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SDM- Ch 11
Learning Objectives
Understand functions of a wholesaler
Understand various classes of
wholesalers
Major wholesaling decisions
Benefits and limitations of wholesalers
Understand about a distributor in more
detail
Trends in wholesaling practices
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Characteristics
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Characteristics of Wholesalers
Operate on large volumes but with chosen
group of products
Food, grocery, pharma or automobile spares etc
Characteristics of Wholesalers
Sell physical inputs or products tangible
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.
Definition
SDM- Ch 11
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
Delivering val
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Delivering Value
Keep goods accessible to customers
instantly
At times, get together to bargain for
better terms
Pass on benefits or incentives to their
customers
Have a wide trading area
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Functions
Strategic Issues in
Wholesaling
Functions of Wholesalers
Varies in degree between free-lance,
company distributors and stockists / agents
Sales and promotion of chosen company
products
Buying the assortment of goods
Breaking bulk to suit customer requirements
Storage and protection of goods till sold
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Functions of Wholesalers
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Types of Wholesalers
Full service: stocking, selling, offering credit, delivery
and business assistance (company distributors,
wholesale merchants)
Limited service: range of service is limited (examples
include Metro C&C, mail order)
Merchant w/s: independent businesses
Brokers and : bring buyer and seller together do not
take possession of goods
Agents: add value to seller in transactions with and
buyer
Others: agri business, auction companies etc
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Limitations of Wholesalers
Some of them do not give complete
information to suppliers for their own reasons
Cannot be relied on to do equitable
distribution
At times, do not want company and
customers to meet
Tend to hoard goods and influence pricing
Consumers have no say in pricing or quality
in a w/s dominated system
Major decision
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Favourable Factors
Companies have limitations in market / outlet
coverage. Wholesalers are required to fill the
gaps
Hundreds of small companies who cannot
afford to set up distribution networks need to
depend on wholesalers
In food grains, fruits and vegetables hardly
any organised distribution network.
Wholesalers help move goods from farm gate
to consumers
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Favourable Factors
Big companies also need wholesalers
to get big volumes
W/s extend credit to customers.
Companies cannot match this level
Retailers have to visit w/s markets to
buy food grains, cereals and pulses
buy a lot more.
Unfavourable
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Unfavourable Factors
Companies coverage focus on retailers
and institutions through their distributors
Using modern retail formats as
wholesalers
More outlets like Metro C&C being
encouraged
Enforcing strict price control so that w/s
do not sell below company prices.
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Effect on Traditional
Wholesalers
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C&C Wholesale
Disadvantages
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Metro C&C
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Distributor
Is a wholesaler nominated by a company to
exclusively re-distribute the company
products to its customers in a designated
territory. He does not deal in competitors
products. Does not sell from his premises.
Extends credit selectively.
A redistribution stockist for HUL
A distributor or dealer for Philips lighting division
A distributor for L&T engineering division
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Dealer
Role similar to a distributor but
May or 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 better
defined roles.
Examples:
Dealer for an edible oil company
A dealer for garment brands
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Stockist
May be working for a company with a
designated territory but does not redistribute the stocks. Sells from his
premises. Extends credit selectively.
A stockist for paper products
A stockist for automobile spares
Managing distributors
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Managing Distributors
The principles are similar across
industry verticals. FMCG is the most
complex.
Has the capacity to maximise sales and
market shares.
Has to ensure buying goods from the
company and re-distribution to the trade
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Why necessary?
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 goods
upfront or on time but extends credit to his customers
Maintaining inventory of company products adequate
at all times to service the market
Assist company in its promotional efforts
Giving regular market feedback
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Cost of servicing
Cost of Servicing
Cost benefit of using distributors to be assessed
Logistics cost of serving the market
The number of customers to be covered by category
wholesalers, retailers, institutions
Frequency of visits to markets and outlets
Sales revenue estimate from each visit
Markets to be covered with ready stocks or order
booking for later delivery
Likely collections during each visit gives an idea of
the credit requirements
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Expectations
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Expectations from a
Distributor
To be stated at the start of the relationship
Helps get the right kind of distributor also
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Expectations from a
Distributor
Merchandising and displays in the market
Secondary sales efforts and tracking critical
for fmcg and pharma (secondary sales is sales
from the distributor to the outlets in the market)
Effectively handling promotions and schemes
initiated by the company
Managing damaged stocks
Providing market feedback
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Expectations from a
Distributor
Organising and participation in promotional
events
Assist company in making a success of
launching 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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Key Learnings
Wholesalers are required to reach hundreds
of business customers and retailers
Wholesaler business is usually B2B
Wholesalers can be free-lance or appointed
by companies like distributors
Strategic issues in wholesaling include
location, trading area, size and composition
of markets.
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Key Learnings
Cash and carry wholesale denotes the goods
sold from a wholesale warehouse on cash
and self service basis.
Two well known examples in India are Metro C&C
and Bharti Wal-Mart Best Price Wholesale.
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