By definition, a wholesaler is an intermediary located in a product’s distribution channel.
More concretely, it’s a participant who is between the producer, who manufactures the product, and the retailer, who markets the product. This is a trader who buys goods in bulk at a lower wholesale price and then resells them in different batches of smaller quantities.
This operation is also known as “allotment”.
In contrast to retailers, wholesalers sell by volume. They don’t sell products one by one.
Likewise, wholesalers are rarely involved in the manufacturing of products, although they may be, and concentrate exclusively on their distribution.
Most of the time, wholesalers specialize in a specific product or category of products: clothing, bags, jewelry, accessories, etc. Only a few players in this sector are more diversified.
Similarly, wholesalers are rarely associated with the manufacturers they buy from. As a result, they’re often unfamiliar with the specifics and subtleties of their products.
In addition, they may have to offer competing products, which is not the case for distributors and retailers.
Wholesalers generally buy their products directly from manufacturers. However, they can also buy from a reseller.
In both cases, since they order large quantities of goods, they often benefit from discounts. To perform their activities, they need a license.
To carry out their business, wholesalers perform important logistical functions, such as warehousing. They also ensure that their customers are supplied on a regular basis.
Between supplying and reselling products in batches, wholesalers build up a stock and ensure a permanent assortment of a wide range of goods to satisfy the demand of other professionals.
Contrary to popular belief, the presence of a wholesaler in the supply chain doesn’t increase the selling price.
In fact, since wholesalers buy products in large quantities, they benefit from attractive prices. This is known as economies of scale.
Working through a wholesaler can therefore reduce logistics costs and benefit from discounts. In the long run, this enables the distributor to generate a more comfortable margin, without increasing the selling price to the customer.
