Wholesaling, Distributing and Retailing
Wholesalers sell to retailers, other wholesalers and industrial users, but do not sell in significant amounts to ultimate consumers. There are two main kinds of wholesalers.
Agent wholesalers can act as representatives of their clients. They also can provide access to market territories that would be available only if the producer expended additional time and cost. This activity requires a great deal of specialization, and they charge fees for these services. For this fee, however, they can help locate alternative buyers, locations, prices, products and various retail market outlets. In addition, some may specialize in a certain kind of product, in different market locations or in a large number of different products.
Merchant wholesalers buy and sell for their own gain based on their knowledge of the market situation. For example, they buy directly from processors and sell products to retailers, other wholesalers and industrial users. They usually specialize in similar types of products in which they have storage and transportation investments.
Retailers buy from many processors and wholesalers to develop a product mix that will attract consumers to their stores. They rely on consistent quality and availability of products. They buy and sell for their own gain.
If you are producing a consumer-ready product, you must understand how to work with retailers. It is important to note several points about the retailer.
- To break into the retail market, a slotting fee is paid to the retailer to gain access to shelf space. In addition, there are requirements for the dollar volume of product that goes through that space in a certain time. These fees are charged because the retailer is trying to realize a specific percentage margin on the gross dollar throughput of the business.
- To successfully enter this market, you will deal first with top management. If it is a chain operation, you may deal at a regional level first and then also with specific stores. Ultimately, you will need to make the sale at several points because you will need full buy-in at the store level as well as within the appropriate division of the store.
- One of the key considerations for doing business with a retailer is meeting his/her gross margin goals. This can be a problem when you are supplying a value-added product such as pre-cooked or case-ready meat items. You may find your product over-priced if the retailer applies a 25 percent markup to your product.
Managers need to decide what kind of a market territory they want to serve and how they can use any or all of the participants in the marketing process. Their selection will depend on different population concentrations, income levels, number of competitive products and number of market outlets. All these should be used to develop the type of market organization that will best serve consumers and sell the product. If these data are too difficult to personally collect, they can be purchased from various marketing consultants and middlemen.
Choosing a Distributor for Your Product provides a checklist for identifying and choosing a distributor.
For more information on this topic, see the links listed below of articles posted on related Web sites.
- Time to Call a Wholesaler/Distributor – Small Farm Center, University of California Extension -- Rich Collins uses a produce wholesaler-distributor these days. He used to sell his Belgian endive himself--to restaurants, hotels and banquet halls. But he decided the time involved in delivery could be better spent at his farm. He considers the 20 percent he pays for the service well spent.
- Marketing Through Wholesalers and Shippers – Small Farm Center, University of California Extension -- Prior to growing your product, every consideration should be given to the method by which your product will be sold or marketed.
- Are Food Brokers Right for You – Oklahoma State University Extension -- This fact sheet describes what a brokerage company does and how start-up companies can select food brokers to sell and market their products.
- Choosing Distribution Methods – CCH Business Owners Toolkit -- Describes some of your options in getting your product or service to your customers.
- Articles on Distributor Sales – SalesVantage.com -- A variety of articles on distribution.
- Marketing food products: Direct sales vs. distributors and brokers – Colorado State University -- This document includes important issues in establishing a distributor relationship.
- Place (Sales and Distribution) – Small Business Notes -- Place refers to how your product or service reaches the customer.
- FoodService University – Where foodservice professionals are empowered with knowledge.
- Deep-Fat Frying Basics for Food Service – Oklahoma State University Extension -- This fact sheet is the first of a series that provides technical and practical information on the science and technology of frying.
- Food Service Software – CostGuard – Software helps you manage a more successful food service business by controlling costs, saving you time and maximizing profit.
- How to Get Value-Added Products into Local Grocery Stores – University of Tennessee Extension -- Analysis of grocery store market access opportunities for small farm and value-added products.
- Trends in Retail Trade – Oklahoma State University Extension -- This fact sheet identifies and describes 10 major trends in the retail trade sector. Details and statistics for the following trends are discussed: the growth of e-commerce, kids in the retail market, building customer knowledge files, the American mall in decline, challenging the category killer, precision shopping, entertaining the customer, globalization of retail trade, smart cards and the general decline in retail sales growth.
Quality Management Systems
Specific Commodity and Product Markets
Food Industry - Distributing
Food Industry - Convenience Stores
Food Industry - Food Service
Food Industry - Packaging
Food Industry - Private Labels
Food Industry - Restaurants
Food Industry - Retailing
Food Industry - Wholesaling
Food Industry - Labeling
Food Industry - Traceability
Food Industry - Country of Origin Labeling