Question

Discuss the issues associated with by-passing the wholesaler.

Answer 1

A wholesaler is basically the link between a manufacturer and a retailer. Wholesaler acts as middleman and acquires products in large quantities from manufacturers, farmers, etc and stores them in warehouses. Then they sell these to the retailers and retailers sell these products to end consumers from either their stores or through e-commerce websites.

Now the question is should manufacture sell directly to retailers and bypass wholesalers altogether. There are a lot of issues that could happen if the wholesalers are bypassed.

Offering Valuable Data
Wholesalers offer valuable data concerning the customers’ tastes, fashions, and demand to makers so the manufactures could make tweaks to their production and do not face any loss. So their existence is important for the manufacturers.

Possessing Specialized Knowledge
Wholesalers produce a more robust demand for products than retailers since they deal with fewer types of goods and additionally possess specialized data of products they deal with. Therefore a wholesaler’s existence is incredibly necessary.

Providing products on credit to retailers
Wholesalers relieve retailers from several botherations. Wholesalers are the ones who collect different types of goods from a lot of different makers and therefore give a choice to the retailers. Wholesalers do not expect cast payment instead they provide goods to the retailers on credit and in turn, they help to solve any kind of issue of retailers related to money. So eliminating them could become a problem for the retailers.

Smooth flow of goods
Business requires a smooth flow of goods and services and wholesalers are the ones who buy from producers and sell to retailers in a smooth manner. That is why eliminating them could become a problem for businesses because they are crucial links in the distribution chain.

Eliminating the need for warehousing
A wholesaler purchases products from the manufactures in huge quantities and stores them in warehouses for safekeeping until they are sold to retailers and then to the consumers. Doing so they eliminate the need for warehousing for the retailers. So in that way wholesalers are essential for retailers.

Making Cash payments instead of credit
Wholesalers purchase goods by making money in cash however sell on credit. The same couldn't be aforementioned for retailers as a result of retailers choose to purchase the goods on credit rather doing a money payment. Thus Wholesalers facilitate makers financially.

Bridge the Gap between Producers and Retailers
There is a space that is empty within the distribution link between the producers and the makers and middlemen are the ones who fill this gap by acting as a link between them. Retailers cannot buy from producers because of insufficient funds and producers need to sell the product in order to make sure that they have money to keep the production running so that is why wholesalers are important to the producer as well as retailers.

No Problem of Marketing
The biggest merit of distributors is that one doesn't must do abundant promoting as retailer’s orders are usually fixed in quantity. It's the producer or company that markets the merchandise and wholesaler got to supply this to retailers. Thus there's no pressure of achieving a monthly target or doing any intensive promotion and distributor must concentrate solely on getting and up keeping the products till retailers take goods from them.