STUDENTS' CORNER -52
As the second type of purchasing, we were looking into Mercantile purchasing. The most fundamental difference between personal purchasing and mercantile purchasing is the second one is done primarily for resale. The mercantile purchaser is in the middle between the consumer who uses out the product and the manufacturer who produces the product.
Now, the middleman can be a distributor, a wholesaler, retailer and also an agent. All of them connect the producer with the consumer through what is called distribution channel. A manufacturer produces a product; he sells them to a distributor; the distributor sells it in turn to a shop keeper; an agent connects the distributor, here with the shopkeeper. So, you see how a product, soap for example, has to pass through so many hands one after another before it reaches the one who uses it. The manufacturer, the distributor, the agent, the shop keeper and the buyer – all of them together make the distribution channel.
Distribution also is a very vast subject; in fact, it is very essential for any business to sustain itself. Here, when we are discussing it as a part of logistics, basic details will do. Under any circumstances, the end-user, the one who buys the product for personal use is all important and he is the target of all businesses ultimately. As a matter of fact, the manufacturer, the middleman and all depend on him only for business; but the marketing excellence turns the consumer into a dependent customer on the product; in other words, the business man is so intelligent and strategic in his ways of dealing with the purchaser that the purchaser begins to depend on the manufacturer. This is really now existing market situation. To use a phrase from the world of movies, he becomes a ‘fan’ of a product.
A wholesaler is also a part of distribution channel but with a difference. He is also an intermediary between the producer and the consumer. He buys products in bulk, in very large quantities and sells them only to distributors but not to the consumer. You see, both the distributor and the wholesaler buy products only to sell them back. In that sense, both of them are doing a similar task and very often the distributor and the wholesaler work together. Still, there are some fundamental differences between the two. A wholesaler main concern is fulfilling the demands of the retailers, but, a distributor must work and get orders for the products; in other words, he acts like sales representative and so promotes the products of a company but a wholesaler does not go that far.
In terms of revenue generation also, there is a difference. A wholesaler buys products in bulk, in large quantities; therefore, he gets them at a lower price. The manufacturer is also willing to give him the products at a lower price because he is buying the products in bulk; for the manufacturer, the products must bring money; the sooner, the better. And the wholesaler sells the products at a higher price, thus making profit; he gets dividends on the money he has put in the purchase of the bulk commodities.
But the distributor gets only commission for the quantity of goods or products he finds market. He does not sell the products directly.
We will look into the role of an agent in our next session.