Day by day the wholesaler’s importance is declining in the business world as an intermediary institution. This is due to many reasons of which introduction of direct retailing by the manufacturers and evolution of large-scale retailing are most important. In order to reduce the cost of marketing their goods and with the ultimate object of securing larger profits by capturing a wider area of markets, the manufacturers now tend to follow the policy of direct selling to the retailers or to the consumers through their own salesmen.
Large-scale retailers also contribute to the diminishing of the wholesaler’s importance. These retailers by-pass the wholesaler in the trade channel. They purchase goods directly from the manufacturer instead of from the wholesaler. Large-scale retailers have enough capital to purchase from the manufacturers in large quantities and hence enjoy economy of bulk purchase. They can buy goods from the producer at cheaper price than from the wholesaler and that is why the whole-salers are avoided by the large-scale retailers.
There are also other reasons. A wholesaler can not push a line as aggressively as can the manufacturer and hence will not usually secure as large a sales volume as the manufacturer could with his own salesmen. The wholesaler is very slow in introducing a line to his customers. It may be a month before his salesmen or customers to know that the article is in stock, and another month or two before the salesmen begin pushing it. The manufacturer with a new product may use specially or detail men to get it into retail stores.
There are two broad but basic reasons for the comeback of the merchant wholesaler. One is a fuller realisation of the true economic worth of his services. The other is the general improvement and modernisation of his management methods and operations. The bandwagon to eliminate the ssholesaler proved to he a blessing in disguise. Many firms tried to by-pass the wholesaler and came to realise that the net result was unsatisfactory.
They could not perform some of the wholesaling functions at all, or they found the cost prohibitive. Eliminating the wholesaler did not automatically reduce the cost of marketing. In many cases it became evident that the wholesaler was able to provide the manufacturers and retailers more and better services and to provide them more efficiently and at a lower cost than these firms themselves could.
Wholesalers are still the controlling force in the channels used by many firms. These producers are totally dependent upon the service wholesaler or some other type of wholesaling middlemen. We must not conclude however that only low cost wholesaler can survive in the competitive market. Even seemingly high cost wholesalers are thriving. A high operating cost-ratio is not necessarily a result of inefficiency. Instead it is usually a result of more and better service Many wholesalers’ costs are high only because they offer an established distribution system and many other services which ease the producers’ marketing and financial burdens.
In conclusion we can say that the wholesalers position seems reasonably secure. His elimination is justified only when the alternative channel structure is more effective and less costly. As long as there are many small scale producers located long distances from many small scale retailers, who, in turn, are located in widely scattered, sparsely populated markets, there will be a real need for wholesalers. Because these mar-ket conditions undoubtedly will exist for some time to come, it looks as if the service wholesaler truely is here to stay.
