1. Vital link:
Wholesalers constitute an important link in the distribution chain of goods. They perform numerous functions and render useful services to ensure smooth flow of goods from producers to consumers.
2. Specialisation:
Wholesalers operate on a large scale and possess the specialised knowledge in goods. They relieve the manufacturers of innumerable duties which they find expensive and difficult to perform. Manufacturers can concentrate on production.
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3. Wider distribution:
Most of the goods are produced by a large number of small producers. Retailers are usually small and scattered widely at different places. Wholesalers are indispensable for country-wide distribution of goods produced at numerous places.
4. Price stabilization:
Wholesalers maintain regular supply of goods at all times. They help to stabilise the prices in the face of temporary fluctuations in demand. They also inform the manufacturers about the changes in the pattern of demand.
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5. Economies of large scale:
Wholesalers buy goods in huge quantities. They enable the producers to secure the benefits of large scale production. The benefits of lower costs of production ultimately pass on to consumers.
6. Market information:
Wholesalers collect information about changes in market demand and competition from retailers and pass on the information to producers. As a result producers can plan production in accordance with the needs of consumers.
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7. Warehousing:
Wholesalers relieve both manufacturers and retailers from the trouble of maintaining huge stocks of goods.
8. Financing:
Wholesalers provide financial support to both producers and retailers.
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9. Assumption of risk:
Wholesalers assume the risks arising from changes in demand, spoilage or damage of goods, etc.
10. Advice to retailers:
Wholesalers, provide advice to retailers regarding quality, prices, availability and timing of purchase of goods. They also provide information about new products.
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11. Generation of Employment:
Wholesalers help to generate employment opportunities by encouraging the growth of small scale retailers. Retailers in turn provide employment to a large lumber of beeps.
12. Economic Growth:
Wholesaler’s enable producers 10 invest money in expansion and growth of output by buying goods in bulk on cash basis. They also help in the growth of exports.
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Organisation of Wholesale Trade
A wholesaler has to maintain large stocks of goods. He requires big and updates warehouses. Moreover, he often has to buy goods in cash and sell them at credit to retailers.
He has also to employ travelling salesmen who visit various retailers and book orders. He also has to maintain motor vans to provide home delivery to retailers.
Therefore, wholesale trade is generally carried on by a joint stock company. A large wholesale firm may be organised as follows
1. Purchase department:
This department buys goods in bulk from different manufacturers. Before buying goods, samples of products, catalogues and quotations are obtained from manufacturers.
After comparing the quality and prices and terms and conditions of sale, most favourable suppliers are selected. Orders are placed with the selected suppliers keeping in view market demand.
Goods ordered from different suppliers are collected or assembled at one place. Purchase manager is the head of this department. Buying experts and clerks are employed to work under the purchase manager.
2. Storage department:
This department receives goods from producers. Goods are compared with the orders and invoices. Any discrepancy or damage is reported and settled with the suppliers. After receipts, proper arrangements are made for storage of goods.
During storage, grading, packing and branding activities are performed wherever necessary. Stocks are kept under control to avoid shortage and surplus. Goods are dispatched to retailers according to the instruction of sales department.
3. Sales department:
This department conducts marketing research to ascertain the nature and extent of market demand. This information is passed on to the purchase department.
Advertising and sales promotion activities are undertaken to increase and sustain demand. Sales representatives of the wholesaler visit retailers, show samples and book orders. Necessary instructions are issued to the storage department for dispatch of goods.
4. Administrative department:
This department is concerned with receipt of cash from retailers and payment of cash to manufacturers. It also keeps accounts, records and files concerning all the transactions of the firm.
It handles correspondence work of the business. Administrative department also looks after recruitment, training, compensation, and welfare of the staff employed in the firm.