When consumers purchase goods, they usually buy them from a retail establishment, such as a supermarket, department store, gas station, or Internet site. When retail establishments, other businesses, governments, or institutions-such as universities or hospitals-need to purchase goods for resale, equipment, office supplies, or any other items, they normally buy them from wholesale trade establishments.
Wholesale trade firms are essential to the economy. They buy large lots of goods, usually from manufacturers, and sell them in smaller quantities to businesses, governments, other wholesalers, or institutional customers. They simplify product, payment, and information flows by acting as intermediaries between the manufacturer and the final customer. They store goods that neither manufacturers nor retailers can store until consumers require them. In so doing, they fill several roles in the economy. They provide businesses a nearby source of goods made by many different manufacturers; they provide manufacturers with a manageable number of customers, while allowing their products to reach a large number of users; and they allow manufacturers, businesses, institutions, and governments to devote minimal time and resources to transactions by taking on some sales and marketing functions-such as customer service, sales contact, order processing, and technical support-that manufacturers otherwise would have to perform.
The wholesale trade industry is divided into three sectors: Merchant wholesalers, durable goods; merchant wholesalers, nondurable goods; and wholesale electronic markets and agents and brokers.
Firms in the merchant wholesalers, durable goods sector sell capital or durable goods to other businesses. Merchant wholesalers generally take title to the goods that they sell; in other words, they buy and sell goods on their own account. Durable goods are new or used items that generally have a normal life expectancy of 3 years or more. Establishments in this sector of wholesale trade are engaged in wholesaling durable goods, such as motor vehicles, furniture, construction materials, machinery and equipment (including household appliances), metals and minerals (except petroleum), sporting goods, toys and hobby goods, recyclable materials, and parts.
Firms in the merchant wholesalers, nondurable goods sector sell nondurable goods to other businesses. Nondurable goods are items that generally have a normal life expectancy of less than 3 years. Establishments in this sector of wholesale trade are engaged in wholesaling nondurable goods, such as paper and paper products, chemicals and chemical products, drugs, textiles and textile products, apparel, footwear, groceries, farm products, petroleum and petroleum products, alcoholic beverages, books, magazines, newspapers, flowers and nursery stock, and tobacco products.
Firms in the wholesale electronic markets and agents and brokers sector arrange for the sale of goods owned by others, generally on a fee or commission basis. They act on behalf of the buyers and sellers of goods, but generally do not take ownership of the goods. This sector includes agents and brokers as well as business-to-business electronic markets that use electronic means, such as the Internet or Electronic Data Interchange (EDI), to facilitate wholesale trade.
Only firms that sell most of their wares to businesses, institutions, and governments are considered part of wholesale trade. As a marketing ploy, many retailers that sell mostly to the general public present themselves as wholesalers. For example, “wholesale” price clubs, factory outlets, and other organizations are retail establishments, even though they sell their goods to the public at “wholesale” prices.
The size and scope of firms in the wholesale trade industry vary greatly. Wholesale trade firms sell any and every type of good. From wholesale trade firms, customers buy goods for use in making other products, as in the case of a bicycle manufacturer that purchases steel tubing, wire cables, and paint; for use in the course of daily operations, as when a corporation buys office furniture, paper clips, or computers; or for resale to the public, as does a department store that purchases socks, flatware, or televisions. Wholesalers may offer only a few items for sale, perhaps all made by one manufacturer, or they may offer thousands of items produced by hundreds of different manufacturers. Wholesalers may sell only a narrow range of goods, such as very specialized machine tools, or a broad range of goods, such as all the supplies necessary to open a new store, including shelving, light fixtures, wallpaper, floor coverings, signs, cash registers, accounting ledgers, and perhaps even some merchandise for resale.
Besides selling and moving goods to their customers, merchant wholesalers may provide other services to clients, such as the financing of purchases, customer service and technical support, marketing services such as advertising and promotion, technical or logistical advice, and installation and repair services. After customers buy equipment, such as cash registers, copiers, computer workstations, or various types of industrial machinery, assistance may be needed to integrate the products into the customer’s workplace. Wholesale trade firms often employ workers to visit customers, install or repair equipment, train users, troubleshoot problems, or advise on how to use the equipment most efficiently.