Wholesale trade consists of, be an intermediary between producers and retail companies, which base their economic activity on buying and selling wholesale products to other retail and wholesale companies. Most of the products sold in stores come from wholesalers.
This is because these types of shops help in the distribution chain, which is the process that a product goes through, from when it is manufactured to when it reaches the hands of a final buyer. In this article we will talk about wholesale businesses, their characteristics, advantages and disadvantages.
What are the characteristics of a wholesale trade?
In the world of commerce we find ourselves in addition to the wholesaler to the retailer, which is responsible for selling products in small quantities. Unlike wholesaler who sells in bulk. We have to know the characteristics of wholesale businesses, which make them what they are. Next, we will see some of these characteristics.
- They are the most basic in the transport chain, this because they give it organization, managing in an effective way, all the logistics that carries the transport, and distribution of the products in large quantities.
- Only work with large quantitiesThis when buying the products as well as selling them. They generally never have contact with the end customer, as they sell to retailers, who deliver the product. There are cases where they can sell to other wholesalers or producers.
- It has less operating costs than retail stores, because much of the work of wholesale stores is manage a large inventory from which to supply retailers.
What are the advantages and disadvantages of wholesale businesses?
As with all businesses, wholesale businesses have a number of advantages and disadvantages. Nevertheless, its efficiency is undeniable. The increase in super markets affected wholesale businesses, despite all business they continue to appear. Next, we will mention and explain the advantages and disadvantages of wholesale businesses.
Advantages of wholesale businesses
Wholesale businesses are an important part of the distribution chain, in addition to a variety of positive aspects which we will see below.
They have lower cost prices
The entrepreneurs of the wholesale trade, have their profit in the sale at low cost, but constant of large quantities of products. This is the business strategy most used in this trade.
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Large quantities of merchandise circulate
When trading with large quantities of products, large sums of money are handled, so you should try to have a good network of contacts, so that this movement occurs constantly. In addition, these contacts give the opportunity to meet other entrepreneurs, who may be clients or partners of the company.
Disadvantages of wholesale businesses
We already talked about the advantages of wholesale businesses, but it is time to talk about the disadvantages that these have, and that is that, since everything is handled in large quantities, if something goes wrong it can be a great loss, in addition to that, has disadvantages even for the general market.
Movement of merchandise
We mentioned this point before, but it can be both positive for the company, and it can harm it, because losing inventory at the wholesale level means a lot of products and money. This is precisely the opposite that the Lean Six Sigma philosophy implements.
Difficult quality control
By having large quantities of merchandise, it can be hard work to verify the perfect condition of 100% of the products, for which a perfect inventory control is not guaranteed.
This point harms both the company and the market in general. In the case of the company, having a large company means that you have to have a large capital, since you have to cover transportation, large premises, among other expenses. Income comes in the same way in large amounts. This type of companies require a large flow of money.
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Now from the market point of view, thanks to the fact that wholesalers are one more intermediary, they raise the price of the final product.
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