channels - whole selling

8/8/2019 Channels - Whole Selling

http://slidepdf.com/reader/full/channels-whole-selling 1/27

Channel Institutions -Wholesaling

1



2

Learning Objectives Understand functions of a wholesaler

Understand various classes of

wholesalers

Major wholesaling decisions

Benefits and limitations of wholesalers

Understand about a ± distributor inmore detail

Trends in wholesaling practices



3

Need for Wholesalers

Widespread economy ± consumers can onlyreached by thousands of retailers (except for

consumer durables and industrial products) Reaching these retailers by a company

directly is not possible (except for consumer durables and industrial products)

Hence the need for wholesalers in two forms: ± Well established free-lance wholesalers

± Contracted distributors, stockists and agents

Characteristics«.



4

Characteristics of Wholesalers Operate on large volumes but with chosen

group of products

± Food, grocery, pharma or automobile spares etc The company itself, contracted parties or free

lancers, can operate as wholesalers

Mostly B2B business ± trade and institutions

Wholesaler could also be a retailer ± in ruralmarkets ± W/s sells to other retailers and alsoto consumers



5

Characteristics of Wholesalers Sell physical inputs or products ± tangible

goods ( Ws in some service industries)

Optimise results, maximise service(effectiveness) and minimise operating costs

(efficiency)

Buy goods for resale, keep inventory, take

risks of price changes, negotiate terms,

procure orders, deliver and extend credit.

D efinition«



6

Definition

Wholesaling is concerned with the

activities of those persons or

establishments that sell to retailers andother merchants and / or industrial,

institutional and commercial users but

do not sell in large amounts to

consumers ± US Bureau of Census

D elivering value«



7

Delivering Value

Keep goods accessible to customers

instantly

At times, get together to bargain for

better terms

Pass on benefits or incentives to their

customers

Have a wide trading area



8

Difference with Retailers

Not too worried about location, ambience or promotions ± prefer to be in the main market

Deal with other businessmen and notconsumers

Deal with a specific group of products only

Much larger trading area

Much larger transactions with suppliers andcustomers

Believe in low margins but high volumes.

F unctions«



9

Functions of Wholesalers Varies in degree between free-lance,

company distributors and stockists / agents

Sales and promotion of chosen companyproducts

Buying the assortment of goods

Breaking bulk to suit customer requirements Storage and protection of goods till sold



10

Functions of Wholesalers Grading and packing of commodities

Transportation of goods to customers

Financing the buying of customers

Bearing the risks associated with thebusiness

Collecting and disseminating marketinformation to both suppliers andcustomers



11

Types of Wholesalers Full service: stocking, selling, offering credit,

delivery and business assistance (company

distributors, wholesale merchants) Limited service: range of service is limited

(examples include Metro C&C, mail order)

Merchant w/s: independent businesses

Brokers and agents: bring buyer and seller together ± do not take possession of goods

Others: agri business, auction companies etc



12

Limitations of Wholesalers

Some of them do not give completeinformation to suppliers for selfish reasons

Cannot be relied on to do equitable

distribution At times, do not want company and

customers to meet

Tend to hoard goods and influence pricing

Consumers have no say in pricing or qualityin a w/s dominated system

M ajor decisions«



13

Major WholesalingD

ecisions Which markets to operate in

Manpower to employ

What products to sell

Pricing decisions / Promotional support

Credit and collections

Image and customer perception Warehouse location and design

Inventory Control



14

Favourable Factors

Companies have limitations in market / outletcoverage. Wholesalers are required to fill thegaps

Hundreds of small companies who cannotafford to set up distribution networks ± needto depend on wholesalers

In food grains, fruits and vegetables ± hardly

any organised distribution network.Wholesalers help move goods from farm gateto consumers



15

Favourable Factors

Big companies also need wholesalers toget big volumes

W/s extend credit to customers.

Companies cannot match this Retailers have to visit w/s markets to

buy food grains, cereals and pulses ±

buy a lot more.

U nfavourable«



16

Unfavourable Factors Companies coverage focus on retailers

and institutions through their distributors

Using modern retail formats aswholesalers

More outlets like Metro C&C being

encouraged Enforcing strict price control so that w/s

do not sell below company prices.



17

Distributor

Is a wholesaler nominated by a company to

exclusively re-distribute the company

products to its customers in a designatedterritory. He does not deal in competitor¶s

products. Does not sell from his premises.

Extends credit selectively.

± A redistribution stockist for HLL

± A distributor for Philips lighting division

± A distributor for L&T engineering division



18

Dealer

Role similar to a distributor but ± May not have a clearly defined territory and may

sell both in the market and from his shop ± May deal with competitive products also

± Extends credit selectively.

± Dealers in industrial products may have better defined roles.

Examples: ± Dealer for an edible oil company

± A dealer for garment brands



19

Stockist May be working for a company with a

designated territory but does not re-

distribute the stocks. Sells from hispremises. Extends credit selectively.

± A stockist for paper products

± A stockist for automobile spares

Re-distribution is visiting customer premises to sell products

M anaging distributors«.



20

Managing Distributors

The principles are similar across

industry verticals. FMCG is the most

complex.

Has the capacity to maximise sales andmarket shares.

Has to ensure buying goods from the

company and re-distribution to the trade



21

Managing Distributors

Distributor responsibilities include: ± Buying adequate quantities by Stock Keeping Unit

(SKU) for redistribution

± Ensuring full market coverage of all customers in

the territory assigned to him ± Help finance the operations ± pays for the goods

upfront but extends credit to his customers

± Maintaining inventory of company productsadequate at all times to service the market

± Assist company in its promotional efforts

W hy necessary?«.



22

Need for

Distributors Under three circumstances:

± For entering a new town

± For additional coverage in the same town

± For replacing an existing distributor For entering a new town, assess the potential

for business to decide: ± If the town can sustain a full fledged distributor

± The number of distributors required Starts with a town profile of potential, number

of customers to be serviced and thecompetition.

Cost of servicing«



23

Cost of Servicing Cost benefit of using distributors to be

assessed ± Logistics cost of serving the market

± The number of customers to be covered bycategory ± wholesalers, retailers, institutions

± Frequency of visits to markets and outlets

± Sales revenue estimate from each visit

± Markets to be covered with ready stocks or order

booking for later delivery ± Likely collections during each visit ± gives an idea

of the credit requirements

Exp ectations«



24

Expectations from a

Distributor To be stated at the start of the relationship

Helps get the right kind of distributor also

± Achieving sales targets ± volume, value and packs ± Financial commitment on inventory and credit

± Investment in infrastructure ± space, vehicles

± Manpower ± front line and back office

± Distribution effort ± market and outlet coverage asper a beat plan with productive calls

± Developing new markets and new accounts

± Managing key accounts and institutional business



25

Expectations from a

Distributor Merchandising and displays in the market

Secondary sales efforts and tracking ± critical

for fmcg and pharma (secondary sales issales from the distributor to the outlets in the

market)

Effectively handling promotions and schemes

initiated by the company

Managing damaged stocks



26

Expectations from a

Distributor Organising and participation in promotional

events

Assist company in making a success of launching new products and packs

Handling consumer quality complaints

Handling statutory requirements on behalf of

the company Payments and remittances promptly to the

company



27

Key Learnings Wholesalers are required to reach hundreds

of customers and retailers

Wholesaler business is usually B2B Wholesalers can be free-lance or appointed

by companies ± like distributors

Company distributors are bound by strict

operating norms Future of wholesalers in India still seems

favourable

channels - whole selling

Documents