The American Standard Industrial Classification Manual has defined wholesaling as including establishments or places of business primarily engaged in selling merchandise directly to retailers; to industrial, commercial, institutional, or professional users ; to other wholesalers; or acting as agents in buying merchandise for, or selling merchandise to, such persons or companies. Thus, individuals or business firms engage in wholesaling when primarily they sell to, or negotiate sales with, those who buy for purposes of resale or industrial use.
We may enumerate the difference between wholesaler and retailer in the following ways
(1) Quantity of purchase and sales: The wholesaler usually sells the product in larger quantities than does the retailer. Large wholesalers may buy many items in carload lots and resell to retailers in small lots. Small wholesalers may not be able to place such large orders, but they do buy in quantities far in excess of those in which they sell. In fact, one of the important services that the wholesaler performs for both manufacturers and retailers is buying in larger quantities and making down into smaller lots. Of course, it is also contended that the difference between the wholesaler and the retailer should not be based on the volume of sales or prices charged although the wholesaler sells in larger quantities than the retailer.
(2) Prices charged: Generally the wholesale price is lower than the retail price. The retailer charges higher prices than do the wholesaler because the retailer adds his profit with the purchase price from the wholesaler.
(3) Type of buyer: The wholesaler sells his products to other wholesalers, retailers or industrial users who do not themselves consume the products, rather resell to the final users. But the retailer sells his products only to the consumers, i.e. to the final users. In retail, goods move only to ultimate consumers and they do not re-enter the channels of trade. In wholesale trade, the goods move out of the channels for further processing of sale and then re-enter.
(4) Intended use of the products: The wholesaler purchases the products from the manufacturers or other sources for the purpose of resale. The wholesaler never himself uses the products for own consumption. On the other hand, the retailer buys the products from the wholesaler and sells them to the persons who finally destroy the utility of the products. The buyer of the wholesaler (i.e. retailer) buys the products for resale to the consumers while the buyer of the retailer (i.e. consumer) buys them for personal use (not for resale).
(5) Methods of operation: A wholesaler differs from a retailer in his methods of operation. The wholesalers usually operate warehouses which serve mainly as storage facilities rather than as sales qu2rters. They do not maintain stores open to the general public. Whereas the retailers must or stores in order to sell their products to the general public.
(6) Location: Since the retailers prefer to buy in their own stores from the salesmen sent out by the wholesalers or buy by telephone, the warehouses of ht’ wholesalers are usually located in less accessible and less attractive places. Because in these places the terms are lower but railroad and trucking facilities are available. The retailers are required to establish their stores in attractive places which are easily accessible and where car parking is relatively easy. fact, wholesalers have lagged far bind retailers in modernization programmes, which is quite understandable since they do not need to have attractive show places to attract customers.