When we think about making a purchase in bulk, two things always come to mind: on the one hand, large quantities of merchandise and, because of this, lower prices too.
However, to most of the ordinary people, those of us who do not have a company that buys from wholesalers, doing this type of business seems risky or absurd because we are not going to buy as many products.
Wholesalers are born from a need given by retailers. Many times, when a company has many retail customers and they are geographically widely spread (sometimes even in different countries), it is very difficult to organize logistics and the expenses become immeasurable.
It is in these cases that wholesalers emerge. They are only in charge of serving retailers and distributing other companies' products to them, so costs are reduced and the organization becomes much more bearable.
What is being a wholesaler?Being a wholesaler means being one more component in a product distribution chain, whatever type they may be. We could say that a wholesaler is an intermediary between the manufacturer of the product and the buyer.
In this way, an entrepreneur who produces, for example, roofing and building supply, contact a roof and building supplies wholesalers to distribute their products.
The wholesale company is then responsible for shipping the products to the retailers who buy. To better understand it, we have prepared this scheme:
Manufacturer (Produces the product) >> Wholesaler (Distributes the product) >> Retailer (Sells the product to the end customer)
In short, we could say that a wholesaler is an intermediate step between the person who has the raw material to manufacture a product and the person who is in charge of selling it to end customers on the street.
The wholesaler, therefore, fulfills two functions:
- Buy: buy the product from the manufacturer in bulk to reduce the cost.
- Sell - Sell the product to another wholesaler or to a retailer.
Types of wholesalersWithin the wholesalers there are at least two types, according to two criteria:
- Location: they can be of origin (place where the product is produced) or destination. For example, wholesalers of origin would be those who work in fish markets. Destination wholesalers would be those who, despite not exercising their activity in the city where the fish is auctioned, receive the merchandise to be resold later in another city.
- Relationships: depending on whether they work with an association of merchants (purchasing centers) or deal, independently, with other wholesalers or retailers.
Advantages of buying from wholesalers
- Cheaper prices: more products, less price.
- Less packaging: which is equal to more product.
- Time saving: it is not necessary for the producer to plan sales strategies; the wholesaler takes care of that.
- Community purchases: several companies can join together to save costs.
- Resell the products: if you buy from a wholesale company, the products will be cheaper and you can have a higher profit margin.
- Product diversity: The range of products that can be accessed is much greater.
- Greater chance of finding customers: It is easier because all large companies need to buy products from wholesalers.
1. Provide access to products
Wholesalers are in business to provide products and services to buyers (for example, retailers) who cannot buy directly from suppliers because their purchase quantities or batches are too low to meet the supplier's minimum requirements or, you will pay higher prices compared to larger retailers who get better prices by buying in larger quantity.
Since wholesalers sell to a large number of buyers their order quantities can match those of large retailers allowing them to obtain lower prices from suppliers. Wholesalers can pass these lower prices on to their buyers, which can allow smaller retailers to remain competitive with larger rivals. In this way the transaction through wholesalers is often the only way that certain retailers can stay in business.
Provide access to markets
One of the main solutions for a very common conflict for example, providing smaller retailers with access to products or vice versa liquidating my stock that we could not obtain without wholesaler, that would offer an extra benefit for suppliers, as well as open new market opportunities for suppliers.
Namely, vendors can have their products purchased and offered for sale at a large number of retail outlets. More importantly, for a company offering a new product, convincing a few wholesalers to stock a new product can make it easier to gain traction in the market as the wholesaler can give up power with smaller retailers by convincing them to the stock of the new product.