purchasing the goods retailers resell it one by one at a different price. The price may vary, it may be higher, but affordable, or it can be much higher.

Wholesalers role in Wholesaling

Normally wholesalers don’t produce items on their own, they purchase and sell it to retailers, thus, focusing on the business. Wholesalers stand between a manufacturer and a retailer. Every wholesaler sees bigger profit in buying in bulk and getting a discount for it rather than purchasing goods one by one.

Although responsible for wholesaling people sell the bought goods to retailers at a higher price, retailers may get a discount at almost the same level wholesalers had. For instance, 7-eleven, an American retail convenience store, buys its products in bulk. Right from a wholesaler it buys 1000 bottles of shampoo. The discount will be higher than if the retailer purchased it one by one. Then 7-eleven puts these shampoos in its stores and as soon as there are no shampoos on shelves the retailer fills them from its inventory one more time.

Wholesaling may consist of different goods, thus, there can be different types of wholesalers. Someone offers only one product and others sell one particular category, there is one more, which provides retailers with many distinct products. The variety of products is wide, it may be food, it may be fuel as well. Sometimes some wholesalers can play the intermediate role between a retailer and other wholesaler.

It’s worth noticing that since wholesalers aren’t official distributors of any product they aren’t able to provide full support of it. Sometimes even the relations with the company whose product wholesalers purchase aren’t so close. Also, there are situations when a wholesaler isn’t aware enough about the products it sells and competing products are sold.

Wholesaling role in the supply chain

Wholesaling plays an exceedingly important role in the supply chain. The supply chain is a complicated system consisting of related people, activities, information, to be more precise it connects suppliers of raw materials with producers, producers with wholesalers, wholesalers with retailers and retailers with consumers.

However, the process of supply is needed to be optimized. For this reason around 30 years ago supply chain management was created. This helps to increase efficiency in business transferring products from the first step of the chain to the last.

Wholesaling connection with the financial sector

In the financial sector wholesaling has a great importance as well. Here wholesaling means to give financial services to the clients, who usually are bigger and can’t be called a mere individual. Such clients are real estate developers, pension funds, etc. Also responsible for wholesaling people may play the role of an underwriter or sponsor.

There are asset management companies, which are responsible for establishing and controlling mutual funds. Then they find a wholesaler for a mutual fund, he or she becomes a mutual fund representative, this person is in charge of purchasing goods to resellers. The wholesaler also may be called a salesperson.