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SDM- Ch 11 1

Channel Institutions - Wholesaling


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SDM- Ch 11 2

Learning Objectives

Understand functions of a wholesaler

Understand various classes of

wholesalers Major wholesaling decisions

Benefits and limitations of wholesalers

Understand about adistributorinmore detail

Trends in wholesaling practices


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SDM- Ch 11 4

Characteristics of Wholesalers

Operate on large volumes but with chosengroup of products Food, grocery, pharma or automobile spares etc

The company itself, contracted parties or freelancers, can operate as wholesalers

Mostly B2B business trade and institutions

Wholesaler could also be a retailer in ruralmarkets W/s sells to other retailers and alsoto consumers


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SDM- Ch 11 5

Characteristics of Wholesalers

Sell physical inputs or productstangible

goods ( Ws in some service industries)

Optimise results, maximise service(effectiveness) and minimise operating costs

(efficiency)

Buy goods for resale, keep inventory, take

risks of price changes, negotiate terms,

procure orders, deliver and extend credit.


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SDM- Ch 11 6

Definition

Wholesaling is concerned with the

activities of those persons or

establishments that sell to retailers and

other merchants and / or industrial,

institutional and commercial users but

do not sell in large amounts to

consumers US Bureau of Census


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SDM- Ch 11 7

Delivering Value

Keep goods accessible to customers

instantly

At times, get together to bargain forbetter terms

Pass on benefits or incentives to their

customers

Have a wide trading area


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SDM- Ch 11 8

Difference with Retailers

Not too worried about location, ambience orpromotions prefer to be in the main market

Deal with other businessmen and notconsumers

Deal with a specific group of products only

Much largertrading area

Much larger transactions with suppliers andcustomers

Believe in low margins but high volumes.


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SDM- Ch 11 9

Functions of Wholesalers

Varies in degree between free-lance,

company distributors and stockists / agents

Sales and promotion of chosen companyproducts

Buying the assortment of goods

Breaking bulk to suit customer requirements Storage and protection of goods till sold


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SDM- Ch 11 10

Functions of Wholesalers

Grading and packing of commodities

Transportation of goods to customers

Financing the buying of customers Bearing the risks associated with the

business

Collecting and disseminating marketinformation to both suppliers andcustomers


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SDM- Ch 11 11

Types of Wholesalers

Full service: stocking, selling, offering credit,delivery and business assistance (companydistributors, wholesale merchants)

Limited service: range of service is limited(examples include Metro C&C, mail order)

Merchant w/s: independent businesses

Brokers and agents: bring buyer and sellertogether do not take possession of goods

Others: agri business, auction companies etc


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SDM- Ch 11 12

Limitations of Wholesalers

Some of them do not give completeinformation to suppliers for selfish reasons

Cannot be relied on to do equitabledistribution

At times, do not want company andcustomers to meet

Tend to hoard goods and influence pricing

Consumers have no say in pricing or qualityin a w/s dominated system


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SDM- Ch 11 13

Major Wholesaling Decisions

Which markets to operate in

Manpowerto employ

What products to sell Pricing decisions / Promotional support

Credit and collections

Image and customerperception Warehouse location and design

Inventory Control


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SDM- Ch 11 14

Favourable Factors

Companies have limitations in market / outletcoverage. Wholesalers are required to fill thegaps

Hundreds of small companies who cannotafford to set up distribution networks needto depend on wholesalers

In food grains, fruits and vegetables hardly

any organised distribution network.Wholesalers help move goods from farm gateto consumers


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SDM- Ch 11 15

Favourable Factors

Big companies also need wholesalers toget big volumes

W/s extend credit to customers.

Companies cannot match this

Retailers have to visit w/s markets to

buy food grains, cereals and pulses

buy a lot more.


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SDM- Ch 11 16

Unfavourable Factors

Companies coverage focus on retailersand institutions through their distributors

Using modern retail formats aswholesalers

More outlets like Metro C&C being

encouraged Enforcing strict price control so that w/sdo not sell below company prices.


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SDM- Ch 11 17

Distributor

Is a wholesalernominated by a company to

exclusively re-distribute the company

products to its customers in a designatedterritory. He does not deal in competitors

products. Does not sell from his premises.

Extends credit selectively.

A redistribution stockist for HLL A distributor for Philips lighting division

A distributor for L&T engineering division


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SDM- Ch 11 18

Dealer

Role similar to a distributor but May not have a clearly defined territory and may

sell both in the market and from his shop

May deal with competitive products also

Extends credit selectively.

Dealers in industrial products may have betterdefined roles.

Examples: Dealer for an edible oil company

A dealer for garment brands


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SDM- Ch 11 20

Managing Distributors

The principles are similaracrossindustry verticals. FMCG is the most

complex.

Has the capacity to maximise sales andmarket shares.

Has to ensure buying goods from the

company and re-distribution to the trade


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SDM- Ch 11 21

Managing Distributors

Distributor responsibilities include: Buying adequate quantities by Stock Keeping Unit

(SKU) for redistribution

Ensuring full market coverage of all customers in

the territory assigned to him Help finance the operations pays for the goodsupfront but extends credit to his customers

Maintaining inventory of company productsadequate at all times to service the market

Assist company in its promotional efforts


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SDM- Ch 11 22

Need for Distributors Underthree circumstances:

Forentering a new town

Foradditional coverage in the same town

Forreplacing an existing distributor For entering a new town, assess the potential

for business to decide: If the town can sustain a full fledged distributor

The number of distributors required Starts with a town profile of potential, number

of customers to be serviced and thecompetition.


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SDM- Ch 11 24

Expectations from a

Distributor To be stated at the start of the relationship

Helps get the right kind of distributor also

Achieving sales targets volume, value and packs Financial commitment on inventory and credit

Investment in infrastructure space, vehicles

Manpower front line and back office

Distribution effort market and outlet coverage asper a beat plan with productive calls

Developing new markets and new accounts

Managing key accounts and institutional business


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SDM- Ch 11 26

Expectations from a

Distributor Organising and participation in promotional

events

Assist company in making a success oflaunching new products and packs

Handling consumer quality complaints

Handling statutory requirements on behalf of

the company Payments and remittances promptly to the

company


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SDM- Ch 1127

Key Learnings

Wholesalers are required to reach hundredsof customers and retailers

Wholesaler business is usually B2B

Wholesalers can be free-lance or appointedby companies like distributors

Company distributors are bound by strict

operating norms Future of wholesalers in India still seems

favourable

6.wholesaling h

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