The marketplace consists of various parties, with the dominant ones being the manufacturer, who is responsible for manufacturing goods using factory premises or any similar establishment. The wholesaler buys the goods in large quantities from the manufacturer, and the customers or the end-users buy the goods from wholesalers. The functioning of a market works in the above manner. The manufacturer produces the goods, and a wholesaler buy huge quantities of those goods, which are ultimately sold to the retailers, who would sell them to the customers.
Unlike a normal wholesaler, a specialty-line wholesaler buys only a specific product or a single item from the manufacturer in bulk quantities. The single item purchased is then sold to several retailers or shopkeepers.
Helps Manufacturing Organizations A specialty line wholesaler usually buys out the entire production of a manufacturer. This helps the wholesaler in several ways, such as:
Reduction in its inventory cost, as the manufacturing organization would sell a majority of its produce.
Due to quick sales, the reduced interest cost will quickly pay off their loans, leading to a lower interest cost.
With an ability to sell its goods quickly, a manufacturing organization would maintain a favorable current assets ratio, thereby enabling them access to cheaper credit facilities.
Enhanced working capital to smoothly conduct production operations.
Guidance to Manufacturers as well as Retailers Since specialty-line wholesalers are engaged in only a single business line, it helps them gain superior knowledge about that particular product. The knowledge possessed by them is usually passed on to the manufacturers and retailers, enabling them to execute their business operations more appropriately. The knowledge passed on usually relates to the customer preferences, styles, and opinions.
Extension of Credit Facilities Manufacturing organizations require money at almost all stages of production. It is common for specialty-line wholesalers to either grant an advance or extend credit facilities to the manufacturers in the form of business loans. Similarly, small retailers are usually short of funds, restricting their ability to purchase goods from the wholesalers. The specialty-line wholesalers sell them the goods on a credit basis or extend them business loans to conduct their business operations efficiently.
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