WHOLESALING

Chapter 15

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 Definitions
 Wholesaling
 All activities involved in selling goods and services
to those buying for resale or business use.
 Wholesaler
 A firm engaged primarily in wholesaling activity.

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Goal 3: Know the major types of wholesalers
 Wholesaling
 Wholesalers add value by performing the
following functions:
 Selling and promoting
 Buying and assortment building
 Bulk-breaking
 Warehousing
 Transportation
 Financing
 Risk bearing
 Market information
 Management services and advice

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Goal 3: Know the major types of wholesalers
 Wholesaling
Types of
Wholesalers
 Merchant Wholesalers
 Brokers and Agents
 Manufacturers’ and
retailers’ branches and
offices
Goal 3: Know the major types of wholesalers
 Full-service wholesalers
Wholesale merchants

 Industrial distributors
 Limited-service wholesalers
 Cash-and-carry wholesalers
 Truck wholesalers (jobbers)
 Drop shippers
 Rack jobbers
 Producer’s cooperatives
 Mail-order wholesalers
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 Wholesaling

Types of  Brokers and agents do not

Wholesalers 
take title of the goods.
Brokers
 Bring buyers and sellers
 Merchant Wholesalers together and assist in
negotiation
 Brokers and Agents  Agents
 Manufacturers’ and  Manufacturers’ agents
retailers’ branches and  Selling agents

offices  Purchasing agents

 Commission merchants

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Goal 3: Know the major types of wholesalers
 Wholesaling
Types of
Wholesalers
 Merchant Wholesalers
 Brokers and Agents
 Manufacturers’ and
retailers’ branches and
offices
Goal 3: Know the major types of wholesalers
 Sales branches and offices
Branches carry inventory:

lumber, auto equipment,
parts
 Offices do not carry
inventory: dry goods
 Purchasing officers
 Perform roles similar to
brokers and agents;
however, these individuals
are employees of the
organization
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 Wholesaling
 Wholesaler Marketing Decisions
 Target market and positioning
 Targeting may be made on the basis of size of customer, type
of retailer, need for service
 Marketing mix decisions
 Product and service assortment
 Pricing: usually markup standard percent
 Promotion: largely disorganized and unplanned
 Place: location, facilities

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Goal 3: Know the major types of wholesalers
 Wholesaling
 Trends in Wholesaling
 Price competition is still intense
 Successful wholesalers must add value by increasing
efficiency and effectiveness
 The distinction between large retailers and
wholesalers continues to blur
 More services will be provided to retailers
 Many wholesalers are going global

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Goal 3: Know the major types of wholesalers
 CONSOLIDATION Trend
 Increase in retailer size pressures wholesalers to
consolidate to obtain related efficiencies
 Huge Wholesalers with much growth via acquisition
 Drives manufacturer consolidation

 Wholesale winners of consolidation:

1. Catalyst firms (rapid acquisitions)
2. Late entrants with defensible niches (after consolidations)
3. Extreme specialists
4. Extreme generalists, large and versatile

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 Future of Wholesaler-Distributors
 International Expansion
 Reduced cross border shipping costs
 Lower trade barriers (NAFTA, EEC)
 Fundamentals of wholesaling precludes most from becoming international
(wholesaling tends to maintain economies of scale by “meeting the needs of a
local market”)
 E-Commerce – four wholesaler challenges:
1. Broader aggregated geography of markets
2. Pricing widely available
3. Distribution segregated from other service outputs such as customer
service (now wholesaler can specialize in a function and outsource
more?)
4. Information functions can be 3rd party internet-based institutions
 E-business models
1. Independent Exchanges (consolidate buying with online catalogue)
2. Supply Chain Networks (internet based integrated supply..EDI
software driven expertise)
 On-line retailers impact
 driving growth of larger wholesalers due to “drop ship model”, e.g.:
Amazon.com 13 - 10
 Vertical Integration in Wholesaling
 Trend of HUGE “Power Retailers” to bypass
independent wholesaler-distributors. Two
types:
1. General-merchandise power retailers (Wal-mart,
Kmart, Costco…)
2. Category-dominant power retailers (category
killers) (Staples, Petco, Home Depot, Toys “R”
Us…)

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 Manufacturer’s Representatives vs.
Wholesaler-Distributors

 MRs (manufacturer’s representatives) enable

manufacturers to have much greater control
over the market and prices than through
wholesale distributors.
 Function like sales force for manufacturers
finding distribution opportunities. Never
possess product, rather negotiate and service
the transfer and sale of goods.
 May still use wholesaler warehouse for
inventory management and shipping.

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