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Managing a Business
Managing a Business
Distribution:
Wholesalers and Retailers
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Wholesalers and retailers are the two important types of middlemen forming a part of the distribution channels. They act as an intermediary link between the manufacturers and the consumers of goods. They specialise in providing a wide range of services for both the producers as well as the consumers. They reduce the amount of efforts required by the manufacturer in distributing his product to the final consumers and provide a vast market coverage to his products. They greatly increase the efficiency of exchange and lead to reduction in total cost of distribution of products. They provide ready delivery of goods to the consumers at places convenient and accessible to them. They also provide aftersale services and handle consumer grievances. They also act as a communication channel by providing information about the products to the consumers,on one hand, and the consumer feedback to the producers on the other hand.

Wholesalers

Wholesaler may be defined as the middlemen who operates between the producers (from whom they purchase goods) and the retailers (to whom they sell goods). Wholesaler refers to any individual or business firm selling goods in relatively large quantities to buyers(retailers) other than the ultimate consumers. Thus the manufacturers who sell their products directly to retailers may also be regarded as wholesalers. The specialised knowledge and skill of wholesalers increases the efficiency of the distribution network. The wholesalers provide important services and solve the problems of both the manufacturers and the retailers.

Services provided by the wholesalers to the manufacturers:-

  • They place orders for the product in advance on the basis of expectations regarding the demand for the product. This enables the manufacturer to plan his production and secure the economies of scale.

  • They may also provide transportation facility by carrying goods from producers to godowns and then to retailers.

  • They perform advertising and sales promotion activities and also employ expert sales representatives for the purpose.

  • They provide financial accommodation to manufacturers in the form of cash payments for goods purchased from them as well as provide credit to them.

  • They keep the manufacturers updated on the changes in customers' habits, tastes, preferences and fashion.

  • They also play an important role in fixation of the final prices of the goods.

Services provided by the wholesalers to the retailers:-

  • They act as the retailers 'buying agent' and saves them from the trouble of searching out and assembling goods from several manufacturers.

  • They inform the retailers about the new products, its uses and changes in their prices. They also assist the retailers in advertising and selling of the products.

  • They provide financial assistance to retailers, sell goods on credit to retailers and thus help them to operate with small working capital.

  • A wholesaler being the ware-house keeper of the market, they protect the retailers from the risk of loss arising from holding large stocks of the product.

  • They may also sort out different grades of products according to quality and pack the goods into small lots for the retailers.

Retailers

Retailing refers to all the transactions which involve sale of goods or services to the ultimate consumers. A retailer is a middleman who procures goods from the wholesalers and sell it to the final consumers. They form a vital link in the channel of distribution of products because without him, neither the products would sell to distant places nor would it be possible for consumers to buy goods of their choice in shops located nearby. They have a much stronger personal relationship with the consumers and deal directly with the people of varied tastes and temperaments. They form the last link in the chain of distribution and give the final selling price to the product. The retailers provide important services and solve the problems of the manufacturers and wholesalers on one hand and the consumers on the other hand.

Services provided by the retailers to the wholesalers and manufacturers:-

  • They provide selling outlets to wholesalers and manufacturers.

  • They save the manufacturers from the inconvenience and expenses of selling the goods in small lots to a large number of consumers.

  • They communicate the needs and desires of consumers to the manufacturers.

  • They may also arrange for transportation of goods from the wholesalers' godowns to the ultimate consumers.

  • They may also perform storage function by keeping stocks of goods.

Services provided by the retailers to the consumers:-

  • They anticipate the needs of consumers and accordingly assemble goods of different varieties. Thus they satisfy their demands and provide them a wide choice of goods.

  • They sort out goods supplied by the wholesalers and keep them in convenient packages for the benefit of the consumers.

  • They even act as an advisor and guide to the consumers by bringing new products to their notice and educating them about its diverse uses.

  • They keep the consumers informed about the changing trends in the market about the different varieties of products.

  • They also provide other services to the consumers such as free home delivery, aftersale services,credit facility,etc.

Retailers are of different types depending upon their scale of operation and location. They are broadly classified into two categories:-

  • Small-scale retailers:- are those retailers whose scale of operation is restricted to a small segment of the market and to a narrow range of products. They generally hold small stocks of the products of regular use. Such retailers are very large in number but account for a small portion of the total retail business. But,small-scale retailing is a very common, simple and flexible way of distributing the products to the final consumers. It incurs low operating costs and is usually owned and operated by a proprietor. The most important feature is that the small-scale retailers have a direct and personal contact with their customers. This form of retailing faces the problems of small capital,lack of professionalism and low purchasing power.

    The two prevalent forms of small scale retailing in India are :-

    • Itinerants or Mobile traders:- are those retailers who carry on their business by moving from place to place for selling the products and have no fixed business premises. They change their place of business according to their convenience and sales prospects. They serve either at the consumer's doorsteps or on busy places frequently visited by the customers. They do not have any particular line of business and carry very little stock of those goods. They save time and efforts of customers in buying articles of ordinary use. The hawkers and pedlars;cheap jacks; market traders and street sellers fall under this category.

    • Fixed Shop Retailers:- are those retailers which have fixed business premises and operate through unit stores or small shops located in residential areas or markets. They mainly include:- (i) street stalls:- are the small shops on the roadside,street-crossing,bus stops, etc. They sell a limited variety of products of regular use like stationery, grocery, etc; (ii) dealers of second hand goods:- are engaged in purchase and sale of used goods like books,clothes, etc; (iii) general stores or variety stores:- are the shops which deal in all types of general consumer goods of regular use like bread, butter, paper and pencils,etc.They are set up in residential areas or busy markets. They provide services like goods on credit and home delivery to their customers; (iv) speciality shops:- are the shops which deal in only one or two special types of goods. They are generally located in shopping centres. For example, chemist shops, grocery shops, readymade garments shop, sweets shop, etc.


  • Large-scale Retailers :- are those retailers whose scale of operation extends to a large segment of the market and to a wide range of products. They have a fixed line of business in which they have invested huge capital. Such retailers are not very large in number. This form of retailing involves high operating costs and lacks personal contact with the customers. But it involves more of professionalism in selling the products through the use of various promotional techniques like advertising, publicity, sales promotion,etc. The various forms of large scale retailers are:-

    • Departmental stores:- are large scale retail establishments comprising of a number of departments in the same building. All its departments are centrally controlled but each forms a complete sales unit in itself and specialises in a particular line of product. They offer a wide choice of products to the customers under one roof. They also provide many amenities for customer's convenience such as restaurants, car parking, recreation rooms, post and telegraph offices and so on. Such stores are generally located in central places of big cities so that they can be easily accessible to the customers.

    • Supermarkets:- are large scale retail shops operating at lower costs. They sell a wide variety of consumer goods of regular use such as food items, groceries,etc at one place. They sell goods at lower prices than the departmental stores. Customers select the goods themselves without salesman's assistance. It is also called self-service stores. But,they do not provide additional facilities to their customers.

    • Multiple Shops or chain stores:- are a group of retail stores of the same type under one common ownership and centralised management but are located at various locations. All of them deal in similar range of products and sell the same standardised products at the same terms and conditions. The goods dealt are generally meant for everyday use and are readily acceptable to all kinds of customers. They offer goods at lower prices as they enjoy economies of bulk buying.

    • Mail order houses:- are those retail trading establishments which receive their orders by mail and deliver the goods by parcel or post express. The post office is their main channel of distribution. Orders from customers may be secured by advertising in newspapers or journals or through telephone contacts. But this type of retailing is non-personal and without any face-to-face contact between buyers and sellers. However, it helps the consumers to get their requirements at their own place and thus saves their time and expenses.

    • Consumer cooperative stores:- are the cooperative stores which are owned and operated by the consumers themselves. They are incorporated as an association under the Cooperative societies Act. The membership of such stores is voluntary and capital is subscribed by the members themselves by purchasing shares of a small denomination. They purchase their requirements of goods in bulk from manufacturers and wholesalers and sell them to its members at lower prices. The aim of such cooperative stores is to render service to its members and not to maximise profits.

    • Hire purchase traders:- is a form of retail trade in which credit is granted to the customers on the security of a lien on the goods. They supply consumer durable goods to the customers who agree to pay the price by installment (also called hire charges)at regular intervals. In this form of retailing, consumers get the advantage of deferred payment as they can purchase goods on credit and make easy payments in installments while using the products at the same time. The buyer acquires the ownership of goods only after the total price has been paid. If there is default in paying installments,the seller has right to recover the goods or sue buyer.

    • Super Bazars:- are large retail stores organised by cooperative societies. They sell a variety of products under a single roof. They procure goods at wholesale rates from the manufacturers and wholesalers and sell them to the consumers at reasonable prices. These may operate either as self-service stores or as separate counters served by a salesman.

    • Automatic vending machines:- are a new and complementary form of retailing operated by inserting coins or tokens into the machine by the buyers. In return, buyers receive a specified quantity of the product from the machine. These are used to sell prepacked and low cost products of mass consumptions like beverages,tickets,etc. This form of retailing can sell goods at places and at times where other types of retailing are not convenient or economical. For example, mother dairy sells milk through such vending machines.

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