Understanding Wholesale – Types, Functions, Benefits, and Differences with Retail

Definition of Wholesale – In the production goods supply industry, there is a term wholesale which also becomes a component in the product distribution process. In order for a product to reach consumers, there must be intervention from wholesale activities because it is also impossible for producers to go directly to consumers.

The existence of this wholesaler is very profitable, especially in areas far from the center of direct production. Even though sometimes the price offered has a slight difference with the price from the center or even the price from the center becomes cheaper, this is not a problem for consumers.

Take a look around you, there must be a lot of grocery stores right? Do you feel helped by the existence of these wholesale shops because you can get a need item quickly.

Does Readers know the difference between a wholesaler and a retailer? Because some people can’t tell the difference between the two. So, so that Readers understands this, let’s look at the following review!

Understanding Wholesale

Wholesale is the second or third distribution channel after distributors or sub-distributors.

According to Setyaningrum et al, wholesalers are business units whose activities buy or resell products to retailers, traders or industrial, institutional and commercial users.

Furthermore, according to Alma (2011), wholesale is all marketing activities that move goods from producers to retailers or to other marketing institutions.

Meanwhile, according to Griffin and Ronald (2007), wholesalers are independent entities that sell various types of consumer goods or business goods produced by various manufacturing companies.

Wholesale can also be referred to as a type of activity in the sale of goods or services to those who wish to resell them for business purposes.

Based on the definitions that have been described above, it can be concluded that wholesale is a marketing (technique) company that sells products in large quantities produced by various manufacturing companies and then resells them to retailers and other wholesalers.

Various Kinds of Wholesale

Although in general wholesale is part of the company’s marketing by selling products from manufacturing companies and then resale, it turns out that there are also three types of wholesale, you know, namely wholesale traders; brokers and agents; as well as branches and offices of manufacturers.

Well, here is the description.

Based on How It Works

1. Merchant Wholesaler

A wholesaler is a type of proprietary business that operates independently and takes title to the merchandise it handles. These wholesalers are also known as distributors, jobbers, or factory supply agencies.

These wholesale traders are usually the largest single group of wholesalers, and it is even estimated that 50 percent of the wholesale business is controlled by them.

Wholesale traders can be classified into two things, namely:

  • Full Service Wholesaler, which provides storage services, has a sales force, sells on credit, delivers goods, and has management assistance.
  • Limited-Service, which only offers some services to its suppliers and customers.

2. Wholesale Brokers and Agents (Brokers and Agents)

This type of wholesale is clearly different from wholesale traders. The most striking difference between the two is that in this type of wholesale they later take over the rights to the goods, then carry out only a small part of the sales functions.

See also  A collection of examples of brief literacy on various topics

Meanwhile, the similarity with wholesalers is that they usually specialize in a certain type of product or type of customer.

The main function of wholesale brokers and agents is to assist in the buying and selling process. For this, they will receive a commission from the sale price of the product.

These wholesale brokers and agents account for 11 percent of total wholesale sales volume.

This type of wholesale has special specialization on certain products and customers, namely:

a) Brokers (Brokers)

That is the type of intermediary that has the main function of bringing together sellers and buyers, as well as helping smooth the negotiation process. This broker or broker will later get a commission from the party who has hired his services.

b) Agent (Agent)

Namely intermediaries who represent sellers or buyers in the transaction process. In this case, it is usually more permanent than the broker. These agents have several types, namely:

  • Manufacturer’s Agent, namely a type of intermediary agent who works for several producers and handles products that do not compete with each other in an area with a certain agreement.
  • Selling Agent, which is a type of intermediary agent who is authorized to sell all products of a company. This authority usually includes responsibility for the entire marketing function of the manufacturer.
  • Buying Agent, which is a type of intermediary agent who purchases, receives, controls, warehousing, and delivers goods for its customers.
  • Commission Agent, which is a type of intermediary agent who handles goods that have been sent by producers to them, then sells them. After that, the sales proceeds (minus commissions and certain fees) will be handed over to the producers.
  • Auction Companies, which are types of company agents that provide a place for sellers and buyers to meet and then make transactions. Not only that, they also provide physical facilities to display their products.

3. Branch Wholesalers and Manufacturer Sales Offices

Well, the next type of wholesale is branch wholesale and producer sales offices, which account for approximately 31 percent of the total wholesale business sales volume. Manufacturers generally open their own branches and sales offices to enhance inventory control and sales and promotion efforts.

In this type of wholesale, the sales branch has inventory and is usually found in the woodworking, equipment, and automotive parts industries.

Based on the Area of ​​Business

The distribution of wholesale based on the area of ​​business can be divided into three types, namely:

  1.  Regional or Provincial Wholesaler ( The Regional Wholesaler )

That is the type of wholesaler that has a marketing area in a certain province or state only.

  1. Local Wholesaler (The Local Wholesaler)

The next type of wholesaler is a local wholesaler which has an area in a certain city only, usually the regional levels are municipality, regency and residency.

  1. National Wholesaler ( The National Wholesaler )

This type of wholesale has a marketing area for all regions within a country.

Based on Field of Activity

When viewed based on the field of activity, wholesalers have eight types, namely:

  1.  Full Wholesale ( The Service Wholesaler )

A type of wholesaler whose business activities are purely in the form of buying and selling activities, such as wholesalers in general.

  1. Wholesale Collector ( The Whole Collector )

This type of wholesale operates by collecting certain goods, either for its own needs or to fulfill orders from other parties (usually customers).

  1. Limited Wholesaler ( The Limited Function Wholesaler )

This type of wholesale can only be done for some services. Limited because they only do “part” of the full wholesale party.

  1. Truck Wholesaler ( Truck Wholesaler )

This type of wholesaler will carry out sales of merchandise, in the form of providing a service for the delivery of goods using truck transportation.

  1. Wholesale Cash ( Cash Carry Wholesaler )

This type of wholesale is in the form of selling merchandise in cash and does not provide goods delivery services to the buyer.

  1. Wholesale Shipping ( Drop Shipment Wholesaler )

This type of wholesale is usually in the form of sales activities and delivery of goods from producers directly to buyers.

  1. Wholesale Order by Post ( Mail Order Wholesaler )

This type of wholesaler will carry out sales of merchandise by ordering via post.

  1. Factory Wholesaler ( Manufacture Wholesaler )

This type of wholesaler will later carry out activities of selling merchandise as well as acting as a supplier, especially for industrial needs.

See also  Examples of Minor Human Rights Violations and Their Punishments

Based on the Type of Goods Traded

When viewed based on the type of goods to be traded, namely:

  1. The Specialist Wholesaler

This type of wholesale is usually only specialized in selling certain items. For example, a grocery wholesaler that only sells basic needs such as cooking oil, rice, sugar, and others.

  1. General Goods Wholesaler (General Line Wholesaler)

Namely the type of wholesaler or distributor who sells various types of goods.

Wholesale function

The existence of wholesalers and their traders certainly has various functions for the continuity of product sales until they reach the hands of consumers. Therefore, wholesalers and wholesalers have the following functions.

1. Sales and Promotion ( Selling and Promoting )

In this function, wholesalers’ sales force will help manufacturers to reach more consumers, especially those with small businesses, at a relatively low cost.

Wholesalers usually have good relationships with buyers, so these buyers also tend to trust wholesalers over distant manufacturers.

2. Purchase and Supply of Various Products ( Buying and Assortment Building )

In this case, wholesalers are usually better able to choose and determine what product items are needed by consumers as their buyers. This capability is certainly very helpful for the customer.

3. Breaking up large quantities ( Bulk Breaking )

Wholesalers usually buy products from central producers in bulk, then sort or “break down” them into smaller units. This is done so that they can provide savings for their buyers.

4. Warehousing ( Warehousing )

Wholesalers will usually store inventory in a warehouse, thereby reducing inventory costs and risks for both suppliers and customers.

5. Transportation ( Transportation )

Wholesalers are usually able to distribute goods more quickly than the central producer, because generally these wholesalers tend to have a close relationship with customers.

6. Financing _

Wholesalers can also help finance consumers as customers and supply prices by credit, with the condition that they must pay on time.

7. Risk Bearer ( Risk Bearing )

Wholesalers can also bear the risks that occur in their goods, such as theft, damage to goods, expiration, and other losses related to the ownership of goods.

8. Market Information

Wholesalers can provide information to their suppliers as well as their customers regarding the activities of new product competitors. This information is of course very useful.

9. Management and Consulting Services ( Management Service and Counseling )

Wholesalers can help retailers with management, from training salespeople to layout and store displays. The governance process can create accounting and inventory control systems.

Advantages of Wholesale Shopping

This wholesale system has been widely practiced by the community, both as buyers and traders. This also provides direct benefits to the producing companies. Well, here is a description of the advantages of shopping for goods wholesale.

  1. Free to Choose Items

When shopping at a wholesale center, we can have the opportunity to choose good quality goods for ourselves.

  1. No Need to Shop Often

In contrast to buying goods in retail which tends to shop continuously when the goods are used up. Through this wholesaler, we can buy in large quantities and use it more economically.

  1. More Controllable Shopping Activities

When shopping for wholesale, we will definitely focus more on picking up and buying the things that are really needed.

  1. Save Operational Costs

Buying goods wholesale can actually save operational costs, you know. When shopping wholesale, we will automatically get a price difference that is quite cheap compared to buying retail.

  1. Stock Availability

When making wholesale purchases, the stock of goods at the wholesale store will continue to be available. This is because grocery stores will usually continue to supply goods that run out to be replenished.

Difference between Wholesale and Retail

Aspect Wholesaler Retail
Definition Sales of goods in large quantities but at a lower price Sales of goods to consumers in limited quantities, but the price tends to be more expensive than the original price
Cost Cheaper More expensive
Business Size Large, usually in the form of a store building with a large size Small, usually in the form of a simple shop
Capital Higher, because they have to deal directly with the central producer It’s cheaper, because it can usually be obtained from the local wholesale center
Sales Reach Can be reached in all provinces, cities, to different districts Has limited coverage space, only in villages or between villages
The Art of Selling Not needed Needed
Promotion It’s not needed, because wholesale places tend to be crowded with consumers Needed, especially in the village
Product Display It doesn’t matter how the product looks, because consumers are only concerned with product quality Necessary to attract customers

Well, that’s an explanation of the meaning of wholesale and the difference between it and retail. If you want to buy goods in large quantities at a more affordable price, you can do this at the wholesale center. However, if you only buy a limited number of items, you can do this at a shop that uses a retail system.