Term

What is Wholesale?

3 MIN READ

Wholesale

Wholesale, or distributing,  relates to the activity when companies purchase certain products directly from warehouses or distributors in bulk to then resell it partially to different buyers (individuals or retail businesses) adding their own margins. Wholesalers can also buy products for a reduced price depending on the agreement with the manufacturer (also called wholesale pricing).

Types of wholesale

It is hard to distinguish specific types of wholesalers because companies can perform the role of manufactures and sell their own products or don’t purchase any products at all and still sell it. In general, there are three types of wholesale businesses, which are:

  1. Merchant wholesalers, which is also the most common type. Merchant wholesalers have connections with manufacturers and buy goods from them in larger quantities for a smaller price so that they can later sell these products to different retailers (brick and mortar shops, small businesses) adding their difference in price. Merchant wholesalers also cooperate with businesses from different industries and typically have insights and predictions on when it is more profitable to start selling goods and to who. 
  2. Brokers who don’t own physical products but can become an intermediary between manufacturers and wholesale businesses. Generally, brokers negotiate for the best price and take a commission from the deal as a form of payment 
  3. Sales and distribution, a company that manufactures a certain type of product and has a sales department to represent them to wholesale companies. What is profitable for both manufactures and wholesalers, in this case, is that they can come to a deal, which is tailored to individual needs.

Benefits of wholesale

A network of suppliers

Most suppliers are looking forward to cooperating with wholesale businesses. Depending on the reputation of your business, as well as the number of products that you are willing to purchase, suppliers may offer you a competitive deal (reduced price, shipment of exclusive goods) and become your loyal partners.

Easy expansion

If you succeed in the wholesale business with sales of a certain product then you can easily find new connections in order to start selling various goods. For example, H. T. Hackney Company, an American wholesale grocery distribution firm, also has subsidiaries in furniture manufacturing and distribution.

Brand awareness

The longer you’re on the market the more recognizable your company becomes. And if you’re considered an expert in your field different companies will be willing to cooperate with you.

 

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