7 Types of Wholesale: What You Need to Know for Your Business

Wholesale is a term that refers to the process of buying goods in large quantities from a manufacturer or supplier and selling them to retailers or customers at a higher price. Wholesale is one of the most common ways of doing business in many industries, especially in the retail sector.

But did you know that there are different types of wholesale? Depending on your business model, target market, and product niche, you may need to choose the best type of wholesale for your needs. In this article, we will explain what wholesale is, why it is important, and what are the 7 types of wholesale that you should know.

What is Wholesale and Why is it Important?

Wholesale is the middle stage between production and consumption. It involves buying goods from the source and selling them to other businesses or consumers. Wholesale is important for several reasons:

It reduces the cost of production and distribution by eliminating intermediaries and increasing efficiency.
It allows manufacturers and suppliers to focus on their core competencies and outsource the marketing and distribution functions to wholesalers.
It provides retailers and customers with access to a wide variety of products, brands, and prices, increasing their choices and satisfaction.
It creates economies of scale and scope by allowing wholesalers to buy in bulk and offer discounts and incentives to their customers.
It facilitates market penetration and expansion by enabling wholesalers to reach new markets and customers that may not be accessible to manufacturers or suppliers.

What are the 7 Types of Wholesale?

There are different types of wholesale depending on the nature of the product, the relationship between the wholesaler and the retailer or customer, and the level of service provided by the wholesaler. Here are the 7 types of wholesale that you should know:

Merchant Wholesalers

These are the most common type of wholesalers. They buy goods from manufacturers or suppliers and sell them to retailers or customers. They take ownership and risk of the goods and usually operate from warehouses or showrooms. They may offer a range of services such as storage, transportation, financing, marketing, and after-sales support. Examples of merchant wholesalers include Costco, Walmart, Amazon, and Alibaba.

Agents and Brokers

These are intermediaries who do not take ownership or risk of the goods. They act as representatives of manufacturers or suppliers and facilitate transactions between them and retailers or customers. They earn commissions or fees for their services. They may specialize in certain products, markets, or regions. Examples of agents and brokers include real estate agents, insurance brokers, travel agents, and export-import agents.

Manufacturers’ Sales Branches and Offices

These are extensions of manufacturers or suppliers that sell directly to retailers or customers. They do not involve any intermediaries and usually operate from offices or showrooms. They may offer lower prices, faster delivery, better quality control, and more customization options than other types of wholesalers. Examples of manufacturers’ sales branches and offices include Apple Stores, Nike Stores, IKEA Stores, and Tesla Stores.

Dropshippers

These are wholesalers who do not stock or handle the goods themselves. They accept orders from retailers or customers and forward them to manufacturers or suppliers who ship the goods directly to the end-users. They do not take ownership or risk of the goods and only charge a fee for their service. They may offer convenience, flexibility, and low overhead costs to their customers. Examples of dropshippers include Shopify, Oberlo, Spocket, and SaleHoo.

Rack Jobbers

These are wholesalers who specialize in selling non-food items such as books, magazines, toys, cosmetics, etc. They rent space in retail stores and display their products on racks or shelves. They retain ownership and risk of the goods until they are sold. They may offer merchandising, inventory management, promotion, and delivery services to their customers. Examples of rack jobbers include Reader’s Digest, Scholastic, Avon, and Hallmark.

Cash-and-Carry Wholesalers

These are wholesalers who sell goods for cash only and do not offer credit or delivery services to their customers. They cater to small retailers or customers who need immediate access to low-priced goods. They operate from warehouses or outlets where customers can inspect and select the goods they want. They may offer a limited range of products but at competitive prices. Examples of cash-and-carry wholesalers include Sam’s Club, BJ’s Wholesale Club, Metro Cash & Carry, and Booker.

Truck Wholesalers

These are wholesalers who sell goods from trucks that travel from one location to another. They serve retailers or customers who are located in remote areas or have limited storage facilities. They do not operate from fixed locations but rather follow regular routes or schedules. They may offer convenience, freshness, variety, and personal service to their customers. Examples of truck wholesalers include dairy products distributors, bakery products distributors, fruit and vegetable distributors, and ice cream distributors.

Wholesale is a vital part of the supply chain that connects manufacturers or suppliers with retailers or customers. There are different types of wholesale that suit different business models, target markets, and product niches. By understanding the 7 types of wholesale, you can choose the best one for your business and optimize your profitability and customer satisfaction.

Types of Wholesale and Their Global Demand

Wholesale is a business model that involves buying products in bulk from manufacturers and selling them to retailers or customers at a higher price. There are different types of wholesale businesses, depending on their relationship with the producers and the buyers. In this article, we will explore some of the common types of wholesale and how their global demand has changed over time.

Merchant Wholesalers

Merchant wholesalers are the most common type of wholesale businesses. They buy products from various manufacturers and store them in their warehouses. They sell the products in smaller quantities to retailers or customers, who then sell them to the end-users. Merchant wholesalers have extensive knowledge of the products they sell and the market trends. They can offer a wide range of products and services to their buyers, such as delivery, credit, and after-sales support.

The global demand for merchant wholesalers has increased in recent years, especially in emerging markets such as Asia, Africa, and Latin America. According to a report by Grand View Research, the global wholesale market size was valued at USD 33.07 trillion in 2019 and is expected to grow at a compound annual growth rate (CAGR) of 5.2% from 2020 to 2027 . The growth factors include the rising population, urbanization, income levels, and consumer preferences in these regions. Moreover, the COVID-19 pandemic has also boosted the demand for merchant wholesalers, as they provide essential goods and services to the consumers amid lockdowns and supply chain disruptions.

Brokers

Brokers are intermediaries between the wholesale operators and their clients. They do not own or store the products they sell. Instead, they negotiate deals and contracts between the two parties and earn a commission for their services. Brokers have access to a large network of suppliers and buyers and can facilitate transactions across different regions and industries. They can also offer specialized expertise and advice to their clients on market conditions, pricing, quality, and regulations.

The global demand for brokers has also increased in recent years, as the wholesale market becomes more complex and competitive. According to a report by IBISWorld, the global business brokers industry revenue was estimated at USD 1.6 billion in 2020 and is expected to grow at a CAGR of 2.8% from 2021 to 2026 . The growth factors include the increasing globalization, diversification, and consolidation of businesses, as well as the rising demand for professional services and guidance in buying and selling businesses.

Sales and Distribution

Sales and distribution are another type of wholesale businesses that work closely with the manufacturers. They are hired by the producers to represent and sell their products to the wholesalers or retailers. They have exclusive rights to distribute the products in a certain territory or market segment. They also provide marketing, promotion, and customer service support to the producers and the buyers. Sales and distribution wholesalers can be agents, representatives, or distributors.

The global demand for sales and distribution wholesalers has also risen in recent years, as the manufacturers seek to expand their market reach and customer base. According to a report by Zion Market Research, the global sales performance management market size was valued at USD 2.54 billion in 2018 and is expected to reach USD 9.34 billion by 2025, growing at a CAGR of 20% between 2019 and 2025 . The growth factors include the increasing adoption of cloud-based solutions, artificial intelligence, analytics, and automation tools by the sales teams to improve their performance and efficiency.

Wholesale is a vital part of the supply chain that connects the producers and the consumers of various products. There are different types of wholesale businesses that have different roles and functions in the market. The global demand for wholesale businesses has increased in recent years due to various economic, social, and technological factors. Wholesale businesses need to adapt to these changes and challenges by offering value-added services, enhancing customer relationships, and leveraging digital platforms.

References:

https://dx.doi.org/10.2307/1247896

http://unstats.un.org/unsd/cr/registry/regcs.asp?Cl=9&Lg=1&Co=6

https://dx.doi.org/10.5040/9781350115408.ch-007

https://www.grandviewresearch.com/industry-analysis/wholesale-market
https://www.ibisworld.com/global/market-research-reports/global-business-brokers-industry/
https://www.zionmarketresearch.com/report/sales-performance-management-market

https://www.investopedia.com/terms/w/wholesaler.asp

https://www.shopify.com/encyclopedia/wholesaler

https://www.thebalancesmb.com/types-of-wholesalers-2948318

https://www.marketing91.com/types-of-wholesalers/