What is a 'Wholesale Trade'

Wholesale trade is an economic indicator that measures the value in U.S. dollars of all merchant wholesalers' sales and inventories. Wholesale trade is one component of business sales and inventories. Only those firms that sell to governments, institutions and other businesses are considered part of wholesale trade.

BREAKING DOWN 'Wholesale Trade'

Wholesale-trade data gives investors a closer look at the consumer economy, as sales and inventory numbers can be a leading indicator of consumer trends. By looking at the ratio of sales to inventories, investors can see whether or not production may grow or slow in the future.

For example, if inventories are growing more slowly than sales, producers will have to make more product so that no shortages occur. Alternatively, if sales growth is slower than inventory growth, there will be an excess of supply, and production should slow in coming months. Because manufacturing is such a large part of GDP, the wholesale-trade data can be a valuable tool for keeping a finger on the pulse of the economy.

Equity markets are positively affected by an increase in production, as corporate profits increase. The bond markets, on the other hand, prefer moderate growth so as to stem inflation.

How Wholesale Trade Is Tracked and Measured in the U.S.

According to the Bureau of Labor Statistics, the wholesale trade sector includes the sale of merchandise that is outputted from manufacturing, agriculture, mining, publishing and some other information industries.

Wholesaling is considered to be an intermediate step in the overall distribution of merchandise and goods. A wholesaler sells or organizes the transaction for the resale of goods to other wholesalers or retailers. They might also arrange the sale or purchase of raw materials, supplies for production, or durable consumer goods.

Typically wholesalers operate from a warehouse or office facility and sell goods to other businesses. Such transactions are rarely done through walk-in business as the operation is not established, nor advertised for, that type of activity. Traditionally, wholesalers do not market their services to the general public. They conduct business with vendors or retailers who are part of the overall supply and sales chain. While wholesale trade is separate from consumer sales transactions, wholesalers are part of the channel that feeds consumer trade. The relationships between wholesalers and their customers may be long-standing with new orders and follow-ups coming in as those retailers and vendors need more merchandise.

The Census Bureau furnishes monthly and annual wholesale trade reports.

RELATED TERMS
  1. Wholesale Money

    Wholesale money refers to the large sums of money lent by financial ...
  2. Wholesale Banking

    Wholesale banking refers to banking services such as currency ...
  3. Wholesaling

    Wholesaling is the act of distributing a product to a reseller, ...
  4. Wholesale Insurance

    Wholesale insurance is coverage for employer groups that are ...
  5. Inventory

    Inventory is the term for merchandise or raw materials on hand.
  6. Vendor

    A vendor is a party in the supply chain that makes goods and ...
Related Articles
  1. Small Business

    When Wholesale Funding Goes Bad

    The wholesale funding process is extremely dependent on the credit markets. Find out why it is not always the best option for a business.
  2. Investing

    Drug Wholesalers Feel Pricing Heat (MCK, ABC)

    Drug wholesalers are feeling a trickle-down pressure from the increased price scrutiny being paid to drug manufacturers.
  3. Insights

    Global Retail Trade: 4 Key Industry Players (WMT, CVS)

    Discover the retail companies that are global key industry players based on annual sales, and gain a brief description and analysis of each.
  4. Insights

    How To Shop At Wholesale Retailers

    Have a plan and think twice before you venture through the sliding glass doors.
  5. Investing

    Economic Indicators You Should Know for Investment

    Economic indicators are some of the most valuable tools investors can place in their arsenals. Understand these investing tools for better market returns.
  6. Insights

    Introduction To Coincident And Lagging Economic Indicators

    Investors can learn a lot, or very little, from these indicators once they know how to use them.
  7. Investing

    Costco Slides Despite Posting a Solid Q4 Beat

    Shares of Costco Wholesale (NASDAQ: COST) fell by 6% on Friday, after the wholesale retailer reported its fourth-quarter earnings. That decline was surprising since the company beat analysts' ...
  8. Investing

    Measuring Company Efficiency To Maximize Profits

    Efficiency ratios can provide indications of profitability, shows how efficiently a company is being managed, utilizes its assets and handles liabilities.
  9. Investing

    Understanding Periodic vs. Perpetual Inventory

    An overview of the two primary inventory accounting systems.
RELATED FAQS
  1. Does working capital include inventory?

    Learn about inventory that is part of current assets and working capital, which is the difference between current assets ... Read Answer >>
  2. Why is it sometimes better to use an average inventory figure when calculating the ...

    For a couple of key reasons, average inventory can be a better and more accurate measure when calculating the inventory turnover ... Read Answer >>
  3. What does a high inventory turnover tell investors about a company?

    Inventory turnover is an important metric for evaluating how efficiently a firm turns its inventory into sales. Read Answer >>
  4. How can a company improve its net margin?

    Learn about what businesses can do to increase their net margin, including ways to increase sales revenue and decrease operational ... Read Answer >>
  5. What financial ratios are best to evaluate for consumer packaged goods?

    Understand various activity and solvency ratios, and learn why these ratios are important when evaluating the consumer packaged ... Read Answer >>
  6. How does inventory turnover affect the cash conversion cycle (CCC)?

    Learn how a company's inventory turnover affects its cash conversion cycle (CCC). Understand why a higher inventory turnover ... Read Answer >>
Trading Center