1. Merchant Wholesalers:
The important feature of merchant wholesalers is that they take title to the goods before being sold by them. A wholesaler who buys plywood from the manufacturer is a merchant wholesaler. He actually takes title to the plywood before selling to the retailers.
Image Source: west-coast-warehousing.com
In India a large number of wholesalers are merchant wholesalers. Merchant wholesalers often specialize in certain types of products or customers and they service relatively small geographic areas. And within that category several wholesalers compete for the same customers.
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Merchant Wholesalers Perform the Following Functions:
i. Market Coverage:
For good market coverage so that customers can get goods as and when they need, manufacturers often rely on merchant wholesalers to secure the necessary market coverage at reasonable cost.
ii. Making Sales Contacts:
For manufacturers, the cost of maintaining an outside sales force is high. To sell products to many customers over a large geographical area, the cost of covering the territory with its sales force can be prohibitive.
iii. Holding Inventory:
By taking title to goods, and stocking the inventory, the wholesalers help manufacturers to reduce their burden and risks. By providing outlet the wholesalers assist manufacturers to better plan their production schedule.
iv. Order Processing:
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Order processing by wholesalers saves manufacturers from number of small orders. Manufacturers prefer to attempt to fill large-sized orders of wholesalers. Many of original dot.com firms engaged demised due to high cost of order processing.
v. Gathering Market Information:
Wholesalers are usually quite close to their customers geographically and in many cases have continuous contact through frequent sales calls on their customers. Hence, they are in a better position to learn about customers’ product and service requirements.
vi. Offering Customer Support:
Merchant wholesaler provide retailers many value added services like facilities like returns, exchanges, repairs, or technical assistance on behalf of the manufacturer.
vii. Breaking Bulk:
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A merchant wholesaler buys in large quantity and breaks down these bulk quantities into smaller quantities.
2. Full Service Wholesalers:
A merchant wholesaler who provides all the services, like delivery, credit extension, marketing information and other managerial assistance is known as full-service or full function wholesaler. Such wholesalers are very popular in rural and suburban India. Within this category, three kinds of wholesalers are visible. General Merchandise Wholesalers (sell different product types), general wholesalers (wide variety in one product line), and Speciality wholesalers (lines further reduced — like Chandak Tea of Jaipur).
3. Limited-service Wholesalers:
The wholesalers who do not provide full service, because customers prefer lower prices rather than paying for the services rendered by wholesalers. Thus, they do not provide many services which full-line wholesalers do provide. Some of the limited-service wholesalers are:
4. Cash-and-carry Stores:
A cash and carry store is different from regular retail chains which target professional customers, who have a membership with them, rather than end-consumers. Customers are usually members of the club and pay an annual fee in order to continue their membership. This concept is based around self-service and bulk buying and serves registered customers only.
The core customer groups are hotels, caterers, traders and other business professionals. METRO Cash and Carry India & Wal-Mart Cash & Carry, which are well-known to most people, are a good example of this format. Some of the recent entrants into this format are Carrefour, Reliance Retail, and Subhiksha.
Such stores aim at preventing any intervention by middlemen and require buyers to make their own arrangements and assume all risk. The wholesale prices are cheaper than Mandis. At Carrefour store these are cheaper by 10 to 15%. Secondly, Kirana stores get everything under one roof, saving time and hassle of hopping stores at the local mandi. But the wholesale kiranas have seen a substantial dip in business, wherever cash-and-carry stores of MNCs are opened.
Cash and carry models are able to sell at lower prices because of the basic, no frills format of the stores, volume of sales, low cost location and lower inventory carrying costs. Cash and Carry offers private labels as well as branded goods. The first Cash & Carry format store was opened in India by METRO in 2003. Most of the Indian companies want to tie-up with the International companies, and vice-versa, as 100% FDI is allowed in this format.
This helps the Indian companies to learn the international best practices and technologies. The German company, Metro was the first one to enter the country. If you want to shop in Metro, you need to have a sales tax number with you and it is meant basically for retailers and distributors and not for consumers. And, you cannot shop for less than Rs 1,000 and, in product offerings, you cannot buy two to three, you have to buy six or more pieces of one particular product. Currently, Metro is present in six cities, present in all the Agricultural Produce Marketing Committee (APMC) licensed states.
Cash and carry format requires a strong backend support. Foreign players are looking for joint ventures with local retailers because they are interested in MBOs or retail outlet, apart from cash and carry format. Having an Indian partner gives them local support and they enjoy the chance to capitalize on a network, which is already established by the local player. Mr Rajiv Bakshi, Managing Director, Metro cash-&-carry India.
Most of the purchases for the hotels business happen through a network of purchase managers, who have long-term relationship with, let’s say, 200 suppliers. It is very unorganized. It is a challenge to convert that habit to a unified buying structure in large hotels. Now Metro supplies the Taj and Oberoi on a national basis. This means those guys had to change the entire system of purchasing and orient themselves to one particular supplier.
5. Truck Wholesalers:
Truck wholesalers are also known as truck jobbers. They typically sell a limited line of items to comparatively small buyers. In Delhi, the truckloads are quite common coming from Super Bazaar, Kendriya Bhandar, and Azadpur vegetable Mandhi (during inflationary periods). These trucks sell normally grocery items of daily use only. The trucks go into different colonies and stay for few hours.
6. Drop Shipper:
Drop shipper are those wholesalers who take title to goods but not the delivery. Normally they procure orders from retailers or professional buyers and ask the manufacturer to directly load the goods to the retailer or professional buyers. Thus product saves double loading. It is quite common in the trade of coal, cement, logs, butter and cheese etc.
7. Mail-Order Wholesalers:
Such wholesalers operate similar to mail-order retailers. In India, mail-order retailers are quite popular, but not so in wholesaling.
Manufacturers’ Sales Branches and Sales Offices: Another form of wholesalers may be the manufacturer’s own branches and sales offices. The manufacturer instead of sending goods on consignment or selling to the wholesalers of that city may decide to open its own branch or sales office to cater to the local retailers. While a branch carries the stock with it, a sales office merely books orders and sends booking to the head office, which ships the goods directly to retailers.