Wholesalers obtain large quantities of products from producers, store them, and break them down into cases and other smaller units more convenient for retailers to buy, a process called “breaking bulk.” Wholesalers get their name from the fact that they resell goods “whole” to other companies without transforming the goods. If you are trying to stock a small electronics store, you probably don’t want to purchase a truckload of iPods. Instead, you probably want to buy a smaller assortment of iPods as well as other merchandise. Via wholesalers, you can get the assortment of products you want in the quantities you want. Some wholesalers carry a wide range of different products. Other carry narrow ranges of products.
Most wholesalers “take title” to goods—or own them until purchased by other sellers. Wholesalers such as these assume a great deal of risk on the part of companies further down the marketing channel as a result. For example, if the iPods you plan to purchase are stolen during shipment, damaged, or become outdated because a new model has been released, the wholesaler suffers the loss—not you. Electronic products, in particular, become obsolete very quickly. Think about the cell phone you owned just a couple of years ago. Would you want to have to use it today?
There are many types of wholesalers. The three basic types of wholesalers are merchant wholesalers, brokers, and manufacturers’ agents, each of which we discuss next.