12.2 Wholesaling
- What is wholesaling, and what are the types of wholesalers?
Wholesalers are channel members that buy finished products from manufacturers and sell them to retailers. Retailers in turn sell the products to consumers.
Wholesalers also sell products to institutions, such as government entities, educational institutions, and hospitals, for use in performing their own missions. A manufacturer, for instance, might buy computer paper from Veritiv, a major paper and packaging wholesaler. A hospital might buy its cleaning supplies from wholesalers such as Imperial Dade or through brands like Lagasse (now part of Staples' distribution network).
Sometimes wholesalers sell products to manufacturers for use in the manufacturing process. A contractor who builds outdoor sheds might buy lumber from one wholesaler and electrical components from another. Some wholesalers even sell to other wholesalers, creating yet another stage in the distribution channel.
Types of Wholesaler Intermediaries
The two main types of wholesalers are merchant wholesalers and agents and brokers. Merchant wholesalers take title to the product (ownership rights); agents and brokers simply facilitate the sale of a product from producer to end user.
Merchant Wholesalers
Merchant wholesalers make up the majority of all wholesaling establishments and more than 60 percent of all wholesale sales. A merchant wholesaler is an institution that buys goods from manufacturers and resells them to businesses, government agencies, other wholesalers, or retailers. All merchant wholesalers take title to the goods they sell.
Agents and Brokers
As mentioned earlier, agents represent manufacturers and wholesalers. Manufacturers’ representatives (also called manufacturers’ agents) represent noncompeting manufacturers. These salespeople function as independent agents rather than as salaried employees of manufacturers. They do not take title to or possession of merchandise. They get commissions if they make sales—and nothing if they don’t. They are found in a variety of industries, including aerospace and defense, consumer electronics, heating and electrical, and safety equipment.
Brokers bring buyers and sellers together. Like agents, brokers do not take title to merchandise, they receive commissions on sales, and they have little say over company sales policies. Their job is to connect buyers and sellers who might not otherwise know each other. These markets include real estate, agriculture, insurance, and commodities.
Concept Check
- Define wholesaling, and describe what wholesalers do.
- Describe merchant wholesalers.
- Explain the difference between agents and brokers.