Whole sailing is an extremely important activity in the marketing process and wholesalers appear in nearly every channel of distribution. It is vital that the various wholesaling functions be understood even though as we shall see, this understanding is complicated by the many types of wholesalers which exist.

10.1. Distinguishing Wholesaling As An Activity

Precisely what is "wholesaling?" just what does a "whole­saler" do? These two questions are hard to answer for a variety of reasons. One is that there are trade and tax reasons why companies may choose to call themselves wholesalers. Even the courts sometimes vary in their definition of the term. Another complication is that wholesalers in various industries perform different groups of functions indeed, it can be said that no two wholesalers are exactly alike. And finally the terminology used in the business world is varied and imprecise.

Let's examine these complications one by one. To start with, there are several reasons why a firm might seek to be classified as a wholesaler.

• First, in some channels, manufacturers permit only wholesalers to buy directly from them. The wholesalers, in turn are expected to sell only to retailers. The firms that will be permitted to buy from the manufacturer obviously will depend upon how wholesaling is defined.  

• Second, and retted to the first point, is the amount of discount granted. If retailers in a certain line expect a 30 Per cent discount off the suggested retail list price, then wholesalers who supply these retailers may be allowed a 40 Per cent discount off retail list price. They in turn are expected to pass on a 30 Per cent discount to their retailers. In practice, this often gets much more complicated; some manufacturers set up a scale of wholesale discounts depending upon the size of the wholesaler and the services which he offers. (These discounts called "trade discounts" are discussed in the pricing section. Correctly determining which wholesale firms are entitled to what trade discounts is especially important because of the provisions of the Robinson Batman act., prohibiting price discrimination and discriminatory discounts).

•  Third, some cities and states have retail sales taxes which do not apply to wholesalers. These taxes require record­keeping and occasionally out-of-pocket costs when retailers fail to collect the tax from the consumer. It is natural, therefore, that some firms should try to avoid classification as a retailer.

• Fourth, fair-trade laws are usually binding only on retailers. Some discount houses have sold below the fair-trade price to customers who were buying as "wholesalers". Being a member of a buying group such as a labor union, church group or local business concern was sufficient rationalization for the purpose.

• Fifth, many states have chain-store taxes on inventories or gross receipts which apply only to retailers. Wholesalers are charged at a lower rate, if at all.

10.2.    Possible Wholesaling Functions

Wholesalers may provide functions both for their own customers and for their suppliers in short, for those above and below them in a channel. These wholesaling functions are really elaboration of the basic marketing functions buying, grading, storing, transporting, financing, risk-taking and gathering market information.

10.3. Functions Provided For Customers By Some Wholesalers

These possible functions should be studied carefully now, because they are referred to frequently below. Again, these functions are provided by some but not all wholesalers.

1-Anticipates Needs; As a purchasing agent for his customers, the wholesaler forecasts his customers demands and buy accordingly.

2-Regroups Goods: The wholesaler provides at least one and sometimes all  four of the regrouping steps in an effort to provide the assortment desired by his customers at the lowest possible cost.

3-Carries Stocks: The wholesaler carries inventory, relieving his customers of the necessity to carry a full inventory.

4-Delivers Goods: The wholesaler frequently has transporta­tion facilities and can provide prompt delivery service at low cost. Speed may be essential to keep factory production lines rolling or to satisfy a retailer's customers.

5-Grants Credit: The wholesaler has traditionally extended credit to many of his customers, sometimes for several months. This financing function may be especially important to small customers and is sometimes the reason why they buy through wholesalers rather than direct from the manufacturer. Generally, the smaller the customer, the more financially dependent he is on wholesalers.

6-Provides Information And Advisory Service: The wholesaler and his salesmen may be specialists in the commodities in which they deal. They are in a position to provide price and technical information as well as suggestions an how to install and sell products.

7-Provides Part Of Buying Function; Many customers appre­ciate the wholesaler having salesmen call on them. This relie­ves customers of the responsibility of looking for supply sources that is, it simplifies their buying function. They have only to evaluate the worth of the various products offered.

8-Owns And Transfers Title To Goods: Ownership of inventory permits a wholesaler and his customer to complete a sale without benefit of other intermediaries (such as a manu­facturer or broker), thus facilitating the whole transaction.

10.4. Functions Provided For Producers By Some Wholesalers

• Provides Part Of Producer's Selling Function: The whole­saler sometimes seeks out supply sources, which reduces producer's need for salesmen, even to call on wholesales. He also participate in the producer's advertising and sales promotions programs.

• Stores  Inventory:  The   classic  wholesaling  function  of storage reduces a manufacturer's need for carrying large stocks, reducing his warehousing expenses.

•Helps   Finance   By   Owning   Stocks:   Some   producers, especially small ones, need financial assistance. When the wholesaler carries inventory, this reduces the producer's need for working capital.

• Reduces Credit Risk: A producer's customers (retailers and producers) are numerous and some may be poor credit risks. It's expensive for a small producer (especially one far distant) to evaluate all of this potential credit risks when sailing only one or o few products. The wholesaler who sells this customers many products is in a better position to evaluate their credit status. And if the wholesaler is a search of supply of many products, the customer may be more likely to pay him then to pay a manufacturer from whom he may be not reorder.

• Provides Market Information:  The wholesaler is closer to the customer and is in a better position to evaluate customer reactions. As an informed buyer and seller, he may reduce the producer's need for market research.