Wholesale trade is an intermediate activity in the goods distribution chain. It consists of the buying and selling of products in large quantities between commercial organizations.
Wholesale companies are those that carry out this activity. Examples of these companies are those that provide products to supermarkets or those that transfer electronic components to technology companies. Any direct sale to end consumers is excluded from this activity.
Wholesale trade constitutes an intermediate task of the distribution process. These companies serve as a link between manufacturing companies and retailers for finished products, and between manufacturers for intermediate products. By specializing in the distribution of goods, these organizations are able to lower operating costs in the delivery of products.
In the opposite case, the activity dedicated to commercializing goods with final consumers is the retail trade. This type of trade is the final activity of the distribution chain. Similarly, retailers sell goods in small quantities to large numbers of customers. For example, clothing or apparel stores, food supply stores and stores that sell appliances, and technological items.
Types of wholesale trade
Wholesale companies are classified into two broad categories:
- Wholesale traders: These companies provide a greater range of services to producers, such as financial assistance and inventory management. Your income is determined by the resale of the products.
- Intermediary agents : These agents offer fewer services but are specialists in the products they handle and the territories in which they operate. Their income comes from the commission they charge for placing the products in the different markets.
Importance of wholesale trade
The wholesale trade activity allows companies to specialize in distribution and inventory management more effectively. In addition, they are experts in handling materials efficiently.
This specialization makes the delivery of goods on a regular basis more effective and efficient. One of its advantages is the reduction of the risk associated with the accumulation and shortage of inventories for producers and retailers. In addition, it allows the reduction of costs in the distribution process. All this leads to the manufacturer increasing the chances that its products will be placed in the target market.
Another element of great importance is providing financing, both to producers and retailers, providing effective financial assistance to their commercial partners.