Determinants Of Wholesale Market Area

(1) Product Characteristics: The bulk and weight of commodities, especially in relation to value, are important in determining the extent of the area of distribution. Where value is high, in relation to bulk and weight, the area of distribution is wide, since transportation cost of a single unit of purchase will be only a small part of the purchase price. Thus, many of these goods have a national market.

When value is low in relation to bulk and weight, the movement of commodities is more restricted, because transportation cost then becomes a higher percentage of the delivered value. This is particularly the case with manufactured goods.

(2) Perishability : Perishability is a factor that may operatr to restrict the movement of goods over long distances. This, is notably the case with refrigeration.

(3) Standardised Products: Standardised products lend themselves to wider distribution than do unstandardised. The same may be said for branded as against unbranded, manufactured goods, especially those backed by advertising. Private brands of wholesalers will, in general, have more extended areas of distribution because of lower initial cost of acquisition or production.

(4) Price and Price Policies : Differential prices are an important economic determinant of wholesale market areas. This is particularly the case with industrial raw materials and agricultural products which are sold in uncontrolled markets and the price of which does not include the cost of transportation to the buyer.

(5) Transportation Service: Transportation service as it affects area of distribution must be related to the needs of individual shippers and the method of transportation available. For railway transport, for example, the layout of railway lines about a market has much to do with the ability of that market to draw from a wide area and to distribute goods effectively to other points.

(6) Transportation Rates : The system of rail rates has been developed largely to favour the high-density traffic between large markets and thus to perpetuate their position of dominance. Low commodity rates have made possible the concentration into these markets of agricultural and industrial raw materials over wide areas. Transportation rate differentials, as between two or more different markets, work with price differentials to determine the shape and size of the market area. Thus rival markets strive with each other to preserve any rate advantages that they may have and try to add to them.

(7) Sales Policies : The sales policies of manufacturers have an important effect on the distributive function of large markets. When the manufacturer decides to carry stocks in branch warehouses or in public warehouses located in the market, the importance of the market is enhanced and its area of distribution is enlarged. The same may be said for a policy of distribution through wholesalers.

(8) Communication Service : It is elementary that the prompt and accurate handling of wholesale transactions over distances is dependent upon an efficient and reasonably cheap communication service. Circulatian of price sheets and trade papers from a market centre help to establish its prestige in a surrounding territory.

(9) Financial Service : The flow of commodities into and out of a market is inseparably tied to the making of advances and the extension of credit. Advances to country shippers helps to tie trade to a particular market in the area to which credit is extended. Credit becomes, in fact, an essential part of the price structure of the market.

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