What is 'Wholesaling'

Wholesaling is the sale and distribution of goods to specific customer types such as those most commonly referred to as resellers. Resellers are traditionally retailers, other wholesalers or merchants who will resell the good to an end user. Certain industrial, commercial and institutional customers also qualify, as the goods are often a component of a different end product.

BREAKING DOWN 'Wholesaling'

Wholesaling often occurs when large quantities of merchandise are purchased, referred to as purchasing in bulk, with the intent of reassembling, sorting, repackaging or distributing the goods in smaller lots. Due to the volume of the purchase, the price of the goods is often lower than the price offered to retail consumers. A wholesaler can also be a business that acts as a middleman, brokering deals between businesses that produce certain components that are not intended for immediate sale on the open market.

Wholesaler Offerings

A wholesaler may specialize in the distribution of one product, or product category, or may offer a variety of goods. Additionally, a wholesaler may do business with particular business types or may have a more open selling policy. Wholesalers are often not involved in the actual production of goods, instead focusing on tasks more associated with distribution.

In contrast to the services offered by an official distributor for a particular good or business, a wholesaler is unlikely to offer higher levels of product support. This is because a wholesaler is generally not supported directly by the company from which it purchases products and may have limited familiarity with the intricacies of the products themselves. Additionally, a wholesaler may be involved in the selling of competing products, which is generally not the case with a distributor.

Wholesaling in Banking

In banking, the term wholesaling refers to services that are designed for large, institutional clients, including real estate developers, pension funds and large corporations, as opposed to retail banking, which provides services to standard, individual customers. A wholesaler can also be a sponsor of a mutual fund or act as an underwriter in a new issue.

Wholesaling within the Supply Chain

Wholesaling is one step in the supply chain, which includes suppliers, manufacturers and retailers. Retailers and other users purchase goods from wholesalers and then sell the products at a higher price to cover costs and generate profits. Supply chain management (SCM) was developed in the 1980s to address the need to maximize efficiency in the business processes involved in moving goods from original suppliers to end users.

Mutual Fund Wholesaling

The wholesaler of a mutual fund is one of several parties who work to give access to the fund to investors. The asset management company, which develops and makes investing decisions for the fund, employs a mutual fund wholesaler, also known as a mutual fund representative, to sell the product to resellers. Typically, the wholesaler is a salesperson, but the role increasingly involves consulting and publishing. In turn, the reseller, or distributor, typically earns commissions by selling the product to the end consumer. Wholesalers compensation derives from the fees of the mutual fund they sell. 

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