Should wholesalers be removed? Some critics of wholesalers are of the view that wholesalers should be removed. They are of the opinion that the Institution of wholesalers is the useless and avoidable link between the manufacturers and retailers and therefore. It should be eliminated immediately.
Before coming to the conclusion on this question, we shall study the arguments against wholesalers and in favor of wholesalers.
The details in this regard are as follows:
Arguments Against Wholesalers
Critics of wholesalers are of the opinion that there is no need for wholesalers in marketing the products.
They argue that the Institution of wholesalers increases channel of distribution unnecessarily. They further argue that it increases the cost and prices of a product.
Therefore, it must be eliminated immediately keeping in view the interests of manufacturers and Consumers.
Important arguments of the critics of wholesalers are as under:
1. There is No Need of the Services of Wholesalers
The very first argument of critics of wholesalers is that particularly there is no need for services of wholesaler.
They argue that most of the manufacturers use their own brand and Trademark for their products.
It has also been the experience that the importance of advertisement and sales promotion is being realized by the manufacturers and they are stressing upon advertisement and sales promotion.
It has enabled manufacturers to supply their goods direct to the retailers, and therefore, there is no need for the services of wholesalers.
2. Trend of Direct Marketing of Goods from Producers to Consumers is Developing during Recent Years
It has been the experience during recent years that multiple shops, departmental stores, and Super Bazar are becoming very popular among the consumers.
Several manufacturers have started there own multiple retail shops of such as Apple, Samsung store, Nike store, Puma Store, etc.
These shops have proved their success, and therefore there is no need for the services of wholesalers.
3. The Trend of Authorised Dealers is Developing During Recent Years
It has also been seen that most of the manufacturers have appointed their authorized dealers in different parts of the country.
These dealers get goods direct from the manufacturers and sell these goods to the consumers.
This type of marketing is becoming more and more popular day by day and most of the producers are diverting to this practice.
Success and growth of this practice also prove that there is no need for wholesaler.
4. Wholesales are Responsible for Increasing the Cost of Product
As the cost of distribution is an important part of the total cost of a product, the Institution of wholesalers adds to this cost because the commission paid to the wholesalers or their profit margin is included in the price of the commodity.
Thus, the existence of wholesalers proves an additional burden for the consumers.
5. Wholesalers Create a Long Chain Between Producer and Consumers
Producers produce goods and services and the consumers consume them. Any middleman between manufacturers and Consumers creates a distance between these two.
More be the middleman, the longer will be the chain between manufacturers and Consumers.
The result is that the manufacturers are not in a position to know the needs, wants and grievances of consumers, therefore, efforts should be made to cut sort this chain.
6. Wholesalers Encourage Black Marketing
It has also been the experience that wholesalers encourage black Marketing by storing all the available supply of goods and them selling these goods at undue prices. It exploits consumers.
The situation becomes more aggravated if the commodity is an essential commodity.
7. Wholesalers Do not Serve MMuch to the new Manufacturers
It has been the experience that the manufacturers do not take any interest in dealing with the new products.
They prefer to deal with popular products. It creates a problem for new manufacturers.
8. Development of Means of Transportation
Means of transportation have developed a very high rate during recent years. Development of means of transportation and solved the problem of time and distance.
Now the retailers can purchase the goods directly from manufactures and manufactures can supply their goods in all parts of the country.
9. Wholesalers Develop their Own Brand and Trademark
Critics of wholesales are of the opinion that many wholesalers develop their own brand and trade name, and thus, they earn goodwill in the market at the cost of producers.
10. Wholesalers are Interested in High Profits
The wholesalers are generally interested in earning high profits.
They take interest in selling the good only of those manufacturers who offer them a higher rate of commission even if these goods are not of high quality.
This tendency of wholesalers is against the interest of both the manufactures and attendance retailers.
Arguments in Favour of Wholesalers
The about discussion gives an impression that the wholesalers are completely useless In the channels of distribution.
They increase the cost of goods and exploit the manufacturers on one hand and retailers on the other.
Therefore they should be eliminated as soon as possible. But it is not very correct to take such a hard decision because the services of wholesalers cannot be undervalued.
Following are the arguments in favour of wholesalers:
1. To Take Over the Liabilities of Manufacturers
Wholesalers take over most of the liabilities of manufacturers. They purchase the goods manufactured by manufacturers in the large quantities and store these goods until these are sold to the retailers.
They Purchase these goods on cash payment, and thus, solve the financial problems of manufacturers to some extent.
Therefore, elimination of wholesalers would be a problem for the manufacturers.
2. To Take Over the Botheration for Retailers
Wholesalers relieve retailers from many botherations. Wholesalers collect many varieties of products from different manufacturers, and thus, provide an opportunity for the retailers to make their selections.
Wholesalers sell goods to the retailers on credit and thus solve their financial problem to some extent.
Thus, elimination of wholesalers will be a problem for the retailers.
3. Wholesalers Make the Process of Distribution Easy and Quick
Wholesalers are an important link between manufacturers and retailers.
They make the process of distribution very convenient and fast. They collect goods from different manufacturers and store these goods in the warehouses.
They sell these goods to the retailers according to their needs.
Thus, wholesalers maintain an equilibrium between demand and supply of a product.
4. Wholesalers have Sound Sales Organisation
Sales organization of most of the wholesalers is very sound. They collect all the necessary information in respect of the market.
They also undertake the responsibility of conducting market surveys from time to time.
They supply goods to the retailers according to their needs. Thus, the wholesalers provide valuable services both to the manufacturers and retailers.
The above discussion Makes it clear that the existence of wholesalers in the channel of distribution is very controversial. Some of the Scholars strongly oppose their existence.
They argue that wholesalers increase the cost of distribution and the price of the product. Their necessity has been further minimized with the development of large scale retailing, means of transportation and multiples shops.
Critics of wholesalers are of the view that wholesalers are the parasites and an useless link in the chain of middlemen from the producer to the consumers, and therefore, these must be eliminated as soon as possible. The wholesaler is an unnecessary chain between the producer and consumer’.
On the other hand, The Scholars in favour of wholesalers argue that wholesalers render some valuable services to the manufacturers, retailers, and Consumers.
If they are eliminated, it will create many problems for manufacturers and retailers.
Therefore, it is not very correct to decide to eliminate the wholesalers.
The need is to have proper control over their activities through proper legislations and the dependence of Producers and retailers on the wholesalers should be minimized. What is the difference between production and manufacturing?
Thus, now you know the Arguments ‘Against’ and ‘In Favour’ of Elimination of Wholesalers.