Types Or Classification Of Wholesalers, Functions

Welcome to this blog on TYPES or CLASSIFICATION of WHOLESALERS in commerce. Functions of merchant wholesalers and agent middlemen.

Table Of Contents

1. Types or classification of Wholesalers
2. Types and Functions of merchant wholesalers
3. Types and functions of Agent middlemen.

Types or classification of Wholesalers

Wholesalers can be classified into two broad categories, mainly: merchant wholesalers and agent middlemen.

Merchant wholesaler: The merchant wholesaler buys and resells goods on their own account taking title to the products they handle and convey the title directly to those they deal with. They derived profit from the marginal difference between the purchase and selling price. Majority of wholesalers fall into this category.

Functions of merchant wholesalers

1. They arrange credit terms
2. They undertake the storage of goods
3. They provide promotional services.
4. They provide delivery services
5. They also provide advisory services.

Types of Merchant Wholesalers

1. Specialist wholesalers: These are wholesalers who restrict their services to a particular trade and area in which they have specialized knowledge. The products they handle require special skill and handling.
2. Rack jobbers: Rack jobbers sell specialized line of merchandise to retail stores and provide certain special services. Rack jobbers servicing supermarkets usually specialize in one or both of two lines toiletries and housewares. The managers of store served by them are released of the merchandising problems involved in handling sundry items and concentrate effort on other major lines.
3. Cash and Carry Wholesalers: These are at present mainly concerned with grocery products. They do not offer credits nor delivery services to the customer. The normally operate on lower margins. The cash and carry wholesalers requires retailers to pick their orders, pay cash and carry away their purchase.
4. Truck wholesalers: A truck wholesaler combines selling, delivery and collection in one operation. He carries only a limited range of stock although the selection within that range may be rather completed. They handle perishable goods. Their ability to make fast and frequent delivery is the main appeal to customers and manufacturers. Examples of goods handled are fish, tomatoes etc.
5. Drop shipment: Drop shipment handle the goods physically but have the performance of storage and transportation to the producer who it represents. The manufacturer ships them directly to the retailer but bills the drop shipper at factory prices. Goods in industrial manufacturing, such as coal are handled by drop shipment.
6. General wholesaler: General wholesalers are wholesalers who purchase goods from different producers, store the goods and prepare them for sale to the retailer in small quantities.
7. Wholesale co-operative societies: Wholesale co-operative societies are formed by retail stores who purchase goods in bulk or large quantity from The producers at a reasonable price and sell it in units to retail cooperatives. When they come together as a an entity, they have better bargaining power to purchase goods in bulk from the producer.

Agent Middlemen: Agent middlemen are mostly engaged in wholesaling rather than in retailing. They assist in negotiating sales and purchases or both on behalf of their principals. They do not take title to the goods but they receive commission. Agent middlemen are brokers, manufacturers agents, auctioneers, commission merchants and selling agents, etc.

Types Of Agent middlemen Wholesalers

1. Brokers: Brokers are agent that link or connect sellers with the buyers. They take neither title nor possession of goods. A broker receives commission called brokerage. They usually specialize in narrow range of product. He represent either the buyer or seller in negotiating purchases or sell without having physical control over goods involved.

2. Manufacturers agents: Manufacturers agents are appointed by the producer to market it’s product in particular area. The manufacturer will pay them commission. They are usually engaged in industrial and durable goods.

Features of manufacturers Agents

• The agent has extended contractual relationship with the principal.
• He handles sales of product within a limited territory.
• He can represent manufacturers of non-competing but related line of goods.
• The agent possesses limited authority with regard to the term of sales and price.
• He is rarely involved in credit collection and risk.

3. Auctioneers: Auctioneers are agent who offer goods to prospective buyers through public auction. They sell goods to the highest bidder. Auctioneers deal in unique goods, e.g, art work and houses.

4. Commission Agents: A commission agent is an agent merchant who buys and sells goods on commission basis on behalf of his principal. He usually exercises physical control and negotiate the terms of sale of Goods handled by him.

5. Factor: A factor does not buy goods nor do they take title but they do take possession and provide Warehouse and handling facilities. He also receives commission.

6. Del-credere Agents: Del-credere is an agent who undertakes or guarantees to indemnify the principal against any loss arising from buyer’s default in payment. He is paid extra commission called del-credere commission.

Revision Questions

1. List and explain five types of merchant wholesalers.
2. List and explain five type of agent middlemen.
3. What are the features of manufacturer’s agent.

This is a continuation from our previous class on wholesale trade, functions, advantages and Disadvantages. To join the class [Click Here]