What Are Wholesalers: Definition and Types

What Are Wholesalers?

A wholesaler is a person or a company that buys goods from manufacturers in bulk quantities and supplies them to retailers at a profit.

Wholesalers are a crucial part of any product distribution channel. They are the middlemen in the supply chain, connecting manufacturers or distributors with retailers. 

How Do Wholesalers Earn Money?

Wholesalers earn money by buying large quantities of products and selling them at a slight markup. 

Example

A headphone manufacturer is selling headphones at a price of $15 per unit. A wholesaler buys 1000 earphones from the manufacturer. This costs $15000. 

The wholesaler then further sells the earphones to retailers for $16 per piece. That’s $16000.

So, the total profit of the wholesaler is: 16000 – 15000 =  $1000

By selling 1000 earphones, the wholesaler will be able to earn a $1000 profit. 

What Are Online and Offline Wholesalers?

Online wholesalers, as the name indicates, use online platforms such as business websites and wholesale marketplaces for their business. 

However, offline wholesalers only use their brick-and-mortar stores to sell their products. 

Types of Wholesalers (Service Based)

Next comes the different types of wholesalers according to their services and specializations.

Merchant Wholesalers

These are the types of wholesalers who buy merchandise in larger quantities from the manufacturer. Merchant wholesalers then resell it to retailers, other wholesalers, businesses, or government institutions (anyone other than consumers). 

They are further classified as:

• Full-Service Merchant Wholesalers

These wholesalers are responsible for end-to-end interactions between manufacturers and retailers. Other than selling products, they are responsible for product promotion and gathering market information.

• Limited Service Merchant Wholesalers

These wholesalers provide a limited set of services. Drop shippers, cash-and-carry wholesalers, mail-order wholesalers, etc. fall under this category. 

Brokers/Agents 

Broker wholesalers work on behalf of manufacturers and hunt potential customers for their products. These agent wholesalers link manufacturers with retailers and receive a commission for their work.

Manufacturer Wholesalers

Next comes the manufacturer wholesalers. They manufacture their goods and sell them to retailers. 

These wholesalers usually don’t deal with the products manufactured by other companies. 

Retail Wholesalers

Retail wholesalers are the ones who not only sell products to the retailers but can also directly supply to consumers. 

Types of Wholesalers (Specialization Based)

General Wholesalers

General wholesalers deal with a wide range of products obtained from different manufacturers. They don’t deal with a single product line and have a huge variety of products.

A single general wholesaler could be selling groceries, drugs, and cosmetics at the same time. 

General Line Wholesalers

These wholesalers carry a complete stock of one type of merchandise. 

Despite selling only a specific type of product, general line wholesalers add variety by sourcing products from different manufacturers. 

FAQs 

Q1: What is the difference between wholesalers and retailers?

Ans: Wholesalers buy products from manufacturers or distributors in bulk and then sell these products in bulk to retailers. Retailers buy products in bulk from wholesalers and sell them to consumers.

Q2: What are the benefits of wholesale?

Ans: Some benefits of wholesale include:

• Little or no need for product marketing or advertisement
• The wholesale business offers a high-profit margin.
• Market competition is low in wholesale.

Q3: What is the profit margin for wholesalers?

Ans: The profit margin for wholesalers may vary according to the type of product they are dealing in. Typically, wholesale profit margin ranges from 30-60%.