Wholesale Formats: Part 1

Considering the criteria by which wholesalers can be categorized, it is not surprising many different wholesale formats exist. Below we discuss ten wholesale formats. While many of these wholesalers also have an online presence, we do not distinguish an “e-wholesaler” as a separate format the way we did with “e-tailers” or online retailers. The reason? While most wholesalers do operate from a brick-and-mortar facility, few wholesale operations permit customer shopping at their facility. Thus, the nature of industry for many years has been to have customers use communication tools (e.g., phone, fax) to place orders. With the wholesale industry, the internet simply serves as another communication option rather than a significantly different distribution channel.

General Merchandise

These wholesalers offer broad but shallow product lines that are mostly of interest to retailers carrying a wide assortment of products, such as convenience stores, and smaller general merchandise stores, such as those offering closeout or novelty products. Since these wholesalers offer such a wide range of products, their knowledge of individual products may not be strong.

Specialty Merchandise

Many wholesalers focus on specific product lines or industries and, in doing so, supply a narrow assortment of products.  However, within the product lines offered there is considerable depth. Additionally, these wholesalers tend to be highly knowledgeable of the markets they serve.

Contractual

In the Distribution Decisions Tutorial, we introduced the concept of wholesaler-sponsored channel arrangements where a wholesaler brings together and manages many independent retailers. The services of these contractual wholesalers are supplied only to the retailers involved in the contractual arrangement.

Industrial Distributors

The industrial distributor directs their operations to the business customer rather than to other resellers. Depending on the distributor, they can carry either broad or narrow product lines.

Cash-and-Carry

A wholesale operation common to the food industry is the cash-and-carry. Historically, this wholesale format involved buyers visiting a wholesaler’s facility where they selected their orders, paid in cash, and then handled their own deliveries (i.e., carry) to their place of business. Today many cash-and-carry wholesalers do not limit payment to cash only and instead accept credit card payment. This form of wholesaling has begun to expand outside of the food industry as large wholesale clubs, such as Costco and Sam’s Club, allow qualified businesses to purchase products intended for retail sale.

Wholesale Categories: Product Ownership
Wholesale Formats: Part 2