Wholesale trade

Business studies study module

Wholesaling involves selling goods in large quantities to traders for resale. A wholesaler is a trader who buys goods in bulk from producers/manufactures for resale to retailers at a profit.

-There are wholesalers who carry out retailing but that do not make them retailers.

Classification of wholesalers/Types of wholesalers

Wholesalers may be classified depending on a number of factors. These factors include;

  1. According to the range of goods they handle
  2. According to the geographical area in which they operate
  3. According to their method of operation.

According to the range of goods they handle

Under this classification, wholesalers may be any of the following;

  1. General merchandise wholesalers
  2. General line wholesalers
  3. Specialized wholesalers

General merchandise wholesalers

The word merchandise means goods.

-The general merchandise wholesalers stock and sell a wide variety of goods e.g. hardware, clothes, cosmetics and foodstuffs. The retailers who buy from these wholesalers are thus able to get a wide variety of goods for resale.

-They are also called general wholesalers or full-line wholesalers

b) General line wholesalers

-These are wholesalers who deal in a wide variety of goods within the same line e.g. textbooks, duplicating papers and other types of stationary.

c) Specialized wholesalers

-These are wholesalers who deal in a particular good from a given line e.g. in the line of grains, they may specialize in maize only.

ii)According to the geographical area in which they operate.

Under this category wholesalers may be;

  1. Nationwide wholesalers
  2. Regional wholesalers.

Nationwide wholesalers:

These are wholesalers who supply goods to traders in all parts of the country.

-They establish warehouses or depots in different areas from Kenya National Trading Corporation (KNTC)

b) Regional Wholesalers

These are wholesalers who supply goods to certain parts of the country only. They may cover a county, District, division e.t.c

iii) According to their method of operation

Under this classification, wholesalers can be:

  1. Cash and carry wholesalers
  2. Mobile wholesalers
  3. Rack jobbers

Cash and carry wholesalers:These wholesalers sell goods on cash and self-service basis like supermarkets

-They neither offer transport nor credit facilities to their customers.

Mobile wholesalers/Track distributors:These are wholesalers who use vehicles to move from place to place supplying goods to retailers e.g. soda distributors, bread distributors, beer distributors e.t.c.

Rack jobbers

These wholesalers specialize in selling certain/particular products to other specialized wholesalers. They buy goods from producers or from other countries for reselling.

E.g. some wholesalers buy horticultural products from producers and sell to other wholesalers in urban areas

-Rack jobbers usually stock their goods in shelves or racks from which customers select the goods to buy. Customers may be allowed to pay for the goods after they have sold them.

d) Drop shippers

These are wholesalers who make orders for goods from manufactures/producers but do not take them from the producers premises. They then look for the buyers for the goods and supply the goods directly from the producers

Alternate classification of wholesalers

An alternative classification of wholesalers is given below:

  1. Those who buy goods store them in warehouses and sell them to traders without having added anything to them.
  2. Wholesalers who act as wholesaler’s agents or brokers. These are middlemen who are paid a commission for their work e.g. commission agents
  3. Those who after buying the goods and storing them prepare them for sale. They break bulk, pack, brand,sort,grade and blend the goods

These terms are explained as below:

  1. Breaking bulk-Reducing a commodity into smaller quantities for the convenience of the buyer e.g. buying sugar from the producer in sacks and selling it in packets.
  2. Packing-Putting goods in packets and boxes ready for sale.
  3. Branding-Giving a product a name by which it will be sold
  4. Sorting-Selecting goods to desired sizes, weight, colour and qualities
  5. Grading-Putting goods in groups of similar qualities to make it easier to price them
  6. Blending-It involves mixing different grades of a product to achieve qualities like taste and colour.

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