Everything you need to know about the types of wholesalers.
The wholesalers can have different forms depending upon the volume of business, number of products/services dealt with, etc. the wholesalers have the ability to influence the producers and the retailers.
If the wholesalers are large, their businesses are important and they can put more pressure on the producers and the retailers. They can introduce their own brands or sell private brands and get the pricing freedom.
The wholesaler bears variety of names like distributor, stockist, semi wholesaler, reseller, trader, jobber, merchant, agent, broker, etc.
A wholesaler is a marketing intermediary that neither produces nor consumes the finished product but instead sells to retailers and other institutions that use the product for ultimate resale.
A wholesaler’s primary function is facilitating either the transportation of or the transfer of title to the products.
The types of wholesalers an be studied under the following heads: A. According to Services Rendered B. According to Specialization C. According to the Area of Operation.
Some of the types of wholesalers are:-
1. Manufacturer Wholesalers 2. Retail Wholesalers 3. Pure Wholesalers 4. Agents and Brokers 5. Assemblers 6. Merchant Wholesalers 7. General Merchandise Wholesalers
8. General Line Wholesalers 9. Speciality Wholesalers 10. Local Wholesalers 11. Regional or Sectional Wholesalers 12. National Wholesalers 13. International Wholesalers 14. Limited Function Wholesalers and a Few Others.
Types of Wholesalers: Merchant Wholesalers, Agents, Brokers, Commission Merchants, Manufacturer Agents and a Few Others
Types of Wholesalers – According to Services Rendered, According to Specialization and According to the Area of Operation
(A) According to Services Rendered:
(i) Manufacturer Wholesalers:
These wholesalers undertake manufacture of goods as well as their distribution directly to the retailers. They usually do not deal in goods manufactured by other firms. By combining the activities of manufacturing and distribution, they are in a position to minimize their overhead expenses on transportation, warehousing, etc.
(ii) Retail Wholesalers:
Retail wholesalers are those who, besides selling goods to the retailers also deal directly with the ultimate consumers. In this way, they are able to establish direct contact with the consumers, so as to get prompt information relating to their preferences. Besides, it enables them to reduce the distribution costs and increase their margin of profit.
(iii) Pure Wholesalers:
Pure wholesalers concentrate on buying from other producers or distributors and selling only to the retailers. They do not engage in production or direct sale to the consumers. Thus, such wholesalers are able to serve the manufacturers as well as retailers in a better way.
(iv) Agents and Brokers:
These are also middlemen and serve as a link between the manufacturers and the retailers. Normally, they function on behalf of the manufacturer, their task being to find buyers for the products of the manufacturer. They receive commission from the manufacturer for the work done by them.
(v) Assemblers:
These are another type of middlemen, engaged mainly in the marketing of agricultural produce. They collect agricultural produce from small farmers scattered over different villages. After collection, the produce is sold to commission agents, other wholesalers, retailers, etc.
(vi) Merchant Wholesalers:
This type of wholesalers undertake no business other than the wholesale one. They purchase goods produced by various manufacturers in bulk and sell them to the retailers. They can also be called ‘pure wholesaler’. They also perform various marketing functions.
(B) According to Specialization:
(i) General Merchandise Wholesalers:
These wholesalers deal in a variety of goods. They do not deal in single line of products. They keep goods of several types to be sold to the retailers. For example, cloth, furniture, groceries, medicines, hardware, etc. They are a boon to the small retailers who can easily purchase their requirements on credit and can pay for them when the sale proceeds are realised.
(ii) General Line Wholesalers:
These wholesalers do not deal with a variety of products. They select a particular line such as groceries, drugs, electrical appliances, textiles, etc. In the particular line selected by them, they sell a number of brands and varieties. For example, a wholesaler dealing in drugs will stock only medicines and nothing else. However, he will stock many different kinds of drugs and medicines.
(iii) Speciality Wholesalers:
These wholesalers specialize themselves in limited items of merchandise or even in single merchandise. They do not keep stocks of variety of merchandise. For example, if they deal in groceries, they do not keep several items of groceries but only deal in tea or coffee. Thus, they render services of high degree of specialization to the retailers.
(C) According to the Area of Operation:
(i) Local Wholesalers:
This kind of wholesalers sell goods to local retailers. They may limit their business to a city or district.
(ii) Regional or Sectional Wholesalers:
These wholesalers sell goods to retailers in a certain section. Their area of operation is greater than a district and may extend to a particular State, for example, the whole of Punjab. In some cases, they extend their operations into nearby States as well. For example, some wholesalers may be operating in Punjab, Haryana and Delhi at the same time.
(iii) National Wholesalers:
These wholesalers have their network throughout the country. They maintain their head office at a strategic place and distribute goods all over the country through their offices and warehouses, spread far and wide.
(iv) International Wholesalers:
These wholesalers are engaged in the import and export trade. Some of them may deal only with import trade or export trade, while some of them may deal in both types of trade. Wholesalers dealing only in import trade, import goods from different countries and stock them in their warehouses.
From these warehouses, the goods are then sent to different retailers. Wholesalers dealing only in export trade, collect goods from manufacturers in the country and then export these goods to foreign countries.
Types of Wholesalers – Limited Function Wholesalers, General Merchandise Wholesalers, General Line Wholesalers, Speciality Wholesalers and Functional Wholesalers
A business unit which buys and resells merchandise to retailers and other merchants and/or to industrial/institutional and commercial users but which does not sell in significant amounts to ultimate consumers.
Wholesalers can be classified as follows:
(i) Limited function wholesalers – They are merchant wholesalers who do not provide full services, but only the minimum services among limited functions.
(ii) General merchandise wholesaler – Such a wholesaler never restricts the varieties of products to be handled. He may even handle unrelated product lines.
(iii) General line wholesalers – They deal in closely related items, for example, Cosmetics wholesalers. They are also known as “Industrial Distributors”.
(iv) Specialty wholesalers – They deal in only one merchandise, offering the whole range and also specializing in concentrating on the products of single or special group of manufacturers.
(v) Functional wholesalers – They fall under the category of agent middlemen. Their main function is to facilitate selling. They are of various types like brokers, drop-shipment wholesalers, commission merchants, manufacture’s agents, selling agents, etc.
Types of Wholesalers – 3 Basic Types: Merchant Wholesalers, Brokers and Agents, Manufacturer’s and Retailer’s Branches and Offices
There are basically three types of wholesalers.
They are:
1. Merchant Wholesalers.
2. Brokers and Agents.
3. Manufacturers’ and retailers’ branches and offices.
Let us take a look at these various types of wholesalers in greater detail:
Type # 1. Merchant Wholesalers:
These are independently owned businesses that take title to the merchandise they handle, that is they buy the merchandise that they are to handle. Different industries call them by different names – jobbers, distributors, or mill supply houses.
The merchant wholesalers are further divided into two categories:
i. Full Service Wholesalers, and
ii. Limited Wholesalers.
i. Full Service Wholesalers:
As the name suggests, these wholesalers provide a full line of services of carrying stock, maintaining a sales force, offering credit, making deliveries, and providing assistance.
Full service wholesalers are further categorised into:
a. Wholesale merchants, and
b. Industrial distributors.
a. Wholesale merchants – They are full service wholesalers who primarily sell to retailers. General merchandise wholesalers carry several merchandise lines while general line wholesalers carry one or two lines in greater depth. Speciality wholesalers specialise in carrying only part of a line.
b. Industrial distributors – These sell to manufacturers rather than to retailers. They provide the full range of services and may carry a broad range, or a general line, or a speciality line.
ii. Limited Service Wholesalers:
Again, as the name suggests, they provide limited services or fewer services, and do not provide the entire range of services like the full service wholesalers.
There are several types like:
a. Cash and carry wholesalers,
b. Truck wholesalers,
c. Drop shippers,
d. Rack jobbers,
e. Producers’ co-operatives and
f. Mail-order wholesalers.
a. Cash and Carry Wholesalers:
They have a limited line of fast moving goods to sell to small retailers for cash. Normally they do not provide additional services like delivery, warehousing, etc.
b. Truck Wholesalers:
They primarily undertake the selling and delivery functions. They generally carry a limited line of semi-perishable merchandise, which they sell for cash to small retailers.
c. Drop Shippers:
These wholesalers operate in bulk industries such as – coal, lumber and heavy equipment. They do not carry inventory. When they receive an order, they select a manufacturer who directly ships the merchandise to the customer. The title and risk is taken by the drop shipper from the time the order is accepted to the time it is delivered to the customer.
d. Rack Jobbers:
They generally serve mostly non-food items to grocery and drug retailers. They price the goods, keep them fresh, and set up point of purchase displays, and keep inventory records. They maintain title to the goods and bill the retailers only for those goods that are sold to consumers.
e. Producers’ Co-operatives:
These are owned by farmer members, who assemble to sell their farm, produce in local markets. The profits made by these co-operatives are distributed to its members.
Type # 2. Brokers and Agents:
These types of wholesalers typically do not take title to the goods and perform only a few functions. Their main function is to facilitate the buying and selling process for which they receive a commission. They generally specialise by product line or customer types.
i. Brokers:
Their main function is bringing buyers and sellers together and assisting in the negotiation process. They are generally paid by the party who hires them. They are not responsible for carrying any inventory, do not assume financial risks, and do not take title to the goods. Some of the common examples are Real Estate Brokers and Security Brokers.
ii. Agents:
They represent either buyers or sellers on a more permanent basis than the brokers do.
Let us look at some of the common types:
a. Manufacturers’ Agents:
They represent two or more manufacturers having complimentary product lines. Their businesses are governed by a written contract or agreement covering issues such as – territories, order handling, pricing policies, and commission rates.
b. Selling Agents:
A selling agent has a contractual authority to sell a manufacturer’s entire output. The manufacturer himself does not engage in the selling function. The selling agent serves as a sales department and has a significant influence over prices, and terms and conditions of sales. The selling agent normally does not have any territorial restrictions.
c. Purchasing Agents:
These are wholesalers who have a long-term relationship with buyers. They make purchases for the buyers and often take on the functions of inspection, warehousing and shipping for the buyers.
d. Commission Merchants:
They take physical possession of the products and negotiate sales. A commission merchant typically takes loads of material from the manufacturer to the central market place and sells it for the best price. He keeps a commission on the sales made and gives the balance amount to the manufacturer.
Type # 3. Manufacturers’ and Retailers’ Branches and Offices:
Here, the manufacturers conduct their own wholesaling activities and have branch offices and sales offices for the same.
i. Sales branches and offices – Sales branches and offices are set up by manufacturers to improve inventory control, selling, and promotion. Generally it is found that sales branches carry inventory whereas sales offices do not carry inventory.
ii. Purchasing offices – These offices perform a role similar to that of brokers or agents, but are a part of the buyer’s organisation.
Types of Wholesalers – 6 Important Types: Merchant Wholesalers, General Merchandise Wholesalers, Single-Line Wholesalers, Drop-Shippers and Truck Wholesalers
The following are the different types of wholesalers:
1. Merchant wholesalers – These wholesalers own (take title to) the products they sell because they buy the goods and then sell them to the retailers.
2. General merchandise wholesalers – These wholesalers carry a wide variety of nonperishable items such as hardware, electrical supplies, plumbing supplies, furniture, drugs, cosmetics, and automobile equipment.
3. Single-line (or general-line) wholesalers – These are wholesalers who carry a narrower line of merchandise than general merchandise wholesalers.
4. Specialty wholesalers – These are service wholesalers who carry a very narrow range of products-and offer more information and service than other service wholesalers. These wholesalers specialize in their respective types of products.
5. Drop-shippers – These wholesalers do buy the products they sell-but they do not actually handle, stock, or deliver them. These wholesalers are mainly involved in selling. They collect orders-from wholesalers, retailers, or other business users- and pass these orders on to manufacturers.
Then these manufacturers send the goods directly to the customers. As drop-shippers do not have to handle the products, their operating costs are lower. Drop-shippers commonly sell products which are bulky that additional handling would be expensive and unnecessary.
6. Truck wholesalers – These wholesalers specialize in delivering products such as ready-to-eat-foods, toiletries, sweets etc. that they stock in their own trucks.
Types of Wholesalers – 4 Major Types: Merchant Wholesalers, Brokers and Agents, Sales Branches and Offices and Miscellaneous Wholesalers
The wholesalers can have different forms depending upon the volume of business, number of products/services dealt with, etc. the wholesalers have the ability to influence the producers and the retailers.
If the wholesalers are large, their businesses are important and they can put more pressure on the producers and the retailers. They can introduce their own brands or sell private brands and get the pricing freedom.
The wholesaler bears variety of names like distributor, stockist, semi wholesaler, reseller, trader, jobber, merchant, agent, broker, etc.
1. Merchant Wholesalers:
They are the independent business houses. They perform all the functions of the wholesaler and deal with the entire product range of the producers or they deal with few products and provide limited services. Thus, they can be classified as – Full service or limited service wholesalers.
(a) Full Service Wholesalers:
They provide an array of the services to the producers and the retailers. They perform all the functions of the marketing channel. They deal with the entire product range of the producers. They carry the stock, maintain the sales force, offer credit, provide management support to the retailers, etc. In short, they discharge all the responsibilities towards the producer and the retailers. They carry either all product lines or one or two lines in a greater depth.
For example, the wholesaler can keep all varieties in soaps or he may carry only a single product line, i.e., beauty soaps with all possible varieties in that from the different producers. Industrial distributors sell to the manufacturers or to the Original Equipment Manufacturers (OEMs) instead of the retailers. They provide services such as, carrying the stock, providing delivery and services of repairing and maintenance.
(b) Limited Service Wholesalers:
These wholesalers offer fewer services and carry limited product lines. They have limited responsibilities.
(i) Cash and carry wholesalers carry fast moving goods and sell them to the small retailers for cash and the retailers collect goods from them.
(ii) Truck wholesalers have their own transport facilities. They deal with limited line of semi perishable goods such as milk, bread, bakery products and cold drinks. They deliver these products to supermarkets, restaurants, canteens, and hospitals and collect the cash and orders.
For example, local bakeries often use this form of wholesalers to reach to the large number of retail stores selling the bread and other bakery products. In case of soft drinks, the distributors have their own carriers for picking the cold drink bottles from the manufacturer/bottling plant. They are also responsible for collecting back glass bottles from the retailers and send them back to the bottling plant for refilling. Thus, they are also responsible for reverse logistics.
(iii) Drop shippers do not carry inventory but they just collect the orders from the customers and then they select the manufacturer who ships the consignment directly to the customers.
(iv) Mail order wholesalers send the catalogues to the institutional and retail customers and book the orders from them. They neither maintain the sales force nor do they need any outlet to keep the stock. This type is widely used for some standard industrial products as well as jewelry, cosmetics, designer wear, etc.
2. Brokers and Agents:
Basically they act as a facilitator, and offer few services. They do not take title of the goods and the ownership remains with the producer. They do not hold the inventory. They represent either buyer or seller and get commission from either or both the parties. Agents work for permanent or relatively longer time than the brokers, e.g., Insurance Agents, whereas the brokers are used for case-to-case basis, i.e., on the assignment basis, e.g., brokers of the farm products.
3. Sales Branches and Offices:
Wholesaling activities can be carried out by the manufacturers through their own branches and offices. They keep inventory in their branches to meet the immediate requirements and they can undertake sales support and promotional activities, as well. Sales offices do not carry any stock but can be used to book the orders and providing sales and service support to the retailers/ customers.
4. Miscellaneous Wholesalers:
They are many other intermediaries who undertake the wholesaling activities. Specialized wholesalers are found in different industries, e.g., auction companies, agricultural assemblers, import-export agents, etc.
Types of Wholesalers – 2 Major Groups: Merchant Wholesalers and Limited Service Wholesalers
Wholesalers fall into two major groups:
1. Merchant wholesalers, and
2. Limited service wholesalers.
Type # 1. Merchant Wholesalers:
Merchant wholesalers are independently owned businesses that take title to and store goods for the purpose of resale. Merchant wholesalers include two broad types —full service wholesalers and limited service wholesalers.
Full-service wholesalers provide a full set of services, such as carrying stock, using a sales force, offering credit, making deliveries and providing management assistance. They are either wholesale merchants or industrial distributors. Wholesale merchants sell mostly to retailers and provide a full range of services.
Some carry several lines of goods to meet the needs of both general merchandise retailers and single-line retailers. Others carry one or two lines of goods in a greater depth of assortment.
Industrial distributors are merchant wholesalers who sell to producers rather than to retailers. They provide inventory, credit and other services. Industrial distributors may concentrate on lines such as maintenance and operating supplies or equipment.
Type # 2. Limited-Service Wholesalers:
Limited-Service wholesalers offer few services to their suppliers and customers. There are different types of limited service wholesalers.
i. Cash and Carry Wholesalers:
Have a limited line of fast-moving goods; sell to small retailers for cash and usually do not deliver the goods they sell to the retailer. The most important product line offered by this type of wholesaler is the grocery line. They sell to small grocers who are often unable to purchase from service wholesalers because the amount they buy are too small. Some service wholesalers operate cash-and-carry departments specifically to serve the small retailer. These departments provide immediate cash for the wholesaler.
ii. Drop Shippers:
Do not perform warehousing. Their function is to obtain orders from retailers and to process these orders through producers. The producer then ships the merchandise directly to the customer. Although drop shippers do not physically handle or store the goods —as do most wholesalers — nevertheless they take little to the goods which makes them the owners. With the elimination of warehousing and reassembling the goods for shipping, their operating costs are reduced.
iii. Rack-Jobbers:
Are the newest types of limited function wholesaler? Rack jobbers sell merchandise other than food items mainly to supermarkets. The retailers do not maintain displays of hundreds of non-food items. Products such as toys, paperbacks, and stationery are usually merchandise maintained and owned until sold by the rack jobber.
The store provides space in which rack jobbers set up racks for the display of merchandise. They are responsible for the display and the replenishment of the merchandise and get paid only for the merchandise that has actually been sold. Super markets have experienced greater success in the merchandising of these non-food items when handled by a rack jobber than when handled by the own staff. Rack jobbers are sometimes called service wholesalers because the services provided by them have increased in scope.
iv. Mail-Order Wholesalers:
Send catalogues to retail, industrial and institutional customers offering cosmetics, jewellery and other small items. Similar to a mail-order retailer, the mail-order wholesaler operates through the use of catalogues, with orders placed by mail. The only difference between the two kinds of mail-order houses is the type of customers being served. The former sells to the ultimate customers whereas the latter sells to retail stores.
1. Manufactures’ Sales Branches and Offices:
This type of wholesaling is done by sellers themselves rather than through independent wholesalers. The establishment of these types of branches and offices has cut substantially into the traditional methods of wholesaling. One of the reasons for bypassing the traditional wholesaler is the belief that lower marketing costs will be incurred.
Moreover, the fact that some wholesalers do not satisfy all the requirements of manufacturers regarding the distribution of their goods makes this kind of wholesaling popular. For example, the Japanese camera manufacturers Minolta, Pentax and Canon dissatisfied with the job that American wholesalers were doing, dropped them in favour of their own sales force.
2. Manufacturer’s Agents:
The manufacturer’s agent or manufacturer’s representative works for a manufacturer on a commission basis. Agents are assigned specific territories in which to transact business. Most manufacturer’s agents are small business, with only a few employees who are skilled salesmen. They are hired by small producers who cannot afford to maintain their own sales force and by large manufacturers who want to sell in areas that cannot support a fulltime salesman.
3. Selling Agents:
Usually provide more marketing services than do other agents and brokers. The selling agent serves as a sales department and has much influence over price, terms and conditions of sale. The selling agent has no territory limits. Selling agents are found in textiles, lumber, chemicals and metals.
4. Purchasing Agents:
Have a long-term relationship with buyers. They make a purchase for buyers and often receive, inspect, warehouse, and ship goods to the buyers.
5. Brokers:
Dealing mainly in information, the broker brings buyers and sellers together and assists in negotiations. Brokers are paid by the parties hiring them. They do not carry inventory, get involved in financing or assume risk. Brokers work for a variety of producers. It should be noted that unlike manufacturers and selling agents, brokers do not enter into permanent relationships.
6. Wholesaler Marketing Decisions:
Wholesalers have experienced massive competitive pressures in recent years from more demanding customers, new technologies and more direct buying programmes by industrial, institutional and retail buyers. As a result, they have to improve their strategies regarding target markets, product assortment, price, promotion and place.
7. Target Market Decision:
Like retailers, wholesalers must define their target markets since they cannot serve everyone. They can select a target group by size of customer, type of customer or other factors, within the target group. They can identify the more profitable customers and build better relationships with them by setting up management training and advising system.
8. Product Assortment and Services Decision:
The wholesaler’s product is its assortment. Wholesalers are under great pressure to carry a full-line and stock much for immediate delivery. But this practice can damage profits. Wholesalers today are reducing the number of lines they carry and choose to carry only the more profitable ones.
9. Price Decision:
Wholesalers usually mark up the cost of goods by a standard percentage, say 20%. Expenses may run 17% of the gross margin, leaving a profit margin of 3%. Wholesalers are adopting new pricing approaches. They cut their margin on some lines in order to win new customers.
10. Promotion Decision:
Most wholesalers are not promotion-minded. They use advertising, promotion, personal selling largely in an unplanned manner. Wholesalers should develop an overall well-integrated promotion strategy to face new challenges.
11. Place Decision:
Wholesalers usually locate in low-rent, low-tax areas and tend to invest little money in their buildings and equipment. As a consequence, their materials handling and order-processing systems are often out-dated. Recently progressive wholesalers are reacting to rising costs by turning to computers to do accuracy, billing and inventory control.
Types of Wholesalers – 6 Important Types: Merchant Wholesalers, Agents, Brokers, Commission Merchants, Auction Companies, Manufacturer Agents and Selling Agents
A wholesaler is a marketing intermediary that neither produces nor consumes the finished product but instead sells to retailers and other institutions that use the product for ultimate resale. A wholesaler’s primary function is facilitating either the transportation of or the transfer of title to the products.
Intermediaries performing wholesaling functions are traditionally divided into two groups — merchants and agents. The only distinction between these categories is whether their members take title to the goods they sell. Merchant intermediaries take title; agent intermediaries do not.
This has nothing at all to do with possession of goods. Some merchants take possession of merchandise and others do not. Some agents take possession of the goods they sell, but most do not.
The distinction between a merchant and an agent is important in the behaviour of these two types of intermediaries. After all, when title is taken to merchandise, the intermediary owns that merchandise and must be prepared to handle any risks/associated with ownership — including that of getting stuck with merchandise that, for whatever reason, turns out to be unsaleable.
Wholesalers have much in common with retailers; both of these types of marketers act as selling agents for their suppliers and as buying agents for their customers. Both are creators of time and place utility.
Both must carefully evaluate the needs of their customers and deliver an appropriate total product of goods and services if they are to succeed in business. And both have developed ways of performing marketing functions that specially suit market conditions.
A recent Census of Wholesale Trade reported that there were 4, 67, 000 wholesale trade establishments in the United States. More than 3, 88, 000 of these were merchant wholesalers. There were more than 41,000 manufacturer’s sales branches and more than 36,000 agents and brokers.
Type # 1. Merchant Wholesalers:
Merchant wholesalers account for over 58 percent of all wholesale transactions. Merchant wholesalers are independently owned concerns that take title to the goods they distribute. They represent about 80 percent of all wholesaling concerns in the United States.
Many of these operations are fairly, small, and most of the small wholesalers restrict their business to a limited geographical area. Many merchant wholesalers cover only single cities or areas stretching only 100 or 200 miles from the main office. This allows them to replace retailers’ inventory quickly. It also reduces or eliminates the need for overnight trips by trucks or sales personnel and so holds down expenses.
Merchant wholesalers may be classified in terms of the numbers and types of services they provide to their customers. In this regard, they are perfect examples of how marketing firms adjust their total product offerings of goods and services to reflect the demands of particular situations and market segments.
(i) Full-Service Merchant Wholesalers:
As their name suggests, full-service merchant wholesalers provide their customers with a complete array of services in addition to the merchandise they offer. Such services include delivery, credit, marketing information and advice, and possibly even such managerial assistance as accounting aid or other non-marketing aids. Full-service wholesalers are also called full function wholesalers.
Within this category, three subsets of wholesalers are identifiable by lines of goods offered:
(a) Like retailers, these intermediaries may be general merchandise wholesalers, which sell a large number of different product types;
(b) General-line wholesalers, which limit their offerings to a full array of products within one product line; and
(c) Specialty wholesaler, which reduce their lines still further. A coffee and tea wholesaler or a spice wholesaler exemplifies this last class.
Wholesalers determine how wide or narrow a line to carry by carefully considering the customers they serve and the industry in which they operate. When the target customers are operators of general stores, the decision to be a general merchandise wholesaler is logical.
In some industries, however, traditional marketing practices may require some degree of specialisation. Occasionally, the specialisation is required by law, as in the case of beer wholesalers, which in many states are not permitted to deal in any other alcoholic beverage.
(ii) Limited-Service Wholesalers:
Regardless of the product line carried, full- service wholesalers provide an essentially complete line of extra services. However, some customers may not want, or may not want to pay for, some of those services. Some buyers may prefer to sacrifice services to get lower prices. Because this is entirely likely, a group of limited-service whole-salers, or limited function wholesalers, has developed.
(a) Cash-and-Carry Wholesalers:
Buyers not willing to pay for and not needing certain wholesaler services, such as – delivery and credit, may choose to patronise cash-and-carry wholesalers. Such intermediaries eliminate the delivery and credit functions associated with a full-service wholesaler and permit buyers to come to the warehouse or other point of distribution to pick up their merchandise and to pay cash. Resultant savings are passed on to buyers, who are, after all, performing several functions normally associated with wholesalers.
(b) Truck Wholesalers:
Truck wholesalers, also called truck jobbers, typically sell a limited fine of items to comparatively small buyers. Most of these merchant wholesalers sell perishable items. Their mode of operation, selling from a truckful of merchandise, can be justified by the increased freshness immediate delivery offers.
Some truck wholesalers sell items that are not particularly perishable but that face keen competition. They might, for example, sell potato chips and other snack items to tavern owners. Although truck jobbing is an expensive means of distributing relatively small amounts of merchandise, it is an aggressive form of sales and provides instant delivery to buyers.
(c) Mail-Order Wholesalers:
Mail-order wholesalers operate in much the same way as mall-order retailers. They use catalogues or take phone orders and then forward merchandise to buyers via mail. Traditionally, these wholesalers have been most important in reaching remote rural locations where delivery services other than the U.S. mail chose not to go.
As delivery services have become better over the years, the importance of mail-order wholesaling has declined, but it still is appropriate for servicing small-order customers.
(d) Drop Shippers:
Drop shippers are merchant wholesalers that take title to goods but do not take possession of the goods or handle them in any way. Drop shippers accept a buyer’s order and pass it on to a producer or supplier of the desired commodity, which then ships the product directly to the buyer.
The big advantage of this system is that the product escapes double handling — that is, it need not be loaded and unloaded several times. It goes directly to where it is needed, which also lowers transportation costs. These advantages are especially important when the product in question is bulky, unwieldy, and comparatively inexpensive.
Thus, drop shipping is most commonly encountered for products such as coal, cement, building blocks, and logs. Because the drop shipper does not physically handle any products, no investment in warehousing facilities or equipment is required. In fact, so little equipment of any sort is required that these wholesalers can often get by with little more than a small office, a desk, and a telephone. For this reason, they are also called desk jobbers.
(e) Rack Jobbers:
Rack jobbers are merchant wholesalers that came to prominence in the 1930s when supermarket operators began to practice scrambled merchandising and started selling cosmetics and other items they had not previously carried. To do this easily, they contracted with wholesalers willing to come to the store, set up a display rack, stock and replenish it, and give the supermarket operator a percentage of the sales.
Now rack jobbers sell many different product lines. Small items of clothing such as – work gloves, paperback books, magazines, toys, cosmetics, and panty hose are among the items most commonly handled in this way. The attraction of this system to the store operator is the chance to stock and sell certain items at little risk.
The great attraction to the rack jobber is the chance to place-merchandise in a high-traffic supermarket location. Like most relationships among channel of distribution members, theirs is a mutually beneficial one.
Type # 2. Agents:
Agents, the second general category of wholesalers, may take possession of goods they deal in but do not take title to them. Agents, as a rule, do not carry an inventory or, extend credit but they may provide physical facilities for conducting business. They may help to arrange for delivery or credit as part of their services, which can be generally described as bringing buyer and seller together.
Agents typically receive commissions based on the selling prices of the products they help to sell. The commission percentage varies tremendously depending on the industry. They are expected to be familiar with those products and with who wants to sell and who wants to buy them. In short, they are expected to have an expert knowledge of the market in which they operate.
Type # 3. Brokers:
Brokers are agent intermediaries that receive a commission for putting sellers in touch with buyers and assisting with contractual negotiations. While brokers generally portray themselves as – “neutral” in their selling process, their commission is based on the selling price of the product involved; and if the product is not sold, they get no commission whatsoever.
For these reasons, brokers may be seen as working more for the seller than for the buyer in any transaction. Effective brokers are experts in the market for the products in which they deal. In effect, they sell their expertise. They have relatively low expenses. Their commissions are also small, likely to be 6 percent or less of the selling price.
Use of brokers holds particular appeal for sellers because brokers work strictly on commission and do not enter into long-term relationships with the companies that use them. A broker can be used only when needed and does not tie sellers to continuous expenses the way a full-time sales force does.
Brokers are found in many fields. Such commodities as coffee, tea, crude petroleum, and scrap metal are frequently brokered, as are the financial instruments handled by the familiar stock broker. Many other things are sold in this way, as well. Among them are time on commercial radio stations and used industrial equipment.
Because they are commonly used on a sporadic basis, brokers as a group do not constitute a major selling force in the day-to-day marketing activities of most organisations. A notable exception is the food broker, which represents a number of manufacturers of food products on a constant basis and actively attempts to sell their products to wholesalers or supermarkets.
However, such an operation really violates the standard description of a broker. In many ways, food brokers better fit other categories of agents. By tradition as much as anything else, however, they continue to be referred to as brokers.
Type # 4. Commission Merchants:
The commission merchant is an agent intermediary similar to a broker. Unlike brokers, however, commission merchants are usually given certain powers by the sellers that use them. They might be empowered, for example, to attempt to bid up the selling price or to accept a selling price as long as it is above a previously agreed-on floor.
Commission merchants thus perform a pricing function and more clearly work in league with the seller than do most brokers. They are most commonly found representing producers of agricultural products. Commission merchants, despite the name, do not take title to the goods they sell.
However, they often take possession of those goods for inspection by potential buyers. Once a sales agreement has been reached, the commission merchant deducts a commission from the selling price and returns the balance to the producer.
Type # 5. Auction Companies:
Auction companies are agent intermediaries that perform valuable services in the buying and selling of livestock, tobacco, and other commodities, as well as artwork and used mechanical equipment. In a sense, these companies take possession of the goods they deal in, because, frequently some special place is provided in which the auction can take place.
The products sold through auction might have been sold in some other manner, but auction companies offer a certain convenience in that they bring buyers together in one spot and expedite a bidding process that might otherwise take a long time. Some industries, such as – the tobacco industry, have traditionally used auction companies and simply continue to do so.
The operation of the auction system provides some less-than-obvious advantages – (i) products can generally be examined by potential buyers; (ii) sellers and buyers may, if they choose, remain anonymous; (iii) buyers may enjoy the thrills involved with the auction approach to selling and savour their victory over other bidders for years to come. This last factor may not be important to a tobacco buyer, but it is to a patron of art auctions.
The auction company receives a commission based on the final, highest bid offered for an item or product, provided that this bid is above a minimum agreed- on figure.
Type # 6. Manufacturers’ Agents and Selling Agents Manufacturers’ Agents:
Also called manufacturers’ representatives are independent intermediaries that specialise in selling and are available to producers that do not want to perform sales activities themselves. These agents operate in geographically limited areas, such as – a few states or a portion of a state, representing two or more noncompeting producers and spreading selling costs over all of them.
Suppose a maker of photocopy equipment wants to employ a sales force only in major markets, not in smaller cities or rural areas. It might decide to hire a series of manufacturers’ agents to cover areas with low market potential and to let the company’s own sales force take the more important markets.
The existence of markets with low market potential is not the only good reason to use manufacturers’ agents. Their familiarity with local markets is often an advantage. Another reason is that the producer may lack the interest or expertise to perform sales and marketing functions. Still another is finances – A company that has relatively few financial resources is more likely to use an agent because the agent need not be paid until a sale is made.
Selling agents are also paid a commission and are expected to be familiar with the products they handle and the markets they serve. However, they differ from manufacturers’ agents in one major respect. They sell the products manufactured by the producers they represent not in a single geographical area but in all the areas in which the products are sold.
Because in effect they function as sales and marketing departments, they are often given more responsibility than manufacturers’ agents. They may be permitted to handle the advertising and pricing of the products sold and determine any conditions of sale to be- negotiated. When a selling agent is utilised, the manufacturer obtains what might be called an external marketing department.