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What Does a Wholesaling Company Do

Understanding a wholesaling business

Wholesaling companies have very close relationship with manufacturers and they are responsible for product acquisition. These companies usually have very high capital investments and can hugely benefit from economies of scale. Economies of scale happen when one buyer arranges regular or big orders with one manufacturer, who will gran the buyer unique prices and discounts for the scale of their orders. By getting lower acquisition costs, they are able to resell these products at lower prices than the competitors.

However, the capital needed to start a wholesaling company is usually very high, since it requires to ensure big orders to achieve economies of scale with their manufacturers. Furthermore, the inventory risk tends to be very high as well.

What does bulk packaging mean?

Bulk packaging is also referred as tertiary packaging. This kind of deliveries happen when the destination has ordered several items that need to be protected and packed together. Bulk packaging is very common in wholesaling companies, who usually order hundreds of products of different nature to the same destination. Bulk distribution companies will ensure proper packaging to protect the products during the journey to the client.

Difference between wholesalers, distributors and retailers

Wholesalers

Wholesalers usually acquire huge quantities of items from the manufacturers or distributors. By purchasing big quantities of products, they will increase their buying power and the power of negotiation as well. As it happens in every economy, larger orders will get better prices. Wholesalers purchase any kind of products in big quantities such as clothing, computers, smartphones and others and their objective is to resell these products to smaller retailers.

Distributors

Distributors usually have exclusive buying agreements with manufacturers and they are responsible to help manufacturers to cover certain business areas around the world. Distributors can also be considered as retailers at some point, since they are not manufacturers, but the selling hand of the manufacturers instead. Furthermore, a single manufacturer can have agreement with several product distributors to cover wider areas or regions.

Retailers

Finally, retailers are companies that have direct contact with the final customer. Retailers can be small city shops or huge selling platforms. The main distinction between retailers and wholesalers is that the first usually sell single products to the final customer, whereas the latest are in charge of selling huge quantities to other stores and shops. Therefore, retailers usually depend on wholesalers and distributors for their product acquisition. Retailers become the customer of wholesalers and distributors.