What are the consequences of eliminating wholesalers from the chain of distribution?
- Thread starter Stardom22
- Start date
It is actually not possible to eliminate wholesalers in distribution chain. Wholesalers is the medium in which retailers and producers interact and exchange ideas.
There is absolutely no advantage to that kind of action. They are the people who have the capacity to buy in bulk. And any production needs that turnover.
If there is no wholesaler, then the goods or products would not be able to reach the retailers, which means the final consumers won't be able to have access to these products, which would bring about loss to the manufacturers.
- Thread starter
- #7
I think when the wholesalers are eliminated out of the market, the products may go directly to the retailers from the distributors. The main disadvantage for this move is that the retailers would spend more capital to buy in larger quantities as distributors sells in bulky.
From a producer's point of view, it would make the producer to have more profit if the final consumers buy directly from them.
The cost of selling from manufacturer to customers directly is lower than having to use middleman. That is because the middlemen would want to charge you a commission for each unit of your product sold.
If there are no wholesalers in the distribution chain, it will be difficult for factories to distribute their products. It would be impossible for manufacturers to ship to individual retail stores, which would be time-consuming and ineffective.
If wholesalers are eliminated from a supply chain, customers enjoy a potential benefit of lower product prices.
A local company that manufacturers building materials has actualized these benefits by selling to customers directly. This company charges less than retail outlets do.
A local company that manufacturers building materials has actualized these benefits by selling to customers directly. This company charges less than retail outlets do.
Wholesalers stock and sell products for manufacturers. Other than the obvious hole that eliminating wholesalers who produce, the potential lost opportunity for data collection would be massive. By tracking each product sold at the wholesale level, crucial data on volume, trends, quantities, shelf duration, and geographic preference would be paused if not lost. Manufacturing companies use this data to predict trends based on historical reporting, develop offerings for specific markets, and tailor distribution plans (Marshall & Johnston, 2023).
Wholesalers execute an essential customer service role. They handle customer complaints, product returns, and faulty products. These situations are recorded and analyzed, then sent to the manufacturers. Additionally, consumers develop their brand preferences and make purchasing decisions based on the wholesaler's inventory. The consumer trusts the wholesaler and their offering selection. Without this level of quality control, the consumer does not have a reliable barometer to gauge a product. Thus, the manufacturer will have to assume the cost of tracking this data for market research, leading to higher prices for the consumer. At the wholesale level, much of the product promotion is facilitated. Customers have the opportunity to conduct personalized market research with an experienced wholesaler. Without the wholesaler managing the customer service troubleshooting, the customer must contact an ill-prepared manufacturer.
Because wholesalers are B2B with manufacturers, product orders are filled in massive amounts. The bulk-style ordering allows the wholesaler to sell the products at an affordable rate while simultaneously providing expansive availability. The customer who utilizes the wholesaler makes their decision to buy based on tangible answers to their questions (Marshall & Johnston, 2023). By removing the wholesaler from the distribution line, the customer may lose the opportunity to physically compare multiple products simultaneously while systematically decreasing access and availability. Bulk inventory has the advantage of product availability and accessibility, in addition to immediate customer procurement. If wholesalers were to be eliminated, manufacturers would assume the responsibility of direct-to-customer shipping. Manufacturers may develop massive delivery delays.
Additionally, the economic impact of wholesaler elimination would be globally crippling. Wholesalers employ millions globally, with Costco at 300 thousand, Amazon at 1.6 million, and Walmart at 2.1 million (Costco.com, n.d.) (amazon.com, n.d.) (Walmart.com, n.d.). Wholesalers employed 6.2 million Americans and were responsible for 5.9% of the U.S. GDP in 2023 (U.S. Bureau of Labor Statistics, 2024). The global economy cannot support eliminating B2B (wholesale) transactions (Digital Disruption, 2022).
Lastly, although e-commerce and B2C provide a one-to-one marketing approach to the consumer and often yield higher customer satisfaction rates, this access is limited to those with the technology needed to shop (Marshall & Johnston, 2023). Thus, the manufacturers would systematically reduce their product offering and distribution zone to only those with a computer (Marshall & Johnston, 2023).
[CHARGE=.50][/CHARGE]
Wholesalers execute an essential customer service role. They handle customer complaints, product returns, and faulty products. These situations are recorded and analyzed, then sent to the manufacturers. Additionally, consumers develop their brand preferences and make purchasing decisions based on the wholesaler's inventory. The consumer trusts the wholesaler and their offering selection. Without this level of quality control, the consumer does not have a reliable barometer to gauge a product. Thus, the manufacturer will have to assume the cost of tracking this data for market research, leading to higher prices for the consumer. At the wholesale level, much of the product promotion is facilitated. Customers have the opportunity to conduct personalized market research with an experienced wholesaler. Without the wholesaler managing the customer service troubleshooting, the customer must contact an ill-prepared manufacturer.
Because wholesalers are B2B with manufacturers, product orders are filled in massive amounts. The bulk-style ordering allows the wholesaler to sell the products at an affordable rate while simultaneously providing expansive availability. The customer who utilizes the wholesaler makes their decision to buy based on tangible answers to their questions (Marshall & Johnston, 2023). By removing the wholesaler from the distribution line, the customer may lose the opportunity to physically compare multiple products simultaneously while systematically decreasing access and availability. Bulk inventory has the advantage of product availability and accessibility, in addition to immediate customer procurement. If wholesalers were to be eliminated, manufacturers would assume the responsibility of direct-to-customer shipping. Manufacturers may develop massive delivery delays.
Additionally, the economic impact of wholesaler elimination would be globally crippling. Wholesalers employ millions globally, with Costco at 300 thousand, Amazon at 1.6 million, and Walmart at 2.1 million (Costco.com, n.d.) (amazon.com, n.d.) (Walmart.com, n.d.). Wholesalers employed 6.2 million Americans and were responsible for 5.9% of the U.S. GDP in 2023 (U.S. Bureau of Labor Statistics, 2024). The global economy cannot support eliminating B2B (wholesale) transactions (Digital Disruption, 2022).
Lastly, although e-commerce and B2C provide a one-to-one marketing approach to the consumer and often yield higher customer satisfaction rates, this access is limited to those with the technology needed to shop (Marshall & Johnston, 2023). Thus, the manufacturers would systematically reduce their product offering and distribution zone to only those with a computer (Marshall & Johnston, 2023).
[CHARGE=.50][/CHARGE]
