Wholesale Trade: KCSE Business Studies Notes

​Wholesaling involves selling goods in large quantities to traders for resale. A wholesaler is a trader who buys goods in bulk from producers/manufactures for resale to retailers at a profit.
There are wholesalers who carry out retailing but that do not make them retailers.

Classification of wholesalers/Types of wholesalers

Wholesalers may be classified depending on a number of factors. These factors include;

1. According to the range of goods they handle
2. According to the geographical area in which they operate
3. According to their method of operation.

ii) According to the range of goods hey handle 
​Under this classification, wholesalers may be any of the following;

1. General merchandise wholesalers
2. General line wholesalers
3. Specialized wholesalers

a) General merchandise wholesalers 
The word merchandise means goods.
The general merchandise wholesalers stock and sell a wide variety of goods e.g. hardware, clothes, cosmetics and foodstuffs. The retailers who buy from these wholesalers are thus able to get a wide variety of goods for resale.
They are also called general wholesalers or full-line wholesalers
b)  General line wholesalers
These are wholesalers who deal in a wide variety of goods within the same line e.g. textbooks, duplicating papers and other types of stationary.
c) Specialized wholesalers
These are wholesalers who deal in a particular good from a given line e.g. in the line of grains, they may specialize in maize only.

ii) According to the geographical area in which they operate.
Under this category wholesalers may be;

1. Nationwide wholesalers
2. Regional wholesalers.
   

a) Nationwide wholesalers;
These are wholesalers who supply goods to traders in all parts of the country.
They establish warehouses or depots in different areas from Kenya National Trading Corporation (KNTC)
b) Regional Wholesalers
These are wholesalers who supply goods to certain parts of the country only. They may cover a county, District, division etc.

iii) According to their method of operation;
Under this classification, wholesalers can be;

1. Cash and carry wholesalers
2. Mobile wholesalers
3. Rack jobbers
   

a) Cash and carry wholesalers; these wholesalers sell goods on cash and self-service basis like supermarkets. They neither offer transport nor credit facilities to their customers.
b) Mobile wholesalers/Track distributors; these are wholesalers who use vehicles to move from place to place supplying goods to retailers e.g. soda distributors, bread distributors, beer distributors etc.
c) Rack jobbers
These wholesalers specialize in selling certain/particular products to other specialized wholesalers. They buy goods from producers or from other countries for reselling.
E.g. some wholesalers buy horticultural products from producers and sell to other wholesalers in urban areas
Rack jobbers usually stock their goods in shelves or racks from which customers select the goods to buy. Customers may be allowed to pay for the goods after they have sold them.
d) Drop shippers
These are wholesalers who make orders for goods from manufacturers/producers but do not take them from the producer’s premises. They then look for the buyers for the goods and supply the goods directly from the producers

Alternate classification of wholesalers

An alternative classification of wholesalers is given below;

1. Those who buy goods store them in warehouses and sell them to traders without having added anything to them.
2. Wholesalers who act as wholesaler’s agents or brokers. These are middlemen who are paid a commission for their work e.g. commission agents
3. Those who after buying the goods and storing them prepare them for sale. They break bulk, pack, brand, sort, grade and blend the goods

​These terms are explained as below;

1. Breaking bulk-Reducing a commodity into smaller quantities for the convenience of the buyer e.g. buying sugar from the producer in sacks and selling it in packets.
2. Packing-Putting goods in packets and boxes ready for sale.
3. Branding-Giving a product a name by which it will be sold
4. Sorting-Selecting goods to desired sizes, weight, colour and qualities
5. Grading-Putting goods in groups of similar qualities to make it easier to price them
6. Blending-It involves mixing different grades of a product to achieve qualities like taste and colour.

Functions of a wholesaler

These can be discussed as services rendered to producers, retailers and to consumers.
Services of wholesalers to the producers

1. They relieve the producers the problem of distribution by buying goods from them and selling to retailers
2. They relieve the producers of some risks they would experience e.g. damage, theft, fall in demand etc.
3. Save the producers from the problem of storage by buying  goods and keeping in their warehouses
4. They prepare goods for sale on behalf of the producers
5. They get feedback from consumers on behalf of producers
6. They promote products through advertising, displays, trade fairs and exhibitions
7. They finance producers by buying goods from them and paying in cash.

Services of wholesalers to the Retailers

1. They stock a wide variety of goods in large quantities relieving the retailer from buying from different producers
2. They avail goods at places convenient to retailers
3. They break bulk for the benefit of retailers
4. They offer transport facilities to retailers
5. They offer advisory services to retailers regarding market trends
6. They offer credit facilities to retailers
7. They engage in product promotion on behalf of retailers
8. They sort, blend, pack and brand goods saving retailers from having to do it.

Services of wholesalers to consumers

1. They ensure a steady supply of goods to retailers hence consumers are not faced with shortages
2. They ensure a stable supply of goods hence there will be stability in market prices
3. They enable consumers to enjoy a wide variety of goods
4. They break the bulk of goods thus enabling the consumer through the retailer to get the goods in convenient quantities
5. They prepare goods for  sale e.g. branding, blending and packaging
6. Pass information to consumers through retailers about the goods e.g. new products, new prices and their use.

Next: Documents used in Home Trade

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