Functions of a Wholesale Broker
Although the job of a wholesale broker may look simple from the outside, it is not the case. A wholesale broker has to take risky decisions continuously, and a simple-looking process of buying from a manufacturer and selling it to retailers includes multiple complex steps. Following are the functions that a wholesaler has to perform:
Buying and assembling – A wholesale broker buys goods in bulk from various manufacturers to assemble them in one place.
Storage – Since there’s a significant time gap between buying goods from the manufacturer and selling it to retailers, a wholesale broker must store the goods properly in warehouses.
Grading and Packaging – A wholesale broker has to grade the products according to their quality and package them before transporting them.
Transportation – A wholesale broker sells goods to multiple retailers, and it’s the wholesale broker’s responsibility to transport the goods to these retail shops.
Financing – A wholesale broker has to pay manufacturers in advance often when ordering goods, and the broker often provides credit to retailers who can’t pay for the goods straightaway.
Risk management – A wholesale broker has to deal with many risks daily. For example, the goods in the warehouses could get damaged; goods could get damaged while transporting. There are other market risks like a sudden change in demand or prices of the goods. There’s also the risk of retailers defaulting on their loans.
Studying the market – A wholesaler is in direct contact with retailers and thus knows the market trends and which products are rising in popularity. He can share the information with manufacturers.
Types of Wholesalers
There are multiple types of wholesalers, and each operates differently. Three types of wholesalers are listed below:
Merchant Wholesalers – This is the most popular kind of wholesalers. They buy products from multiple manufacturers at a low price in bulk and sell them to retailers at a higher price.
Brokers – Brokers serve as the middlemen between the manufacturers and retailers. They design a deal that suits both parties and earns from the commission.
The Effect of the Internet on Wholesalers
Due to the massive popularity of the internet and e-commerce websites such as Amazon, wholesaling faces the threat of extinction in the future. The desire to cut the middleman was always present among intermediaries and retailers, but it’ s becoming a reality with the internet. Large online corporations buy from the manufacturers themselves and have warehouses of their own. Therefore brick and mortar stores get replaced by large corporations online, wholesalers see their business going extinct.
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