Components, justification and classification.
Definition:
All the activities of sale, representation and promotion of products and services to be "resold" make up the wholesale trade. Includes any sale of any nature excluding the sale to final consumers.
Wholesale sales are justified because:
- Small businesses do not always have sufficient budgets to reach end consumers. The profitability of many distribution operations outweighs the retail sale of products. (unprofitable small quantities). Production does not justify sales efforts focused on end consumers. Businesses do not have consumer information and cannot access it directly.
Given these conditions, many companies that produce goods and services decide to take their products to intermediaries or wholesalers who sell to final consumers.
The products that we find in supermarkets, stores or warehouses, generally follow a scheme of wholesale sale. A company that sells toothpaste does not use its sales force to reach homes directly, it simply uses its means of distribution to locate its products on warehouse shelves in all of its markets.
Wholesale intermediaries are classified into three categories:
- Merchant wholesalers: It is the independently owned company that is dedicated exclusively to wholesaling and that receives ownership of the products that are offered to it. Wholesale intermediary agents: It is the independent company that engages in wholesale sales without receiving ownership of the products it distributes.
Among this category are commission brokers and merchants, who are looking for an incentive to place products in different markets.
Manufacturers' sales facilities: This is the facility that is dedicated to the wholesale sale of products and is owned by a manufacturer that operates the facility.
Wholesalers: Wholesale marketing generally exceeds retail trade due to the marketing facilities that this implies, despite the fact that generally when retailing the price is higher.
Other types of wholesale intermediaries are:
Auction companies: This is the case of companies that simply help buyers and sellers to complete commercial operations. Generally applies to luxury goods.
Sales agents: It is the independent intermediary that takes the place of the marketing department of a company to directly sell the products of a company.
Importing-exporting agents: These are companies specialized in international markets.
Some trends and problems of wholesalers:
Use of direct marketing: Today many companies seek greater efficiency in their sales using direct distribution channels, avoiding sales through wholesalers. The clearest case of this trend today is Dell computer, a company that bases its business model on direct and personalized delivery of computers avoiding using intermediaries in the sale and offering low prices.
Vertical Marketing Systems: Many companies today coordinate their marketing strategies with other companies by displacing wholesalers.
Development of customization in the wholesale sector: A trend today is to make the most of product customization in wholesale business.
The wholesaler uses its distribution networks to easily reach end consumers.
The distribution networks of wholesale companies generate competitive advantages when there is great market knowledge and great brand acceptance. Placing the products in the indicated markets will be an advantage for companies that can buy to "resell".
Companies must learn to establish alliances with companies that engage in wholesale marketing to make their products known and generate effective sales and cash flows. Selling to others to resell implies a marketing decision that, if applied correctly, can reduce own distribution problems and expand markets.
