What is Trade?
Trade means exchange of goods and services between sellers and buyers with profit motive.
In other words, Trade refers to buying and selling of goods and service with the motive of earning profit. Trade can be classified into two categories: Internal Trade and External Trade.
Types of Trade
Trade can be classified into two categories:
- Internal Trade: Internal trade refers to the buying and selling of goods and services within the boundaries of a nation. Or When buying and selling of goods and services takes place within the geographical boundaries of a country, it is referred to as internal trade.
- External Trade: External trade is a type of trade which takes place between two or more countries i.e., buying and selling of goods outside the boundaries of a nation.
Internal Trade can be classified into two categories
- Wholesale Trade: Wholesale Trade is concerned with the type of trade in which a person purchases the goods in bulk directly from the manufacturers and sell them in small lots to retailers and other merchants.
- Retail Trade: Retain Trade is a type of trade which involves the sale of goods to the final consumer. In this article we will discuss Wholesale Trade.
Wholesale Trade refers to the buying of goods on large scale from the manufacturer and selling them in small lots to retailers, merchants or to the other industrial, commercial users.
Person doing wholesale trade is called Wholesaler. A Wholesaler acts as a link between the manufacturer and the retailers. Usually, he does not sell goods to the ultimate consumers.
Features of Wholesale Trade
- A wholesaler buys goods on large scale.
- He sold the goods in small quantities to retailers and other merchants.
- This trade provides links between the manufacturer and the retailer.
- The wholesaler usually specialises in one particular line of goods.
- The margin of profit is generally low in order to take advantage of high turnover.
- The wholesaler bears the business risk by buying and selling goods in his own name.
They generally provide credit facility to retailers.
- The wholesaler provides several services to the manufacturer and the retailers such as:
- Warehouse and Transportation
- Collection of Market information
- Grading of Products
A wholesaler is a person that buys goods/products in bulk quantity from manufacturers/producers and sells them to retailers in small quantities.
Functions Of Wholesaler:
Following are the functions of wholesalers,
- Collection of Goods: Wholesaler collects the goods from manufacturers or producers in bulk.
- Storage of Goods: Wholesaler collects and stores them safely in warehouses, till they are sold out. Perishable goods like fruits, vegetables, etc. are stored in cold storage facility.
- Distribution: Wholesaler sells goods to different retailers. Thus he performs the function of distribution.
- Financing: Wholesalers provide financial support to producers and manufacturers by providing money in advance to them. He also sells goods to retailer on credit. Thus, at both ends wholesaler acts as a financier.
- Risk Taking: Wholesaler buys finished goods from the producer and keeps them in the warehouses till the time they are sold and assumes the risk arising from price, spoilage of goods, and changes in demand.
- Grading Packing and Packaging:Wholesaler classifies the goods into different categories. He grades the goods on the basis of quality, size and weight etc. He also undertakes packaging of goods and also performs the function of branding.
- Providing Information:Wholesalers provide valuable information to retailers and producers. The retailers are informed about the quality and type of products available in the market for sale. The producers are informed about the changes in taste and fashions of consumers by wholesalers so that they may produce the goods on the basis of tastes and preferences of customers.
- Transportation:A wholesaler arranges for the transport of goods from producers to his warehouse and from the warehouse to retailer. Many wholesalers maintain their own trucks, carry goods in bulk and add place utility to the goods.
Services of Wholesaler
Services to Manufacturer
The wholesaler provides the following services to the manufacturer.
- Facilitating Large-Scale Production: The wholesaler purchases goods from the manufacturer in bulk quantities, this enables the producers to produce goods on a large scale. Large-scale production reduces the cost of production per unit.
- Expert Advice: Wholesalers have direct contact with the retailers; thus, they collect information about the customers’ choice, preferences, market condition, etc. and help the manufacturer by such information.
- Bearing Risk: The wholesaler bears the business risk by buying and selling goods in his own name and keep them in their own warehouses. They bear risk arising out of fall in prices, theft, spoilage, etc., and relieve the producers from such risks.
- Financial Assistance: A wholesaler provides financial support to the manufacturer by making advance payments for bulk orders.
- Storage: The wholesaler takes the deliveries of goods from factories and store them in his own warehouse relieving the manufacturer of the storage problem.
Services to Retailers
- Regular Supply of Goods: The retailer has to manage stock of large variety of products to meet demand of his customers. The wholesaler provides such products to the retailers from different manufacturers and save them from keeping large quantity of each product.
- Credit Facility: Wholesalers helps retailers financially by selling them goods on credit. It enables retailers to manage their business with less working capital.
- Taking Risk: Wholesaler saves the retailers from assuming risk of spoilage, obsolescence(outdated), price drop or demand fluctuation and any other such damage.
- Specialise Knowledge: Wholesaler usually deals in a particular line of products and have expert knowledge of the market condition relating to such products. The wholesaler helps retailers by passing such specialise knowledge and informing them about new products, their quality and market price.
- Market Control: Wholesaler have control over the supply and demand of products. He is in a position to maintain price stability. They help the retailers in avoiding the losses they may suffer due to these price shifts.
Types of Wholesalers
Wholesalers are classified into following categories.
1. Manufacturing Wholesaler: Manufacturer Wholesaler is a person who is involved in both manufacturing activities as well as distribution activities. In other words, A manufacturer who sell their goods to the retailers are manufacturing wholesalers. They produce goods on a large scale to meet the requirements of retailers.
2.Retailer Wholesaler: These type of wholesaler purchases goods directly from the manufacturers and sold them to the consumers. They keep large stocks of goods.
3.Merchant/Pure Wholesaler: Merchant wholesaler is a type of wholesaler who neither manufactures goods nor sells goods directly to the consumers. They purchase goods directly from manufacturers and sell them to retailers. They act as the intermediator between the manufacturer and the retailers. Merchant wholesaler can be further classified into three categories.
- General Wholesaler: General Wholesaler keeps a large variety of goods. He keeps wide range of products and help small retailers to meet the requirements level of his customers. For example, a wholesaler buying and selling different types of electronic products like TVs, Laptops, Smartphones etc.
- Single Line Wholesaler: Such Wholesaler deals only in one line of products. They purchase goods from different manufacturers of their line. They keep large variety of same type of products and sell them to retailers. Example: A Wholesaler who keeps different types of TVs from different brands.
- Specialised Wholesaler: Specialised Wholesaler is similar to single line wholesaler but the only difference is that they purchase and sell only a particular type of products. Example: A Wholesaler buying and selling the TVs from only Samsung.