Wholesalers are very different from the retailers as they pay less for promotion, location; they have bigger transactions and usually cover larger trade area. Also, the legal restrictions and taxes employed by the government are very much different from the retailers. The reasons for growth of wholesalers in the recent years are that they can provide production in advance of orders rather than in response to specific orders; transactions are direct and no middlemen concept and most importantly the prices are low. Wholesalers are used when they are more efficient in performing the following functions.
Selling: – Their work force helps them reach many small business customers at a relatively low cost. The have more contracts and hence larger sales volumes. Bulk breaking: – Wholesalers achieve savings for their customers through buying in large volumes and breaking the bulk into smaller units. Warehousing: – They hold inventories, thereby reducing inventory costs and risks to suppliers and customers. Transportation: – They can provide quicker and cheaper delivery to buyers. Financing: – They finance customers by granting credit, and finance suppliers by ordering early and paying bills on time.
Risk bearing: – The bear the risk of damage, theft or spoilage instead of passing
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Philip Kotler, Kevin Keller. Marketing Management 12e. Managing retailing, wholesaling and logistics, New Jersey: 2006