Distribution

Wholesale and Retail

Dr Naresh N Chugh
 PROFORMA INVOICE / BILL / INVOICE /
INVOICE BILL CASH MEMO

C& F 1. HOSPITALS
AGENT 2. CLINICS
3. DISPENSARY
1. STOCKISTS
FORMULATION 4. PRIMARY HEALTH
2. AREA CENTRES
MFR. DISTRIBUTORS 5. ESIS / ARMY
3. WHOLESALERS HOSPITALS
6. GOVT. HOSPITALS
4. TRADERS
7. CGHS
DISPENSARIES
ZONAL 8. PHARMACY
DEPOT

GOODS
TRANSFER INVOICE /
NOTE BILL PATIENT
 Channels of Distribution
– Zero level : Mfr to consumer (Eureka Forbes), Internet (eBAY) etc.
– Single level : Mfr – retailer/Franchisee/Retail Outlet – consumer
– Two or more levels
Mfr – wholesaler – retailer – consumer
Mfr – C&F agent - Stockist – distributor – wholesaler – retailer-
consumer

Advantages of Channels of Distribution

– Goods are available all the time and at all places
– Cost of marketing is lesser
– More finance is introduced, so more goods are produced and
hence better productivity
– Boosts consumption
– Solves distribution problems and removes burden of economic
functions from manufacturer
– Makes the price competitive and reasonable
 Middlemen in Distribution
Apart from wholesalers, i.e. C&F agents, stockists,
distributors, wholesalers, dealers etc. there are those other
middlemen who are not actual traders but definitely boost
trade activities they are also called as mercantile agents
viz.
– Brokers
– Commission Agents
– Auctioneers

Mercantile middlemen those who keep stocks are the

wholesalers and retailers they are the links between the
manufacturer and consumer.
 Wholesale Trade
9 Link between the manufacturer and retailer in trade
9 Important link ?
9 Is he required ??
9 Can he be eliminated ????
9 ills of society or boon to mankind ????

So why wholesale trade ?

i. Manufacturer location is fixed, market is dynamic

ii. Anticipation of demand, goods mfd and stocked.
iii. Economic boost to nation, employment generation
iv. Reduce total no., of transactions.
v. Transfer of economic functions so that the manufacturer
can concentrate on his manufacturing activities
 Who are wholesalers

Wholesalers are those unwanted,

undesirable “links in the chain of
distribution who perform the mundane task
of all the economic functions relieving the
manufacturer and the retailer to
concentrate on their business i.e.
manufacturing and selling”
 Features of Wholesale Trade

1. They are purchasers in Large quantity (assembling)

2. Specialised in one line of business e.g. foods /
Pharmaceuticals / cosmetics etc.
3. Sell in smaller quantities
4. Assortment of Products and Pack sizes
5. Large storage capacity (warehousing)
6. Capital investment on goods - Extends facility of
payment to manufacturer immediately
7. Bears risk of market fluctuations
 Why Wholesale Trade
Few in numbers therefore less competition
Decrease in total number of transactions
Manufacturer is substituted in marketing and/or
distribution
Important financial risk bearing
– Obsolescence
– Market fluctuation of demand and supply
– Damage and deterioration
Important Link between the retailer and
manufacturer
 Organisation of Wholesale Trade

Three Basic Functions

1. Administration : Record keeping,
correspondence, and accounting

2. Purchase and Sales : Stocking, and Stock

advice, Purchasing and receipts

3. Promotion : Media and Publicity

Other functions of wholesalers
Assembling
– Collection of large assortment of goods of varying quality and
variety
Warehousing
– Stocking or storage till sale
Transportation
– From factory to warehouse
– From warehouse to retailer / trader
Risk bearing
– Fluctuation in prices
– Damage due to deterioration, natural calamities, pests etc.
– Pilferage
– Obsolescence
– Bad credit
Other functions of wholesalers
Financing
– Extension of credit, Advance to manufacturers
Information
– Source of information to retailer
– Source of information (feedback) to
Grading
– Sorting and classification of goods
Packing
Determination of Price
 Services of Wholesaler
Services to Manufacturer
– Free the mfr. from responsibility of sales
– Allow mfr. More time to concentrate on production
and innovation
– Economy of production because of quick disposal
and creation of available stock
– Storage of goods
– Funds
– Source of market information
– Risk bearing
– Transportation
– Marketing / Sales enhancement
 Services of Wholesaler
Services to Retailers
– Ready stock of goods
– Market information
– Sale trends
– Credit availability
– Storage
– Risk bearing
– Guidance to establish lineage of products
– Transportation
 BUYING FOR A RETAILER
MANUFACTU
S.No. Feature WHOLESALER
RER
more since all
goods not Less since ready
1 Supply time
readily stock
available
Less since More since his
2 Cost
direct purchase margin is added
difficult since
3 Replacement transportation Easy
is costly
4 Inventory Huge Smaller
5 Turnover Less More
 BUYING FOR A RETAILER
(contd)
S.No. Feature MANUFACTURER WHOLESALER
Biased , because
unbiased (to
6 Information need to promote
retain customer)
self
7 Transport On buyer on wholesaler
8 Margins higher lesser
9 Availability Less More
10 Range Limited More variety
Kind of Direct, hence Indirect, less
11
Purch more responsible responsible
TYPES OF WHOLESALERS
Clearing and Forwarding Agents (Consignment
Agents , C & F Agents)
Stockists
Distributors
Wholesalers
Consolidators / Indentors
Traders
Doctor Suppliers (suppliers to Clinics/Gen.
Practitioners)
 Retailing
It is that aspect of home trade which is mainly
concerned with the sale of goods in the small
quantities to consumers. Retailing is the last link
in the chain of economic chains connecting the
manufacturer / producer with the consumer.
Retailing is derived from the French verb
“retailier”

“He is the messiah of the consumer, he reaches to

him at all times and at odd hours arranging what
is not available and reaching where humans
habitate”
 Types of Retailers
Itinerant Retailers (mobile retailers)
– Mobile e.g. hawkers
– Limited stock (to carry on self)
– Generally single
– Work on low margins
– No goodwill is developed
– Generally low quality products
– Cheap products
– Bargaining an essential feature
– Stiff competition
– Quick sale and new areas everyday
– Cover larger section of population
– Convenience of shopping at door step.
 Types of Retailers
Non – Itinerant retailers ( fixed)
– Fixed at one place (Rigid Construction)
– Large variety of goods
– Higher margins because of admin. Costs
– Managed by more than one person
– High priced goods also available
– Fixed price no bargain
– Goodwill and reputation build-up
– Fixed hours of business
– Home delivery , 24 hours etc possible.
 Types of Retail Stores
Traditional Dispensing Pharmacy
Conventional Pharmacy
Pharmacy in a Departmental Store
Pharmacy in a co-operative
Pharmacy in a Super store (Mall)
Pharmaceutical Centers
Chain of Pharmacies ( Dial+ in Mumbai , Boots
Chemists in London, Medicine Shoppe, Apollo
etc.)
 Features of Retail Trade
Small Quantity sale (retail sale)
Local Sale (community)
Variety and wide range (ready stock)
Provide personalised service (close relation)
After sales service
Direct to consumer (last link)
Buyer is individual or consumer no resale
Boost to economic consumption. (increases
GDP)
Promote or enhance image of Producer
 Functions of Retailer
Connecting link to consumer
Assembling of goods
Storage
Grading and Packing
Risk bearing
Ready stock
Market information to and from consumers
Sales promotion
 Services of Retailer
To Consumer
– Ready Stock for continuous and regular supply
– Supply of information (display, information & advice)
– Personalised Service (Owner driven) deals directly
with the consumer
– Convenience of Location and timing
– After sales service
– Home delivery
– Wide Variety of goods in different pack sizes
– Sale on credit
 Services of Retailer
To Wholesaler
– Organised network (fixed no. of retailers)
– Quick distribution of goods (perishable
commodities like bread, milk etc)
– Risk bearing, storage, assembling, grading
functions
– Relief of sales to individuals
– Market information
 Services of Retailer
Service to Manufacturer
– Market information
– Development of Goodwill
– Relief of sale of goods
– Relief from economic functions
 Co-operative Stores
Features
– Voluntary association of persons
– Investment by and for all members
– Democratic organisation
– Eliminate middlemen (wholesalers &/or retailer)
– Profit of sale to all members
– VFM purchases i.e. economic buying
– Liability is limited
– Audited Accounts
– Own consumption, hence lesser dead stock
 Co-operative Stores
Advantages
– Eliminate middlemen : direct purchase from mfr or
producer.
– Mutual benefit good quality @reasonable price
– Credit facility to members
– Outside sale as further discount to members
Disadvantages
– Poor management, since run by members
– Lag period to increase efficiency and dead stocks
– Democratic approach leads to slow decision making
process.
 Departmental Stores / Malls
Features
– All under one roof organisation : shopping
convenience
– Capacity to handle large number of customers
– Wide capital base
– Centralised management
– Departments or sections of specialised merchandise
– Quality and service
– Centralised location
– Discounts, schemes etc always present.
 Limitations
High cost of goods : due to large operating
expenses
Large capital investments hence only
corporate funding possible
High cost of location due to centralised
place
Large expenditure on advertisement
No personalised service
Complex management
 Chain Stores
Features
– Operated by manufacturers or large corporate
organisation
– Wide range of one type of products
– Network of branches throughout Country
– Own distribution network
– Cash and Carry sales
– Centralised purchase, decentralised sales
– Uniform appearance
– Economics of sale (centralised management)
– Goodwill created
– Low cost of advertising / promotion per outlet
– Large discounts possible due to direct sale from
manufacturer
 Chain Stores
Limitations
– Limited range of goods
– Speciality shops
– Risk of huge losses due to competition and
obsolescence
– Complex working at the store
Depot
Local franchisee
Employees (COCO- company owned company operated)
– Lack of flexibility
– Local tastes can’t be catered
– E.g. BATA / GODREJ / VIP / BOOTS U.K./ ADIDAS
etc.