Management Studies: wholesaler

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Retailers: Meaning and Roles of Retailers || Buying goods in huge quantity from producers and selling out them in small quantity ||

Meaning of Retailers

The buyers who buy goods or services for selling them to final consumers are called retailers. Retailers are the last step of distribution channel. In the lack of it, functions of producers and wholesalers cannot be effective. Retailers are the business intermediaries. They work as the bridge between wholesalers

and final consumers. Retailers deal in small quantity. However, their total business transaction becomes very much. In French language, retailer means ‘to cut into small pieces’. It also makes clear that the function of buying goods in huge quantity from producers and selling out them in small quantity is called ‘retailing’. Every retailer sells goods or services to ultimate consumers in small quantity.

Different marketing experts and writers have defined retail trade and retailing. The important definitions are given as follows:

Prof. Philip Kotler has defined retailing and retail trade as, “Retailing includes all the activities involved in selling goods or services directly to the final consumers for their personal or non business use.”

Prof. William J. Stanton has defined it as, “A retail or retail store in a business enterprise that sells primarily (over one half of store sales volume) to household consumers for their non-business use.”

E. Jerome McCarthy has defined it as, “Retailing is selling to final consumer products to householders.”

Condiff and Still have defined retailing and retail trading as, “A retailer is a merchant or occasionally an agent whose main business is selling directly to the ultimate consumers.”

Such retailers are the different types. On the basis of business operation, they can be divided mainly into two classes as full service retailers and out-store retailers. Similarly, on the basis of the sales volume, retailers can be divided into two classes as large quantity selling retailers and small quantity selling retailers. In the same way, on the basis of dealing in goods, retailers can be divided into three classes as simple/general business product retailers, product line retailers and special retailers. Similarly, on the basis of ownership, retailers can be divided into four classes as independent store, consumer store, chain store and contract store.

Retailers provide various services. They supply goods or services by purchasing them from wholesalers to final consumers at right place and at right time when demanded. They also provide information about quality, utility and operation methods of the goods or services to the consumers. Besides, the retailers provide important information to wholesalers about market demand, consumers’ wants and purchasing power. From this, the wholesalers can take right decisions easily about what products should be sent to retailers or distributed, what products should be postponed from supplying.

Role of Retailer

The task of sending / distributing goods or services to different parts and places of any country is done by retailers. This task also takes responsibilities to improve people’s life standard and provide necessary services and facilities to the society. In addition to this, retailers’ have an important role in the development of national economy. Retailers have important role in distribution channel for the following reasons:

1. Efficiency in distribution

Retailers become efficient in their business. Retailing performs distribution more skillfully and efficiently than producers and wholesalers. Distribution of goods through retailers takes lower cost and the number of transactions becomes small. Retailers fully know about how to provide goods or services to all their customers, by which wholesalers get great help in distribution.

2. Market information

Retailers live in direct contact with consumers. They establish long and deep relationship with the consumers. So, retailers give all information to producers and wholesalers about the need, priority, wants and interests etc. of the consumers. Besides, they also give information to the producers and wholesalers about the activities of competitors, their products, price, promotional strategy etc. On the basis of the market information, the producers produce new goods. The retailers also collect information from producers and wholesalers and send them to consumers. This task benefits both two sides.

3. Financing

Retailers keep on selling goods even in small quantity every time. Hence, some amount of money is collected from continuous sale. Such cash amount can be paid to the wholesalers according to the right time, due to which both the wholesalers and producers become successful in financial management. The retailers also get ownership of the goods by purchasing them. As they get ownership of the goods, they also bear the risk.

4. Contact with consumers

As the retailers sell goods or services to consumers, they remain in close contact with them. They establish long and deep relationship with the consumers. The customers trust retailers more than the producers and wholesalers. So, the producers and wholesalers do not need to keep direct contact with consumers. This also makes clear about the importance of the role of retailers in the distribution system.

5. Selection facility

Retailers sell various goods produced by many producers. They purchase goods from producers and wholesalers and keep them in their own shop. The consumers get chances to buy such goods from the retailers’ shop whichever they like. The retailers in super markets, departmental stores, shopping centers etc. give ample chance to the customers to select goods.

6. After sale service

Retailers should also give all information about services what they can provide to the customers after sale of the goods. Retailers should make the customers believe that they can also get after sale service, for example, free repairing, instruction about the method of use, simple repair, how to keep the goods safe etc. After such services to be provided are ensured, the customers trust the retailers, due to which the sale quantity increases.

7. Sales of new products

Producers may produce different types of new goods. Retailers make flow of description and information about quality, features, utility and weaknesses of the new goods. On the basis of the same, the customers buy new products. In the lack of retailers, it becomes very difficult to get entrance to markets for the new goods. In this way, the retailers play a great role in selling new goods in markets.

8. Consumer satisfaction

Retailers know about the interests, wants, needs and purchasing power of their customers. They also know what goods they need what they demand at what time and season etc. and satisfy them by providing wanted goods. In the lack of retailers, it becomes very difficult to get such facilities for the consumers. In this way, the retailers keep the customers always happy and satisfied.

9. Home delivery service

Retailers promptly implement their customers’ order. Nowadays, the customers demand goods or services even through telephones. The retailers provide home delivery services to the customers who have no time or remain busy. Such facilities are also provided to the physically unable customers. Such simple and special activities have made the retailers more important in distribution system.

10. Seasonal goods

Retailers can well identify the wants and needs of the local customers. So, they also know about what kinds of goods in what season their customers want and provide them seasonal goods. For example, they provide warm clothes, jackets etc. in cold season and thin in hot seasons, coffee in cold seasons and cold drinks in hot season, umbrella, raincoat etc. in rainy season. So, retailers play very important role in distribution system.

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Meaning of Promotion and Its Objectives in Marketing

Wholesaler: Meaning, Role and Functions of Wholesaler || Person who performs the wholesale trade ||

Wholesaler: Meaning

The business men who sell huge amount of goods are called wholesalers. Wholesalers sell goods to retailers by purchasing huge amount from producers. In other word, the person who performs the wholesale trade is a wholesaler. Wholesalers work as a bridge between producers and retailers. Such intermediaries do not produce goods nor sell to ultimate consumers. The work of wholesaler, sometimes,

may be done by producers or retailers. The producers work as wholesalers when they sell goods to industrial users, to government offices, to users, or other organizations.

Wholesalers invest much capital and make arrangement for necessary warehouse/storing. So, such wholesalers are known as big businessmen. Such businessmen have their own warehouse for storage, means of transport and modern communication system. So, wholesaler or businessmen purchase goods in mass quantities transport them, bear risk etc. Wholesalers may also provide credit facility to their customers.

Different experts and scholars have defined wholesalers; the important are given as follows:

Prof. William J. Stanton has defined wholesaler as, “Wholesaling or wholesale trade includes the sale and all activities directly incidental to the sale of product or service to those who are buying for purpose of resale or for business use.”

Prof. Philip Kotler has defined it as, “Wholesaling includes all activities involved in selling goods or services to those who are buying for purpose of resale or business use.”

Peter D. Bennet has defined it as, “Wholesalers are the merchants who buy products from producers or other wholesalers and release them to retailers, organizational buyers or to other wholesalers.”

Wholesalers are of two types – agent wholesaler and trading wholesaler. Agent wholesalers work as the wholesalers but do not take the ownership of products. They only facilitate wholesaling on the basis of commission. Under agent wholesaler commission house, there are limited numbers of brokers wholesalers, workers, agents, sales agent, producers’ agents, auction company etc. Trading wholesalers take ownership by purchasing goods from producers. They conduct independent wholesale trading concern. Wholesalers include simple product wholesalers, simple line product wholesalers, and special product wholesalers.

Trading wholesaling includes five types of wholesalers such as full time workers, simple wholesalers, simple product line wholesalers, limited worker wholesalers, and postage order wholesalers, drop-shipment wholesalers and rack jobbers. Similarly, there are four types of wholesalers according to the extension of trade or on the basis of geographical region, such as local, regional, national and international. In this way, it becomes clear that the businessmen who sell goods/products to retailers, government and other organizations, and business users by purchasing in huge quantity from producers are called wholesalers. Sometimes producers and retailers also work as wholesalers. Wholesalers can be divided into different types on the basis of functional area and ownership. However, the main task feature of all types of wholesalers is to conduct wholesale trading.

Situation of Wholesalers

Role of Wholesaler in Distribution Channel

Wholesalers conduct businesses investing huge capital in it. Besides, they also provide special types of facilities and services. Producers do not have to worry about sale of their products. Wholesalers have great role in distribution channel. The functions and roles of wholesalers are mentioned in short as follows:

1. Bulk buying

Wholesalers buy products in huge quantity from producers. Then the products are sold to retailers, government offices and organizations in small quantity. As the wholesalers become physically, financially and intellectually capable and knowledgeable about markets, distribution channels have proved very important. So, the wholesalers purchase products in mass/ huge quantity. As the scattered innumerable retailers buy goods from wholesalers but not directly from producers, wholesalers make bulk buying/ purchase in huge quantity of products.

2. Warehousing

Wholesalers also make effective arrangement for storing the products. Until the purchased goods are sold to retailers, they should be properly stored in warehouse. Such storage arrangement keeps the goods safe. Besides, it also stabilizes market price keeping balance in demand and supply.

3. Quick delivery

Wholesalers quickly deliver goods after they receive order from government offices, organizations, retailers etc. But, if all the buyers demand for goods/products from producers, they cannot deliver goods to all at the same time. As wholesalers become efficient in distribution, sufficient stock of goods remains with them. On the one side, there remains sufficient stock of goods and on the other means of transport remain ready at any time when needed. So, they can fulfill the demands or order of buyers immediately.

4. Financing

Wholesalers are capable intermediaries in terms of capital. They help producers by purchasing goods in huge quantity and paying bills immediately. Similarly, they provide goods to their regular retailers on credit. Because of credit facility, financially weak retailers can increase their business. As a result, sale quantity also considerably increases.

5. Order collection

At first the wholesalers store goods buying them in huge quantity and deliver the goods to the customers when demand or orders are received. Demands or orders should be collected for delivering the goods of different qualities and features. The task of collecting and scanning different orders and demands made by different retailers of different places, areas or regions is done by wholesalers. Hence, records of demands and deliveries also become ready.

6. Risk bearing

Wholesalers purchase huge quantity of goods from producers at a time. They also take ownership of the goods so purchased. If prices, fashion, demands and wants of customers for such goods change, all the goods may not be sold out. In such situation, the wholesalers have to bear the risks. Similarly, there also remain possibilities of damage, fire caught, robbery, stealing etc. of the stored goods. The wholesalers have to bear such risks. So, the wholesalers should also try to minimize such risks.

7. Promotion

Wholesalers remain in contact with government bodies, organizations and many other retailers. So, they believe the wholesalers. They purchase different goods from them believing in the wholesalers. Besides this, the wholesalers are also involved in advertisement with the producers and retailers. They give suggestions to retailers about exhibitions and decorations. If needed, they also know wants, interests, needs and desires of the consumers.

8. Expert advisor

Wholesalers become experienced, qualified and effective in wholesale job. Such sellers sell products through direct contact with government organizations, institution and retailers. So, they provide information about the consumer’s wants and interests to the producer. Thus, the wholesalers give valuable information as expert advisor.

9. Market information

As wholesalers are the important parts of producers, they keep various information and records. Besides, the wholesalers remain in close contact with retailers and markets. So, they provide information about the need of production/ product customers, competitors’ activities, price of products, new products and environmental changes etc. They also provide retailers the important information and notices received from producers.

10. Efficiency in distribution

Wholesalers become experienced in distribution. So, such sellers can perform wholesale and distribution more efficiently than the producers. They quickly deliver goods to the customers of target markets. This also cuts down the distribution cost. The wholesalers bring effectiveness in distribution; make available the right goods, at right place, at right time at lower cost.

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Channel System and Channel Structure in Marketing || Producer, Wholesaler, Retailer, Agent, Ultimate Consumer, Consumer Channel ||

Channel System

Goods are produced to use/ consume. Goods should be distributed from production place to sale center. Right channel is needed to carry goods to right place at right time. The way used to distribute goods/ products is called channel. All the elements present in this channel are called channel system. Intermediaries, industrial buyers, ultimate consumers and channel member manage conflicts and play important roles. This type of channel system does production, whole selling and retailing functions. This channel system is categorized in different classes as follows:

1. Vertical Channel System

Vertical channel system integrates different types of intermediaries. This type of channel system performs producing wholesale and retailing functions. Such channel system can be classified as follows:

Corporate system: Company’s own excessive channel works in corporate vertical system. It does all the works from production of goods or services to selling to final consumers. All the channels involved in distribution are integrated under single/sole ownership. The business firms which want to keep control over distribution channels use this system.
Administered system: In this system, one company controls channel co-ordination activities. So, the company does not have formal organizational structure. In other word, this system is conducted under the leadership of any one channel member.
Contract system: Members of vertical channel are independently involved in this system on contract. The members involved in this system conduct programs of distribution channels. The works of channel members are formally divided which are also controlled through co-ordination.

2. Horizontal Channel System

In this system, different channels jointly and mutually integrate the available man power and programs. In this way, if different organizations and intermediaries work together, this is called horizontal channel system. Among the members of such system, some may produce goods and others may distribute. This type of mutual work may be practiced at production level. This system can also be used at the wholesaler and retailer level.

3. Multi channel system

A company may use several channels to provide goods or service to the customers. In this way, if many channels are involved in distribution, it is called multi channel system. Producers may directly supply their products to final consumers. They can also sell their products through wholesalers and also through retailers. In this way, the producers may use multi channel to distribute their products according to suitability.

Meaning of Channel Structure

In simple meaning, the way to supply products from production place to consumers is called distribution channel. Structure of distribution channel may be different according to the nature of product and environmental elements. Whatever may be the channel structure, it works as a good bridge between producers and consumers. This type of distribution channel may be direct or indirect. In direct channel, the producers supply their products to the consumers by themselves. In indirect channel, the products are supplied to the consumers through intermediaries or distributors. Such indirect channel can be classified into three types as follows:

Single level channel: In this channel one retailer works.

Two level channel: In this channel two intermediaries, the wholesaler and retailer, work.

Three level channel: In this channel three intermediaries work. They are wholesalers, jobber and retailer.

Levels of Distribution Channel

Channel Structure for Consumer Goods

Personal or daily uses product is called consumer goods. According to product nature, size and price, the firm can be used as direct or indirect channel. In indirect channel, the products are supplied to the consumers through agents, wholesalers and retailers. Producer, agents, wholesalers and retailers directly participate in the channel structure for consumer goods. The following four levels are involved in the channel structure of consumer goods.

Channel Structure for Consumer Goods

1. Producer → Consumer Channel

The channel in which no any intermediaries are involved between producer and consumer is called producer – consumers channel. As no any intermediary is needed between the two sides, it is called zero level channel. In this type of distribution channel, the producers themselves supply goods to the consumers. In other word, producer does all the works to distribute produced goods directly to the customers. In such channel, it is necessary to have direct contact and talks between producer and customers. This channel is very cost effective / economical. But the producer should be physically, financially and intellectually able to distribute produced goods.

Technological goods such as television, deck, computer, automobile, machines and machinery goods are distributed through direct channel. Similarly, this channel is used to distribute perishable goods, such as milk, fruits, fish and meat, etc. Door to door service facilities such as mail, order, TV selling, exhibition arcade, telemarketing etc. are forms of direct distribution channels.

Wants and interests of consumers can be easily identified through such direct channel. To perform this task, no any added or extra expense is needed. But, as management for all the tasks should be looked after by producers themselves, it needs capital. Besides, it becomes very difficult for the producers to have direct contact with all the customers.

2. Producer → Retailer → Consumer

In this channel, one intermediary business holder is involved. This is the shortest indirect channel for consumer goods. This is also called single / one level channel. In this channel, retailers remain in between producers and consumers. Consumer goods reach retailer from producers and consumers from retailers. There may be a large number of retailers. Perishable goods such as fruits, vegetables, eggs, milk etc. are distributed through this channel. In this channel, the producers do not need to keep direct personal contact with consumers. Goods are sold out in high quantity with low distribution cost. Channel store, departmental store, super market, discount houses, big mail order houses and cooperative organizations are involved in the single / one level channel.

3. Manufacturer → Wholesaler → Retailer → Consumer Channel

Two intermediaries, wholesaler and retailer work in this channel. So, this channel is also called two – level – channel. This distribution channel becomes longer than one / single level channel. In practice, most of goods reach market through this channel. Goods can easily reach even any market segment where there are many wholesalers and innumerable retailers. The producer / manufacturer does not have direct contact with retailers and consumers but only with wholesalers. As distribution function widens very much through this channel, there remains possibility of large amount sale. But it takes more distribution cost. This channel is used to distribute groceries, medicines, food stuff, hardware, goods, etc.

4. Producer → Agent → Wholesaler → Retailer → Consumer Channel

The longest channel to distribute goods to the final consumers is this three – level channel. In this channel, there are three intermediaries such as agents, wholesalers and retailers between producer / manufacturer and consumers. The goods reach the hands of consumers through agents, wholesalers and retailers respectively. Mostly the international and global companies use this channel. Such companies produce goods in huge quantity. Sale quantity of goods increases through three – level channel. But it takes high sales cost.

Different experts and scholars of marketing have prepared different types of structures of distribution channels. Marketing scholar William J. Stanton has suggested that five / fifth type distribution channel also can be used. This structure is as follows:

Channel Structure of Final Consumer Goods

Channel Structure for Industrial Goods

The goods used in order to produce any new goods are called industrial goods. Direct or indirect distribution channel can be used according to the nature, size, design, price etc. If it is to use indirect distribution channel, goods reach the users through agents and industrial distributors. Producers, agents, industrial distributors and industrial users are directly involved in the channel structure of industrial goods. Specially, there are three levels in channel structure of industrial goods. It is presented in the figure as follows:

Channel Structure of Industrial Goods

1. Producer → Industrial User Channel

This channel is also called direct channel or 0 level channel. In this channel no intermediaries are found between producer and industrial user. This channel has become very popular for industrial goods. Heavy machines and raw materials are distributed through this channel. In this channel the producers themselves identify industrial users, sign contract and supply goods. As this is also direct channel used for industrial goods, its distribution cost becomes cheap, but skilled seller is needed as he/she has also to play intermediary’s role. The seller should be experienced, efficient and have technical knowledge.

2. Producer → Distributor → Industrial User Channel

As only one intermediary works in this channel, it is called one/single level channel. In this channel, industrial goods come to distributors from producers and reach the industrial users. This channel is very popular and is suitable for the goods such as photocopy machine, auxiliary equipment, operation supply, air conditioner, computer etc. This distribution channel becomes more expensive then direct channel. The distributors of industrial goods acquire specialization in dealing industrial goods. Otherwise, dealing in industrial goods becomes impossible.

3. Producer → Agent → Distributor → Industrial User Channel

This is the longest and popular channel. In this channel, agents and distributors work between producers and industrial users. So, this level is also called two level channel. Here agents mean representatives of producer. Agents take the responsibilities to supply goods to distributors. This channel is used for cheap industrial goods for mass distribution. As the way of distribution is long, distribution cost also gets high in proportion. The producer distributing industrial goods can select other distribution channels. The alternative channel is represented as follows:

Alternative Channel for Industrial Goods