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WHOLESALINGWHOLESALING
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What is Wholesaling?What is Wholesaling?Wholesaling refers to business establishments that do
not sell products to a significant degree to ultimate
household consumers. They sell physical inputs andproducts primarily to other businesses: retailers,merchants, contractors, industrial users, institutionalusers and commercial users.
In a channel stretching from the manufacturerto the final household user, wholesaling is anintermediate step.
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WholesalerWholesaler--DistributorsDistributorsWholesaler-Distributors are the largest and most
significant participants in B2B marketing channel flows.
These are independently owned and operatedfirms that buy and sell products to which they havetaken ownership. They generally operate one or more
warehouses where they receive and inventory goodsfor later reshipping.
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The Wholesaler-Distributors Role in Supply Chain
Supply chains are often complex, involving manyparticipants to facilitate the movement of goods.Thus, the channel functions and activities ofwholesaler-distributors are often performed by other
supply chain participants.The following are some examples:
Vertical Integration This can be either forwardintegration, i.e., manufacturers sales branches, thatare wholesaling operations owned and operated
by them; or backward integration, i.e., endcustomers, particularly large multi-establishmentretail firms, which often perform the wholesalingfunctions.
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Agents, brokers and commission agents often buyor sell products for commission or fees, but do not
take ownership to the products they represent.These channels are particularly important in the
service industry.
Transportation and warehousing provides somelogistics functions too. Third-party logistics providers
have also increased steadily in the last decade.These too do not take title for the products that theyhandle. Such providers are proving to be a majorchallenge for the wholesaler-distributors.
Despite such major shifts from wholesaler-distributors inthe supply chain, their importance is still pretty striking.
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Essential Tasks of theEssential Tasks of the
Wholesale SectorWholesale SectorWholesalers perform eight generic channel flows,discussed as under:
Take physical possession of the goods
Take ownership
Promote product to prospective customers
Negotiate transactions
Finance operations
Risk capital
Process orders
Handle payments
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Various WholesalingVarious Wholesaling
Related CostsRelated Costs Locating, assembling and sorting varied products
from manufacturers in various locations.
Assume credit risk to any and all actors in thechannel, including manufacturers and retailers.
Absorb opportunism by retailers, who systematicallymake false claims after taking delivery of themerchandise arrived damaged.
Build and maintain expensive storage facilities.
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Transportation of the goods.
Absorb the risk of wrong pricing.
Absorb risk of losing the products.
Absorb costs in meeting regulations and in
observing informal arrangements of all kinds.
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How Wholesalers can AddHow Wholesalers can AddV
alueV
alueIn todays technologically advanced times, the
competitive advantage wholesalers possessed has
been eroded.The following are some acts that add value to
wholesalers operations:
Collaborative Filtering Using information about thepreference and choices of the customer andsuggesting only the best solution, thereforedecreasing information load.
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Wholesalers indulge in manufacturing activities by
transforming goods that they sell. They assemble toorder, customize, create kits with instructions, addproprietary complements, and even design new
products from components.
Wholesalers have an advantage in adding value asthey can unite their knowledge of the supplier base
and the customer base with their knowledge of thecustomer needs.
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Master Distributors
Master Distributors
End Consumers
Wholesalers
Master Distributor
Multiple Manufacturers
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A master distributor is a distributor to only otherdistributors, and no one else. It is a type of super
wholesaler. For a given manufacturers products, this is the only
contact point for all the other wholesalers.
The master distributor acts as an invisiblewarehouse from where the distributor can buy aproduct as needed feasibly.
They consolidate offers from all the manufacturers,allowing their customers to get quality discounts,lower transportation costs from varied vendors and
avoid manufacturers minimum order requirement. They even help their customers improve their
business processes and give them economies of
scope and scale.
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The FutureThe FutureB2B E-Online Exchanges
Independent electronic exchanges operate as online
brokers within a given industry. These companiesaggregate supplier catalogs on the internet, enablingbuyers of like products to purchase items from multiplesuppliers in a single location.
Such exchanges, however, have failedmiserably. The following discussion points towards thesame.
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Entrants face difficulty unseating incumbent
wholesalers, who benefit from established and wellworking routines and lean operations.
They face a challenge creating new values that arenot readily matched by the incumbents, many ofwhich have started using the Web as a tool.
Despite, exchanges should not be written off. They are
growing in sectors where the product can beseparated from other aspects of the business.
The following obstacles need to be focused on:
Classification of parameters that are difficult toestimate. For example, quality of customer service,etc.
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Discoveries by customers pertaining to
characteristics they failed to consider. For example,design know-how, emergency service, etc.
Establishing a reliable relationship is costly. Expertise,credit worthiness and general qualification to bid
must be accounted for, and this isnt an easy task.
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Thank You.Thank You.Sugandha Gupta
08/BBS/7146
Sem V