Wholesale trade is a step in the process of moving merchandise from manufacturing to the end user. It involves the sale of goods to retailers, who then sell to consumers. Wholesale companies offer a vital service to small retailers who cannot purchase directly from manufacturers. Some industries involve a distributor between the manufacturer and wholesaler. The lines between wholesale and retail sales are becoming blurred as more manufacturers sell directly to consumers.
There are several steps involved in the process of moving merchandise from its point of creation or manufacturing to the end user. Wholesale trade, a transition stage in the movement of products to market, is one such step. Wholesale trade involves the sale of goods to a company or individual, known as a retailer, who then sells the goods to consumers at a higher price.
Most merchandise is sold at the retail level. When an item is purchased off a store shelf, it is typically purchased at retail price. The retailer provides the final step in the process of selling consumer goods. This is the step where the product is placed in the hands of the person who will use it.
The way the merchandise arrives at the retailer is where wholesale trade comes into play. In a typical scenario, a manufacturer will produce a product and sell large quantities to a wholesale business. The wholesaler will increase the price of the product to make a profit, and then sell it to various customers, usually retail stores or outlets. Most wholesale companies have a large number of retail customers.
Wholesale companies offer a vital service to the market. Most small retailers cannot purchase in sufficient quantities to purchase directly from a manufacturer. They lack the necessary storage capacity as well. Buying from a wholesale company allows small retailers to purchase the products they need for their stores in quantities they can manage.
There is an additional level of commerce that is often involved in the movement of goods as well. In some industries, a distributor is included in the sequence. A distributor is a business that exists between the manufacturer and the wholesaler. The distributor buys products from the manufacturer in very large quantities. The products are then sold to wholesale trading companies, who then move the merchandise to their customers.
Historically, wholesale trade has been viewed as transactions involving the sale of merchandise that take place between businesses, without the involvement of a consumer. In some sectors, manufacturers are moving to the concept of selling directly to the end user. This is particularly prevalent in the computer industry.
This type of sale is difficult to classify. Many people consider this to be a retail sale because the end user is purchasing the product. Others argue that this should be considered wholesale because the manufacturer is selling the merchandise. The lines are likely to get even more blurred as these types of transactions increase and more companies get involved in selling directly to consumers.
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