CBSE Accountancy and Business Studies, Question, Notes and Study Materials By Sam Thomas

Wholesales maintain a team of well trained sales people. They survey the market, locate marketing opportunities, find out suitable retailers, support the retailers. They also conduct direct promotion to customers and route the business through retailers. Every sale made by a retailer is ultimately gives economic benefit to the manufacturer.

ii. Economics of scale

Wholesalers send bulk orders to the manufacturer. The producer need not maintain large marketing network or distribution facilities. But he derives benefit from the specialization of wholesaler. The manufacturer gets the benefit of large scale production by way of reduced price for his raw materials, economy in transportation and preferential treatment in several other services. They can employ better technology in production and keep the cost of production minimum.

iii. Market information

Wholesaler is the producer’s man in the market. Wholesalers has his sales people the watching the market all the time. When there is a change in trend or demand they sense it immediately and report to the office. Information gathers from his wide network of retailers and direct sources will be transferred to the producer. This way the producer can make suitable changes in his product range to prevent loss by shift in demand and capture emerging opportunities by supplying products according to the emerging trends.

iv. Storage

Wholesaler provides storage facility. Thus the manufacturer is free from the burden of arranging warehousing facilities at various places in a wide market. Wholesalers of each region will take care of this work. More warehousing involves various risks such as theft, fire and damage due to weather conditions. Manufacturer is free from all these troubles.

v. Financial support

Wholesalers place bulk orders with the manufacturers. They usually make advance payment for goods. In effect retailer finances the manufacturer’s business. Bulk orders are useful even when there is no advance payment. A manufacturer can raise easy finance form banks if there are confirmed orders from the wholesalers.

vi. Concentration on production

In the absence of wholesalers it becomes the responsibility of manufacturer make arrangement for marketing of his products. Marketing is a specialized activity, which a manufacturer may find a distraction. When the wholesaler takes care of marketing he can do it professionally and better than an industry whose specialization is production. This make provides more capital and facilities for the manufacturing process. Manufacturer can fully utilize his capital for the production activity. This results in large scale production at lower cost.

Physical distribution

Wholesalers provide transportation facility. He collects goods from the factory and brings them to his warehouse, beings related products form other manufacturers, sends his vehicles around to distribute them to retailers. Thus the manufacturer is free from the burden of arranging transportation of goods.

Services to Retailers

i. Availability of goods

Wholesalers provide valuable service to retailers by making goods easily available to them. Retailers have small scale business. They are not able to approach different manufacturers for purchasing goods from them. Wholesalers are usually concentrate on a limited line of products and they are able to place bulk orders to the producers. Retailers on the other hand, supply a wide range of goods to consumers. They buy limited quantity of various goods from different wholesalers.

ii. Financing

Wholesalers extend liberal credit facility to retailers. Retailers need to settle their bills after selling the goods to consumers. Retailers generally provide selling space or shelf space and the wholesalers fills them up. This way retailer can do a large volume of business without having to invest in inventory.

iii. Risk taking

In the absence of wholesalers to supply goods promptly, the retailers have to bear the burden of keeping stock of variety of goods to avoid shortage or supply bottlenecks. Storage of goods involves several risks such as risk of damage, fire, theft etc. which a small retailer would find very hard to bear. While the wholesalers take care of all these problems, retailer can focus attention on sale of goods to the consumer with confidence, knowing that the goods will be replenished as soon as the shelves get empty.

iv. Management assistance

Wholesalers are experts in marketing. They have wide network and they know the trend in market. They can provide valuable managerial assistance to retailers. Wholesalers usually act as consultants in shop design, marketing strategies and administrative measures.

v. Transportation

As the wholesalers maintain the fleet of vehicles and support system, retailers need not worry about transport problems. Goods are supplied at the retailers shop as soon as the order is placed. Some wholesalers follow a fixed visiting schedule to

collect orders from the retailers.

<<previous page | index | next page>>