7 most important functions of the wholesaler in the distribution channel
What is wholesale and why is it important?
Basically, the wholesaler or the middleman is a merchant who purchases goods in bulk from producers and manufacturers and later resells them to different retailers. The wholesaler buys the products in bulk from warehouse depots, stashes the goods in their warehouse, breaks up the bulk, re-packages the products when necessary, and finally sells the goods in smaller quantities to retailers. There are many important functions for the wholesaler in the distribution channel.
The position of wholesalers or intermediaries in the chain of distribution of products is significant because they perform various functions in moving goods to both the producers and the final customers that can’t be accomplished by either side other than the wholesaler.
Moreover, as Covid-19 struck the world and we are witnessing how regular brick-and-mortar industries turn to remote ways of working and collaborating, the same trend applies to the distribution channels worldwide. Nowadays, with the emergence of professional online wholesale marketplace companies, it’s easier than ever for retailers to get their merchandise conveniently and efficiently without any unnecessary hassle.
In this brief article, we’ll go through the most critical functions of the wholesaler in the distribution channel, how they help the manufacturers put their products on shelves worldwide, and consumers get what they need.
Breaking the bulk
First and foremost, the wholesaler fulfils the function of a bulk breaker to the manufacturers so that the retailers can purchase the products. By buying the products from the manufacturer and selling them in smaller units to retailers, the wholesalers are helping both sides ensure that the goods go through the proper distribution channels and end up right where they’re going to sell for the highest price.
If there are no wholesalers in the distribution ecosystem, it would be difficult for specific products to end up in retail stores because many retailers are not financially prepared to buy in bulk from manufacturers.
Financing
In the eventual absence of wholesalers, the manufacturers will certainly face financial challenges in their scope of work because they won’t be able to get back the capital invested in the production of goods that quickly. Wholesalers facilitate manufacturing businesses by paying in bulk, motivating producers to invest more in production and sophisticated technologies.
Distribution of information
Wholesalers have closer connections and relations with retailers than manufacturers, so they know what end customers want and are ready to pay top dollar. In other words, the wholesaler’s function as a distributor of information between both sides is vital so that the products meet rigorous customer expectations.
Warehousing and price stability
Another vital function of wholesalers is that they serve as a timely warehouse for the manufacturer’s goods. Typically, the wholesaler is the one that provides warehousing facilities to get rid of the stock, as goods are stored in these warehouses up until retailers purchase them. Also, wholesalers help prevent price fluctuations by stocking the goods in their warehouses until they are demanded.
Transportation
The existence of wholesalers has made the job of the manufacturers a lot easier because they no longer have to go through the stressful managing of goods distribution directly to customers from different parts of the world. Wholesalers are the ones that provide transport of the goods, and they send their vehicles or other transportation methods to collect the goods from manufacturing sites and warehouses.
Risk bearing
After purchasing the products from the manufacturer, the wholesaler takes the entire risk on their shoulders for anything that might happen to the products afterwards, not minding whether they’ll make profits from the future transactions or not. The wholesaler is the one that takes charge of the goods, accepting full responsibility for any losses suffered in the course of distribution.
Branding and packaging
Where it requires that the goods should be branded or packaged before they are sold to retailers and final customers, the wholesaler must do the job in their warehouse before selling it further down the line.
Final words
As you can tell, the wholesaler plays a significant role in every distribution channel across nearly all industries there are. Whether we’re speaking about food, apparel, electronics, machinery, or any other industrial sector, wholesalers are the ones that are responsible for purchasing the produced goods from the manufacturers and placing them in the right hands at the right time so that the customers will spend top dollar to buy them and fulfil their everyday needs.
