Should The Wholesaler Be Eliminated?

There have been some misgivings against the middlemen in general and the wholesaler in particular. F.C. Clark, in his book ‘Principal of Marketing’ says, “There have always been those who believe that a large number of middlemen between producer and consumer cause and increases marketing cost. Much of the argument for eliminating middlemen arises from the false notion that fewer the distinct agencies that handled a product, the more quickly, efficiently and cheaply it can be delivered to the consumer.”

The trend towards direct marketing of merchandise from the manufacture to the consumer is, no doubt, developing in recent times, but even then the function of the wholesaler remains. It would be just too much to say that the wholesaler does not render any useful service to the society, because, in his absence, it may become impossible for the ultimate consumer to obtain suppliers of such diverse quantity and variety.

Many arguments have been put forth, both in favor as well as against the elimination of wholesalers, from time to time. They are:

Arguments in favor of Elimination of Wholesalers

  1. Wholesalers are just middlemen between manufactures and retailers and hence they just add to cost of marketing. The profit margin of the wholesaler increases the cost of the product and it adversely affects the ultimate consumer. Thus by eliminating him, the consumer will be benefited since he would be required to pay a less price for his purchases.
  2. Wholesalers are obstacles between producers and consumers and hinder the path of trade relations between them.
  3. In some cases; wholesaler is the sole distributor of goods in an area, and the retailers and consumers have to depend on him for their supplies. Since the wholesaler enjoys a monopolistic position, he takes undue advantage of the situation and charges exorbitant prices from his customers. Thus, if such a wholesaler is eliminated, the retailers and consumers would be favorably affected.
  4. Sometimes wholesalers sell goods at unreasonable prices by making maladjustments between the factors of demand and supply, with a view to earn more profit. They also create situations of scarcity by hoarding goods and then indulging in black-marketing. Therefore, if a wholesaler is eliminated, then such trade malpractices can be checked.
  5. Wholesalers do not allow the development of personal relations between the producers and customers / consumers.
  6. Some wholesales give partial treatment to some retailers. Thus, if such wholesalers are eliminated, all the retailers will be treated similarly by the manufacturers.
  7. Most of the wholesalers are transfer agents and most of their services are superfluous in nature. If they are eliminated, goods can be directly supplied from the manufactures to the consumer.
  8. Wholesalers maintain their existence at the cost of consumers and they are nothing but parasites thriving at the expense of the consumers who pay more of the purchases, just to feed these middlemen. Hence they should be eliminated from the business scene.
  9. Large and established retailers can afford to buy their suppliers in bulk from the producers directly rather than approaching the wholesalers. Thus there is no need to have these middlemen.
  10. The wholesalers do not actually bear the trade risks. When production is affected by strikes, labor troubles, power cuts, etc, it is the consumer who suffers. Thus these middlemen can safely be eliminated from the business activities.

Arguments against the Elimination of Wholesalers

  1. The services and functions of a wholesaler are numerous and indispensable for the smooth flow of goods from the manufacturer to the ultimate consumer. He is an important link in the distribution chain of goods so the business cannot do without him.
  2. Evelyn Thomas, in his book “Commerce: Its Theory and Practice” says that “Wholesalers by operating on a large scale relieve the manufactures of innumerable duties which they find expensive and difficult to perform.” A wholesaler relieves the producers of the trouble of ware housing and other marketing problems. Hence his services are very important and are always required.
  3. Wholesalers provide valuable information regarding the customers tastes, fashions and demand to manufacturers so that the latter may adjust their production accordingly and earn more.
  4. Wholesalers create a better demand for goods than retailers since they deal in fewer goods and also possess specialized knowledge in the products they deal in. Thus a wholesaler’s existence is very necessary.
  5. Wholesalers enable retailers to carry on their business efficiently. They deal in fewer goods and also posses specialized knowledge about the products
  6. Wholesalers help in price stabilization-thus their existence is very essential for both retailers and ultimate consumers.

Conclusion – Future of a Wholesaler

Judging from the above arguments, we can quote the words, of J.F. Pyle from his book “Marketing Principles””

“The wholesaler is being put to the acid test as whether he still has place in our marketing organization. As long as he can and does perform marketing services more satisfactorily or at a lower cost than other agencies, he will find a profile place. So long as the producer finds it more economical to devote his major attention to producing and to delegate to the specified marketing agencies the task of selling the goods; so long as the ultimate user finds it more convenient and economical to satisfy his wants by patronizing the wholesaler for instance, rather than by seeking out and buying from the original produces we should expect to find the services of the middlemen greatly appreciated.”

Under the present circumstances, the elimination of a wholesaler is not possible. No matter how much we may try to eliminate them, but their position is necessary in the field of business activities. Of late, many manufacturers have opened their own retailer shops at leading commercial spots. This means direct sales to consumers and removal of wholesalers. But can we really do away with the wholesalers and their services? The answer is an emphatic ‘No’. What is needed is not the elimination of wholesalers as links in the channel of distribution but to see that these links are made to render services to the best advantages of all the parities concerned. Even after doing away with wholesalers, their functions remain and in their functions remain and in heir absence, they will be done either by producer or the retailers. But do these people possess the requisite skill in handling and executing those functions efficiently? Thus we can safely say that the wholesaler plays a pivotal role in the business activities and to maintain the regular chain of supply of goods from the manufacture to the ultimate consumer, the existence of the wholesaler is very essential and that chain cannot be broken merely for the sake of eliminating the wholesaler.