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.

Wholesale/Distribution