Why do manufacturers use wholesalers

Some of the marketing functions provided by wholesalers to their buyers are:. New technology, global competition, and retail consolidation have been forcing many wholesalers to modify their business practices in order to remain competitive.

While some experts have gone so far to say that these factors will eliminate certain kinds of wholesaling altogether, even a cautious prognosis would anticipate that the number of wholesalers will continue to fall as the largest and most efficient—which are not necessarily the same—are best able to cope with market changes.

Two general classes of technology have had a major impact on wholesaling: logistics management technologies and the Internet. Logistics technology is a broad category of devices and software used to make distribution more efficient and reliable. These include implementation of sophisticated automatic identification systems for tracking stock, personnel, and equipment; satellite tracking systems for wholesalers who must manage a fleet of delivery trucks; and integrated computer systems to manage inventory, distribution, and customer services.

The best of these technologies, although they require substantial investments, help keep costs down while improving the quality of service. Meanwhile, the Internet is having a profound effect of giving wholesalers' customers more opportunities to compare prices and obtain goods from alternative sources, making wholesaling more price competitive and signaling danger for inefficient wholesalers who may have enjoyed a near monopoly in local markets. The Internet also feeds on a general wish by both manufacturers and retailers to cut out the middlemen in the distribution process.

If wholesalers fail to use electronic commerce to their advantage, they risk granting that wish. Related to the Internet's leveling power are the benefits and drawbacks of heightened international competition, which is likely to be aided by the Internet. Again, competition from abroad will tend to add downward pressure on prices and hurt inefficient and low-margin wholesalers the most. Conversely, however, when wholesalers are able to expand into new markets while keeping costs under control, they may be able to at least recoup any loss of sales domestically and possibly improve sales and profits overall.

A significant threat to wholesalers has been the rise of large and lean national retailers in sectors such as supermarkets, home electronics, office supplies, and do-it-yourself supplies.

These large chain stores tend to rely less on wholesalers for their own inventories, and at any rate are gradually snuffing out the independent retailers who are more likely to need wholesalers. Wholesalers have little hope of gaining the big chains as customers because often the chains have cost advantages of both scale and scope over wholesalers.

As retail consolidation is expected to continue, a concomitant drop in the number of wholesalers serving those markets can be expected. As some analysts see it, two kinds of wholesalers are likely to weather the changes best: those that will continue growing larger and serving a diverse client base, and those that will focus on specialty markets and excel in those niches.

After purchasing goods from different manufacturers, wholesalers sort them according to size, shape, quality, etc. They then split those into smaller lots. Some even repackage and insert their brands. They perform grading and standardization functions, ensuring uniform-quality supply for retailers. Wholesalers foresee market conditions. They collect information from retailers about changes in consumer tastes, fashions, and buying habits, which they can pass on to manufacturers.

They also conduct market surveys by comparing prices, quality, taste, buying power, competitors, etc. Based on extensive knowledge of products from different manufacturers, they can also advise retailers. Forecasting market conditions, demand, and tastes, wholesalers arrange preparations to meet the demands that will emerge.

They help to stabilize prices by ensuring supply availability on demand. Not only do they stabilize prices, but they also help manufacturers reduce the greater-risk involved in the distribution process. Risks can arise, for example, due to changes in demand or damage to goods while in storage. Wholesalers introduce new products and recommend existing products, extending the sales reach of many manufacturers. Daily contact with customers.

Wholesalers are in regular contact with retailers so the manufacturers' products are consistently promoted and easily available. Onsite product inspection. Wholesalers allow manufacturers to satisfy, not frustrate, retailers by offering onsite inspection of product.

Presidents Club. By serving as the crucial link between the manufacturer and the retailer, wholesale lumber distributors add the value everyone needs to succeed. Wholesalers can help ensure the right product meets the right market at the right time.

The last few decades have seen a significant shift to Just-In-Time delivery of products as the industry standard. Each company has to run lean to remain profitable. Wholesale distributors offer buyers the flexibility to purchase quantities that range from multiple rail cars to individual pieces. By working with a wholesaler, a buyer can turn over investory more quickly to lower costs and free up much-needed cash for further investment.