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The wholesaling process is an
intermediate step in the distribution of merchandise. Wholesalers on a whole are
organized to sell or arrange the purchase or sale of (a) goods for resale (i.e.,
goods sold to other wholesalers or retailers), (b) capital or durable
nonconsumer goods, and (c) raw and intermediate materials and supplies used in
production.
Wholesalers sell merchandise to
other businesses and normally operate from a warehouse or office. These
warehouses and offices are characterized by having little or no display of
merchandise. In addition, neither the design nor the location of the premises is
intended to solicit walk-in traffic. Wholesalers do not normally use advertising
directed to the general public. Customers are generally reached initially via
telephone, in-person marketing, or by specialized advertising that may include
Internet and other electronic means. Follow-up orders are either
vendor-initiated or client-initiated, generally based on previous sales, and
typically exhibit strong ties between sellers and buyers. In fact, transactions
are often conducted between wholesalers and clients that have long-standing
business relationships.
This sector comprises two main
types of wholesalers: merchant wholesalers that sell goods on their own account
and business to business electronic markets, agents, and brokers that arrange
sales and purchases for others generally for a commission or fee.
(1) Establishments that sell
goods on their own account are known as wholesale merchants, distributors,
jobbers, drop shippers, and import/export merchants. Also included as wholesale
merchants are sales offices and sales branches (but not retail stores)
maintained by manufacturing, refining, or mining enterprises apart from their
plants or mines for the purpose of marketing their products. Merchant wholesale
establishments typically maintain their own warehouse, where they receive and
handle goods for their customers. Goods are generally sold without
transformation, but may include integral functions, such as sorting, packaging,
labeling, and other marketing services.
(2) Establishments arranging for
the purchase or sale of goods owned by others or purchasing goods, generally on
a commission basis are known as business to business electronic markets, agents
and brokers, commission merchants, import/export agents and brokers, auction
companies, and manufacturers' representatives. These establishments operate from
offices and generally do not own or handle the goods they sell.
Some wholesale establishments
may be connected with a single manufacturer and promote and sell the particular
manufacturers' products to a wide range of other wholesalers or retailers. Other
wholesalers may be connected to a retail chain, or limited number of retail
chains, and only provide a variety of products needed by that particular retail
operation(s). These wholesalers may obtain the products from a wide range of
manufacturers. Still other wholesalers may not take title to the goods, but act
as agents and brokers for a commission.
Although, in general, wholesaling normally denotes sales in large volumes, durable nonconsumer goods may be sold in single units. Sales of capital or durable nonconsumer goods used in the production of goods and services, such as farm machinery, medium and heavy duty trucks, and industrial machinery, are always included in wholesale trade.
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