Wholesale Trade

Reviewed by Annapoorna | Updated on Aug 27, 2020

What is Meant by Wholesale Trade?

Wholesale trade is a mode of exchange in which products are purchased and processed in large quantities and sold to resellers, specialist users, or companies, but not to end customers, in batches of a specified quantity.

Wholesaling applies to all transactions in which goods are purchased for resale, manufacture of other products, or general business.

Wholesaling is an essential aspect of a company's marketing distribution strategy because it includes industrial customer-related preparation that needs to sell its goods to distributors, retailers, government agencies, colleges, hospitals, and other wholesalers.

Since wholesalers are in the business of buying large quantities and distributing smaller amounts to consumers, they can more effectively carry out physical distribution operations, including material handling, warehousing, and inventory management. These also provide, if needed, fast and regular pick-up and delivery, allowing both the product producers and wholesale buyers to escape the risks associated with holding extensive inventories.

Types of Wholesale Trade

There are different types of wholesalers, such as merchant wholesalers, traders, distributors, contract dealers, distribution branches and offices for manufacturers.

How do Wholesalers Help in the Supply Chain?

Wholesalers help retailers by assisting them in pricing and marketing in their overall integrated market planning. Since they enter into distribution contracts with a manufacturer, and because they can sell different quantities of the commodity to distributors, wholesalers serve as an extension of the workforce of the company.

Wholesalers usually function from a warehouse or office location and sell goods to other businesses. The wholesalers usually don't sell their product to the general public. They conduct business with vendors or retailers who form part of the supply and sales chain as a whole. Although wholesale trading is separate from consumer sales transactions, wholesalers are part of the consumer trade feeding system.

Developments in Wholesale Trade

In the early twenty-first century, gross profits for wholesalers declined. A decline in new store construction and competition declined due to the economic recession, wholesaling growth. Chains, which usually prefer purchasing directly from suppliers, have taken a more significant part of the market in areas, such as goods for home improvement. While severe economic conditions can adversely affect wholesalers, the same can be good for a booming economy.