What functions do wholesalers perform for manufacturers?

Answer Details

A wholesaler is a middleman who buys goods in large quantities from manufacturers and sells them in smaller quantities to retailers. In doing so, the wholesaler performs the following functions for the manufacturer:

• Provides a ready market: by buying in bulk the wholesaler relieves the manufacturer of the burden of searching for many small buyers.
• Bulk purchase and storage: the wholesaler takes large output off the factory, holds stock in warehouses, and so frees the manufacturer's storage space.
• Finances the manufacturer: prompt cash payment on collection gives the manufacturer working capital to continue production.
• Bears risks: once goods are bought, the wholesaler carries the risks of price fall, damage, deterioration and theft.
• Distribution: the wholesaler breaks bulk and spreads the goods to scattered retailers, sparing the manufacturer the cost of wide distribution.
• Provides market information: the wholesaler advises the manufacturer on consumer taste, quality and demand, guiding production decisions.
• Advertising and promotion: the wholesaler helps publicise and promote the manufacturer's products.
• Stabilises prices: by holding stock and releasing it steadily, the wholesaler helps even out supply and price fluctuations.