Know the benefits and disadvantages of wholesale trade
We are a network of Leonese manufacturers specializing in wholesale sales, and for that reason, we decided to let each of our potential customers know, what are the benefits and disadvantages of the wholesale trade? So this issue will give you clarity to make smarter purchases and this way you get results with more benefits; Since from the identification of these differences you will be able to increase the possibilities to grow your business in a sustainable way.
When talking about advantages and disadvantages, we first have to define what is Wholesale Trade, according to several authors can be summarized as a form of trade where the goods or products are bought and stored in large volumes determined by lots of According to the range obtained. An important difference is that these products will not be sold to the final customer, but will be destined to intermediaries, who are in charge of selling them and distributing them in an individual and personalized way to the final customer.
Thanks to this definition some advantages can be highlighted, which influence the structure of the markets in an important way, which are:
Full-Service Wholesale Merchant:
This type of trader buys the goods and resells them at a higher price. In most cases, it offers service of transport of the merchandise to the premises of the retail clients.
This merchant is responsible for establishing the necessary contacts with those interested in buying the products and stimulates the demand for them. They usually maintain a lot of stored inventories, provide loans, give administrative advice to their clients and provide them with market information.
Limited Service Merchant Limited:
They also buy the goods and resell them, establish contact with potential customers, maintain large amounts of inventories and offer transportation, but they will not give administrative advice, or provide market information, in addition to not providing credit and stimulating demand is limited.
They seek to exercise total control over the sale of their products, and because they will occasionally be given at a lower price, these manufacturers make wholesale sales to intermediaries. In this case, there is no administrative advice, nor do they provide segmented information of the potential market. This type of trader usually gives credit to the middleman, as long as there are balanced agreements between both and the "win-win" for the business.
This actor does not buy the products to resell them, but that receives a commission by placing them to the retailers. It can be said that he is a worker of the manufacturer. They usually have a more precise knowledge of the market and share it with the buyer, so that the transaction is easier and in this way, the buyer feels more confident about what type of product he is buying.
Once we have developed the advantages offered by the wholesale trade through the participation of the various players who are involved in the development of the market. Therefore, it is now time to point out the main disadvantages and disadvantages that the wholesale trade may present, so we define the following:
Reduction of levels of profitability of production:
The manufacturers, who know the process through which the product will pass since it has reached the hands of the intermediaries, who added their corresponding profit margin, and once the market price has been determined, there will be a decrease (sometimes, In a considerable way) in a portion of a profit that ensures the competitiveness of the products, and that the profit margin is not affected in a way that equals or losses.
It is important, once we know the advantages and disadvantages of wholesale trade, that these types of companies play a key role in the supply chains and agglomeration economies that occupy a strategic position in the distribution channels. Which will have to the effect a cycle of commerce more effective, but always taking into account that there are flaws that can stop the different mechanisms of potential growth in the market interactions.