Chapter 15: Wholesaling
Joel R. Evans & Barry Berman Marketing, 10e: Marketing in the 21st Century
Copyright Atomic Dog Publishing, 2007
Chapter Objectives
To define wholesaling and show its importance
To describe the three broad categories of wholesaling (manufacturer/service provider wholesaling, merchant wholesaling, and agents and brokers) and the specific types of firms within each category To examine recent trends in wholesaling
Copyright Atomic Dog Publishing, 2007
The Domain of Wholesaling
Wholesaling encompasses the buying and/or handling of goods and services and their subsequent resale to organizational users, retailers, and/or other wholesalersbut not the sale of significant volume to final consumers. Manufacturers and service providers sometimes act as their own wholesalers; other times, independent firms are employed. Independents may or may not take title to or possession of products, depending on their type.
Industrial, commercial, and government institutions are wholesalers leading customers, followed closely by retailers. Sales from one wholesaler to another are also a significant proportion of wholesaling.
Copyright Atomic Dog Publishing, 2007
The Diversity of Wholesaling Transactions
Wholesaling includes: Sales of goods and services to manufacturers, service providers, oil refiners, railroads, public utilities, and government departments. Sales of office or laboratory equipment, supplies, and services to professionals such as doctors, chiropractors, and dentists. Sales of materials and services to builders. Sales to grocery stores, restaurants, hotels, apparel stores, stationery stores, and other retailers. Manufacturer/service provider sales to wholesalers, and wholesaler sales to other wholesalers.
Copyright Atomic Dog Publishing, 2007
The Functions of Wholesalers
Provide a trained sales force Provide marketing & research support
Facilitate local distribution
Process returns
Take responsibility for inventory obsolescence Handle financial records
Wholesalers provide some or all of these functions
Gather assortments for customers
Purchase large quantities
Provide warehousing & delivery facilities
Offer financing
Copyright Atomic Dog Publishing, 2007
Selling TO Vs. Selling THROUGH the Wholesaler
Selling TO the Wholesaler
Manufacturer/ Service Provider
Wholesaler
Retailer
The wholesaler is viewed as a customer who is researched and satisfied. Selling THROUGH the Wholesaler
Manufacturer/ Service Provider
Wholesaler
Retailer
The retailer (or final consumer) is the object of the manufacturers/service providers interests. The needs of the wholesaler are considered unimportant.
Copyright Atomic Dog Publishing, 2007
The Broad Categories of Wholesalers
There are three broad categories of wholesalers:
Manufacturer/Service Provider Wholesaling Merchant Wholesaling Agents and Brokers They all have obligations to both suppliers and customers.
Copyright Atomic Dog Publishing, 2007
Manufacturer/Service Provider Wholesaling
Control/ Functions
The manufacturer/service provider controls wholesaling and performs all functions. The manufacturer/service provider owns products until they are bought by retailers or other organizational consumers. The manufacturer/service provider does not receive payment until the retailer or other customer buys products.
Ownership
Cash Flow
Best Use(s)
The manufacturer/service provider deals with a small group of large and geographically concentrated customers; rapid expansion is not a goal.
Copyright Atomic Dog Publishing, 2007
Merchant Wholesaling
Control/ Functions
The wholesaler controls wholesaling and performs many or all functions.
Ownership
The wholesaler buys products from the manufacturer/service provider and resells them.
Cash Flow
The manufacturer/service provider is paid when the wholesaler purchases products.
Best Use(s)
The manufacturer/service provider has a large product line that is sold through many small and geographically dispersed customers; expansion is a goal.
Copyright Atomic Dog Publishing, 2007
Agents and Brokers
Control/ Functions
The manufacturer/service provider and wholesaler each have some control and perform some functions. The manufacturer/service provider owns the products and pays the wholesaler a fee/ commission. The manufacturer/service provider does not receive payment until products are sold.
Ownership
Cash Flow
Best Use(s)
The manufacturer/service provider is small, has little marketing expertise, and is relatively unknown to potential customers; expansion is a goal.
Copyright Atomic Dog Publishing, 2007
Full-Service Merchant Wholesalers
General Merchandise Carries nearly all items a customer usually needs
Specialty Merchandise Focuses in a narrow product range, extensive assortment Rack Jobber Furnishes racks and shelves, consignment sales Franchise Uses a common business format, extensive management services Producer-Owned Cooperative Farmer controlled, profits divided among members Retailer-Owned Cooperative Wholesaler owned by several retailers
Copyright Atomic Dog Publishing, 2007
Limited-Service Merchant Wholesalers
Cash and Carry No outside sales force, wholesale store for business needs Drop Shipper Ships items without physically handling them Truck/Wagon
Sales and delivery on same call
Mail Order Catalogs used as sole promotion tool
Copyright Atomic Dog Publishing, 2007
Agents and Brokers
Manufacturers (Service Providers) Agent Sells selected items for several firms
Selling Agent Markets all the items of a firm Commission (Factor) Merchant Handles items on a consignment basis Food Broker Brings together buyers and sellers Stockbroker Brings together buyers and sellers
Copyright Atomic Dog Publishing, 2007
Chapter Summary
The chapter defines wholesaling and shows its importance.
It describes the three broad categories of wholesaling (manufacturer/service provider wholesaling, merchant wholesaling, and agents and brokers) and the specific types of firms within each category.
It examines recent trends in wholesaling.
Copyright Atomic Dog Publishing, 2007
