Wholesale or wholesaling, historically was called jobbing, wholesale is the sale of goods or merchandise to retailers, to industrial, commercial, institutional, or other professional business users, or to other wholesalers and related subordinated services.
According to the United Nations Statistics Division, "wholesale" is the resale (sale without transformation) of new and used goods to retailers, to industrial, commercial, institutional or professional users, or to other wholesalers, or involves acting as an agent or broker in buying merchandise for, or selling merchandise to, such persons or companies. Wholesalers frequently physically assemble sort and grade goods in large lots, break bulk, repack and redistribute in smaller lots. While wholesalers of most products usually operate from independent premises, wholesale marketing for foodstuffs can take place at specific wholesale markets where all traders are congregated.
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Wholesale facilitates the economic function of buying and selling (usually termed as "price formation") by allowing the forces of supply and demand converge to establish a single price for a commodity. The wholesaler may also perform storage and warehousing functions, as well as allowing economies of scale to be obtained in the transportation of produce from farm to market. The people involved in wholesale can act simply as merchants, buying and selling produce, can be brokers dealing in orders rather than goods, or can be commission agents. Prices are normally established by negotiation but some wholesale markets use the auction system. The auction is compulsory in all wholesale markets in big cities in Japan. A comparison of the Japanese system with that in Brisbane, Australia, found that prices moved more frequently and with a greater degree of volatility in Japan than those at Brisbane.
Wholesale markets develop in a number of stages. They start as general markets, and then become more specialized by trading in specific types of produce. A later stage is to transact only graded and well packaged produce. A recent trend in Western Europe and the USA is for large retailers to by-pass the wholesale market system. Direct links are created between producers and supermarket chains, often by means of contract farming arrangements or through the use of preferred suppliers. Following the collapse of the iron curtain a large number of markets were developed in Eastern and Central Europe in the 1990s and early 2000s. Examples include markets in Warsaw, Gdansk, Budapest, Bucharest, and Tirana. In other parts of the world, new markets have been built in Amman, Cairo and Mumbai, among many recent developments. Very few new wholesale markets have been built in western countries in the last decades, although old markets have been relocated to new sites (e.g. the new Covent Garden market in London and Rome's new wholesale market). Those that already exist have tended to also attract warehouses for integrated food distribution, changing their role to "food centers" (in the USA) and including other non-fresh food products.
Wholesale markets still have a role in the marketing of horticultural produce but the traditional fresh meat and fish wholesale markets, particularly those dealing with live produce, are generally being closed down in major urban centres. In developing countries, changes in work patterns, particularly the employment of women, and the impact of technological innovations in post-harvest handling, food processing and storage, including the use of domestic refrigerators, tends to encourage the development of one-stop shopping at supermarkets, often on a once-a-week basis. The challenge for wholesale markets in such a trading environment is to retain turnover, both by providing new services to supermarkets and by developing services to the non-supermarket trade and the growing hotel and catering sectors.
Types of Wholesale Market
Secondary wholesale markets are generally found only in developing countries these days. They are located in district or regional cities and take the bulk of their produce from rural assembly markets located in production areas, where the transactions are small scale and usually take place between farmers and traders. The distinction between rural assembly markets and secondary wholesale markets is that secondary wholesale markets are in permanent operation (rather than being seasonal in nature or dealing in specialized produce), larger volumes of produce are traded than at the rural assembly markets and specialized functions may be present, such as commission agents and brokers.
Terminal wholesale markets are located in major metropolitan areas, where produce is finally channeled to consumers through trade between wholesalers and retailers, caterers, etc. Produce may also be assembled for export. In some countries, such as India, terminal markets also supply other parts of the country. For example, New Delhi serves as a distribution centre to the south of India for apples grown in the Himalayan foothills. The problems of terminal wholesale markets are usually ones of congestion caused by an unsuitable location or by an inappropriate mixture of wholesale and retail functions. Traditionally, wholesale markets were built adjacent to city centres, located at a focal point of the inter-city transport facilities and close to the main retailing areas. Population growth, changes in urban land-use patterns and the development of modern transport systems have all influenced the suitability and functionality of existing sites.
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