Wholesaling

Revise Wholesaling for Commerce 7100 (O Level) — revision notes, 74 practice questions and instant AI marking.

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Cambridge O Level Commerce 7100

Wholesaling

The big idea: The wholesaler buys in bulk from manufacturers and sells in smaller amounts to retailers. On the way it stores goods, carries risk, gives credit and spreads information. Large retailers now often bypass it, but independent wholesalers survive through cash and carry and voluntary chains.

Summary — What This Chapter Covers

A wholesaler is the intermediary between manufacturer and retailer in the chain of distribution.
Functions: breaking bulk, warehousing, risk bearing, price stability, credit, transport, information and advice, packing and grading.
Importance to the manufacturer: bulk orders, less storage, fewer deliveries and contacts, quick payment, market information.
Importance to the retailer: small quantities, wide range in one place, credit, delivery, advice.
The independent wholesaler survives through cash and carry warehouses and voluntary chains.

1. Functions and Services of the Wholesaler

Syllabus 2.4.1 · Papers 1 & 2

What the wholesaler does

Definition · Wholesaler A business that buys goods in large quantities from manufacturers (or producers and importers) and sells them in smaller quantities to retailers.

Chain of distribution: manufacturer → wholesaler → retailer → consumer.

Function	What the wholesaler does
Breaking bulk	Buys in very large quantities from the manufacturer and sells in smaller quantities (a carton, a case) that a retailer can afford and store
Warehousing	Stores goods until retailers need them, so manufacturers and retailers need less storage
Risk bearing	Buys ahead of demand, so it carries the risk that goods are damaged, stolen, go out of fashion, go bad or fall in price
Price stability	Holds stock when supply is high (e.g. after a harvest) and releases it when supply is low, so prices do not swing sharply
Credit	Gives retailers time to pay (trade credit), and pays manufacturers promptly
Transport	Delivers to retailers, often in its own vehicles
Information and advice	Tells manufacturers what is selling and what retailers want; advises retailers on new products, displays and prices
Packing, grading and labelling	Sorts goods by size and quality, packs and labels them for sale

Worked example: breaking bulk

A wholesaler buys 2,000 pens at $0.80 each and sells them to retailers in boxes of 50 at $46 a box. Calculate how many boxes it sells, its revenue and how much more it receives than it paid.

Cost = 2,000 × $0.80 = $1,600
Boxes = 2,000 ÷ 50 = 40
Revenue = 40 × $46 = $1,840
Difference = 1,840 − 1,600 = $240

Each pen costs the retailer $46 ÷ 50 = $0.92, more than the manufacturer’s price, but the retailer buys 50 pens instead of 2,000. The $240 pays the wholesaler for storing, breaking bulk and carrying the risk.

Practice Question 1

A potato farmer sells his crop to wholesalers. Describe how the wholesaler supports his business by risk bearing.

2. Importance of the Wholesaler to the Manufacturer and Retailer

Syllabus 2.4.1 · Papers 1 & 2

Who gains, and how

To the manufacturer	To the retailer
Sells in bulk to a few wholesalers instead of small orders to thousands of retailers, so fewer orders, invoices and deliveries	Can buy small quantities, so does not need much money or storage space
Less warehouse space needed: the wholesaler stores the output

4. Exam Technique

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Cash and carry and voluntary chains
Wholesaling in longer answers

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Wholesaling

Wholesaling

What the wholesaler does

Worked example: breaking bulk

Who gains, and how

Past papers that test Wholesaling

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