Page 449 - Foundations of Marketing

416 Part 5 | Distribution Decisions

LO 6 . Understand the nature and WHOLESALING
functions of wholesalers.
Wholesaling refers to all transactions in which products are bought for resale, for making
other products, or for general business operations. It does not include exchanges with ultimate
consumers. A wholesaler is an individual or organization that sells products that are bought
for resale, making other products, or general business operations. In other words, wholesalers
buy products and resell them to reseller, government, and institutional users. For instance,
Sysco, the nation’s number-one food-service distributor, supplies restaurants, hotels, schools,
industrial caterers, and hospitals with everything from frozen and fresh food and paper prod-
ucts to medical and cleaning supplies. Wholesaling activities are not limited to goods. Service
companies, such as financial institutions, also use active wholesale networks. There are more
than 414,600 wholesaling establishments in the United States, and more than half of all prod-
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ucts sold in this country pass through these firms.
Wholesalers may engage in many supply-chain management activities, which we will
discuss below. In addition to bearing the primary responsibility for the physical distribution of
products from manufacturers to retailers, wholesalers may also establish information systems
that help producers and retailers better manage the supply chain from producer to customer.
Many wholesalers use information technology and the Internet to share information among
intermediaries, employees, customers, and suppliers and facilitating agencies, such as truck-
ing companies and warehouse fi rms. Some fi rms make their databases and marketing informa-
tion systems available to their supply-chain partners to facilitate order processing, shipping,
and product development and to share information about changing market conditions and
customer desires. As a result, some wholesalers play a key role in supply-chain management
decisions.

Services Provided by Wholesalers
Wholesalers provide essential services to both producers and retailers. By initiating sales con-
tacts with a producer and selling diverse products to retailers, wholesalers serve as an exten-
sion of the producer’s sales force. Wholesalers also provide financial assistance. They often
pay for transporting goods, reduce a producer’s warehousing expenses and inventory invest-
ment by holding goods in inventory, extend credit and assume losses from buyers who turn out
to be poor credit risks, and can be a source of working capital when they buy a producer’s out-
put in cash. Wholesalers also serve as conduits for information within the marketing channel,
keeping producers up-to-date on market developments and passing along the manufacturers’
promotional plans to other intermediaries. Using wholesalers, therefore, gives producers a dis-
tinct advantage because the specialized services wholesalers perform allow producers to con-
centrate on developing and manufacturing products that match customers’ needs and wants.
Wholesalers support retailers by assisting with marketing strategy, especially the distribu-
tion component. Wholesalers also help retailers select inventory. They are often specialists on
market conditions and experts at negotiating final purchases. In industries in which obtaining
supplies is important, skilled buying is indispensable. Effective wholesalers make an effort to
understand the businesses of their customers. They can reduce a retailer’s burden of looking
wholesaling Transactions in for and coordinating supply sources. If the wholesaler purchases for several different buyers,
which products are bought expenses can be shared by all customers. Furthermore, whereas a manufacturer’s salesper-
for resale, for making other son offers retailers only a few products at a time, independent wholesalers always have a
products, or for general
business operations wide range of products available. Thus, through partnerships, wholesalers and retailers can
forge successful relationships for the benefit of customers. Organizations like the National
wholesaler An individual or
organization that sells products Association of Wholesaler-Distributors can provide firms with solutions to their wholesaler
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that are bought for resale, for issues, including finding firms that carry out various services.
making other products, or for The distinction between services performed by wholesalers and those provided by
general business operations other businesses has blurred in recent years. Changes in the competitive nature of business,

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