Link between manufacturer and trade
The distribution chain in many areas of trade looks like this: the manufacturer sells his products to the wholesaler, who sells them on to the retail trade, where there is then direct contact with the customers. This distribution chain can be found in many situations and the function of the wholesaler is correspondingly important.
What is wholesale?
Wholesale is a form of distribution in which job lot pallets are purchased from manufacturers and then resold to retailers at a profit mark-up. The aim of wholesaling is thus to sell the products as profitably as possible without having to produce them themselves. The manufacturer could also consider selling the products himself, but many decide against this and concentrate on manufacturing. By selling to wholesalers, there is no need to worry about distribution to retailers.
A wholesaler does not sell to private households and in most countries it is regulated by law that he is not allowed to do so. He sells to other businesses such as retailers, commercial enterprises or similar businesses that either process the goods themselves or sell them to the final consumer.
Advantages of wholesaling
Wholesalers have an important function for the manufacturer because they do not have to deal with a large number of buyers. This distribution of goods is taken care of by the wholesaler, who can be understood as a distribution centre. Wholesalers, on the other hand, have to do good marketing in order to attract as many customers as possible, i.e. companies, so that the goods can actually be sold.
As with commercial enterprises or the retail trade, there are different forms of enterprise in the wholesale trade. There are companies that offer only one type of goods, these are called special wholesalers. Very well known are the cash-and-carry wholesale businesses. In these, entrepreneurs can go shopping personally in the same way as end consumers do in the supermarket. As a prerequisite, the entrepreneurs receive a customer card, which is necessary for payment processing.
Wholesale and dropshipping
A special form has emerged through the internet. Retailers offer products on their websites (online shops, etc.) that they do not even have in stock because they do not have a warehouse. This saves capital because the wholesaler has the products anyway. The retailer sells as intended, but the products are sent via the wholesaler with the retailer’s letterhead. This increases sales and profits for both and this system has become very popular especially with the extensive item lists and the many online shops.
There is a whole range of terms used in retail to describe everyday situations. The catalogue is a constant companion, even though much has been outsourced via websites and online shops. But mail-order companies still sell many products by selecting them from the mailed catalogue. This is where the concept of telesales comes into play, although this can also be taken to mean active selling by telephone by calling customers.
Wholesale is an important part of the entire retail network and is also important in the calculation through the wholesale price. This also applies to the brands in the trade as a sales promotion measure. Retail strategies are also very important and perhaps have become even more important. Dropshipping is one such solution to save costs. Another approach is dynamic pricing.
Buyer behaviour is also important. Rational buying is about the norm, but there are also the spontaneous buying decisions that one would naturally like to encourage. An important solution for suppliers are promotional opportunities as well as seasonal solutions, which are then referred to as seasonal business.