In the preceding section we have learnt that wholesalers perform limited functions or undertake a variety of functions. Actually, the functions of a wholesaler depend upon the nature of the products dealt with and the business policy of that particular wholesaler. Of course, every wholesaler must carry out the minimum functions of buying, storing and supplying one or more products. Besides these primary activities, several other functions may also be performed by wholesalers Broadly. the functions of wholesalers may be grouped as follows:-
(1 ) Assembling products : The basic function of every wholesaler is that of procuring goods From manufacturers and holding large enough stocks for sale to the retailers.
(2) Arranging storage: The wholesaler has to make arrangements for holding stocks to meet the needs of retailers from time to time. He must see that goods in stock are not spoiled or damaged. For proper storage, he may have his own warehouse or hire one.
(3) Grading and packaging : Wholesalers who usually purchase in bulk may have to do the grading of products, i.e., sort out the products according to quality or size or other factors. For convenience, it may also be necessary for wholesalers to undertake packaging of goods.
(4) Transporting goods : The wholesaler is generally required to arrange transportation of the goods procured from the place of manufacture to his godown. Often he is also to arrange delivery of the goods to retailers according to their needs.
(5) Distribution of goods : Goods assembled and held in stock must be made available to the retailers who may be scattered in different parts of a city or region. For this purpose, advertisenle~lt and employment of salesmen must be undertaken by the.wholesaler.
(6) Financial : As general practice wholesalers provide crdit facilities to retailers. Thus, payment can be made by retailers after goods have been sold by them or when their clients have cleared their accounts.
The financing of retail trade is a very common function of wholesalers. Sometimes, .wholasalers also advance money to manufacturers against orders placed for purchase of goods. This is another type of financing done by wholesalers.
(7) Risk-bearing : Procurement and holding large stocks of goods in anticipation of demand from retailers involves considerable risk of loss for the wholesalers. If market conditions change due to reduced demand or entry of competitors, the wholesalers end up with huge unsold stock.
(8) Price fixation : The prices of goods which consumers have to pay depend upon the prices fixed by wholesalers and charged from retailers. This is an important function to be performed by wholesalers because a number of factors including prices of competing goods, effect of prices on demand, etc., have to be taken into account.
SERVICES OF WHOLESALERS
We have already learnt how wholesalers serve manufacturers and retailers by buying goods in large quantities, holding stocks and supplying smaller quantities to the retailers. In that way, the wholesalers act as a bridge between producers and retailers. Let us now examine closely the services rendered by wholesalers to the manufacturers and retailers.
Services to Manufacturers
The wholesalers perform several important functions for the manufacturers which may be stated as follows:
(1) The wholesalers place large orders with the manufacturers or procure large quantities of goods from manufacturers. Thereby manufacturers are relieved of the task of marketing their goods, and they can concentrate on production only. Manufacturers need not necessarily hold large stock in their godown. Hence there is saving of expenses on storage and warehousing.
(2) Wholesalers remain in close touch with the retailers. They get regular information from the retailers about changes in the consumer’s demand for particular products as also about competing products. On the basis of such information, wholesalers place orders with manufacturers. Thus, wholesaler’s purchase orders reflect the changing market conditions. Hence the volume of production can be regulated by the manufacturers in accordance with the changing market conditions as reflected by the wholesaler’s purchase orders.
(3) Often the wholesalers place orders in advance on the basis of their expectations regarding future demand of products even though the current demand is low. This helps manufacturers to continue their production on an even pace.
(4) Wholesalers may also participate in the advertising of products jointly with the producers, which is of great advantage to both parties.