A merchant wholesaler is an intermediary who buys goods from manufacturers and sells them to third parties – retailers, businesses, government institutions, or other wholesalers. Merchant wholesalers are irreplaceable participants of indirect sales.
The video below from the Lagos State Employment Trust Fund explains what a merchant wholesaler is, what place it takes during indirect sales, and how it differs from retailers and distributors.
This concise guide will help you understand the concept of what a merchant wholesaler does. We’ll explore the types of wholesalers, list some companies, and provide an example. Let’s start by learning about the difference between a merchant and an agent wholesaler.
Merchant Wholesaler vs. Agent Wholesaler
Merchant wholesalers and agent wholesalers are the two main types of intermediaries in indirect sales. The main difference between them is ownership of the products they sell. While merchant wholesalers take the title for the goods they sell, agent wholesalers only earn commission fees for their sales.
You can encounter both merchant and agent wholesalers in various industries, including clothing, electronics, furniture, hardware, and so on. However, merchant wholesalers are believed to be the more common type of intermediaries.
The term “merchant wholesalers” encompasses quite a large variety of companies with different characteristics. Read on to explore the main types of merchant wholesalers.
Types of Merchant Wholesalers
Generally, there are two types of merchant wholesalers: full-service wholesalers and limited-service wholesalers. Let’s unveil the main differences between them.
Full-service Merchant Wholesaler
Full-service wholesalers perform end-to-end interactions between manufacturers and retailers. They buy goods, divide, store, and deliver them to shops. Apart from that, this type of wholesalers take care of the financial part of reselling, promote their products, and collect market information.
Finally, they bear all the risks of indirect sales. If a consignment went bad during transportation or storage, it’s a full-service wholesaler who will incur the losses.
Limited Service Merchant Wholesaler
This type of intermediary only provides a limited set of services. Based on them, we can divide these wholesalers into several groups.
- Cash-and-carry wholesalers deliver goods to their selling points, where retailers and customers can buy those products.
- Truck wholesalers deliver a small number of products to retailers and customers. You can encounter them at markets.
- Rack jobbers buy and stock goods for stores, fill the shelves in shops, and keep inventory.
- Drop shippers don’t participate in delivering goods at all. They market products and take orders via websites or landing pages.
- Mail-order wholesalers sell goods to retailers or customers through catalogs. Usually, they send these catalogs through the mail.
Merchant wholesaling is a large industry with lots of significant players. However, most of them are unknown to end customers. Next, we’ll unpack some of the companies operating in the US market.
Merchant Wholesaler Companies
Typically, a merchant wholesaler operates in a specific region. Below is a list of companies that work in the US.
- McLane distributes grocery and non-food supplies to stores, retailers, and restaurants throughout the United States.
- AmerisourceBergen supplies pharmaceuticals, health care products, medical equipment to hospitals, and more to the US and UK markets.
- Core-Mark is one of the largest wholesalers of fresh groceries to convenience stores in the USA.
- Eby-Brown distributes groceries, tobacco, and candy to the convenience stores in the United States.
- The H. T. Hackney Company operates in the Eastern US and specializes in snack foods, tobacco, oil, and beverages.
We’ve already discussed what merchant wholesalers are, what categories they belong to, and what players are on the market. To shed more light on the wholesaler process, we’ll take a look at an example.
Merchant Wholesaler Example
The American wholesalers, Allen Brothers, specializes in steaks and other meat products. The company buys meat from manufacturers in the Midwest.
In the next step, the wholesaler processes the meat – selects the most suitable pieces, ages the beef, cuts custom portions, freezes them, and so on. The company receives orders and delivers meat to steak houses and restaurants across the country. Apart from that, Allen Brothers also sell their products to individual customers through its website.
So, Allen Brothers buy from manufacturers, sorts and processes products, stores, and delivers them. It’s a typical example of a full-service merchant wholesaler approach.
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References
- The article “Types of merchant wholesalers” by Business Marketing will give you more information about different kinds of wholesalers.
- For more market players, follow the “List of wholesale companies” by Ranker.
Last Updated: 22.03.2023
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