wholesale-examples

Wholesale Examples In A Nutshell

A wholesale business purchases goods in bulk from a supplier and then sells them to other merchants in smaller quantities. The wholesaler relies on economies of scale to make a profit. Most wholesale businesses do not sell to the end-user. However, two exceptions are commodities trader Trafigura and big-box retailer Costco. Sysco is the largest wholesale foodservice distributor in the United States while McKesson Corporation is the largest distributor of pharmaceutical drugs and various other healthcare products and technology.

Introduction

A wholesale business purchases goods in bulk from a supplier and then sells them to other merchants in smaller quantities. The wholesaler relies on economies of scale to receive a discount price from the manufacturer and then adds mark-up before selling to the merchant. Most merchants are not the end-user of the product, but as we will discover later, there are exceptions to this rule.

Wholesalers play an important role in the market. They maintain supply-demand equilibrium by storing goods until there is merchant demand. What’s more, a wholesaler is responsible for the distribution and transportation of goods from their warehouse and bears the risks associated with product shrinkage or fluctuations in demand.

The rest of this article will be devoted to discussing some specific wholesale business examples.

Costco

costco-business-model
With a substantial part of its business focused on selling merchandise at the low profit-margin, Costco also has about fifty million members that each year guarantee to the company over $2.8 billion in steady income at high-profit margins. Costco uses a single-step distribution strategy to sell its inventory.

Costco, also known as Costco Wholesale Corporation, is an American multinational big-box retail chain founded by James Sinegal, Jeffrey Brotman, Sol Price, and Robert Price in 1976.

Costco is a membership-only warehouse that requires consumers to purchase a membership before they can shop. The company is somewhat unusual in that it is a retailer and a wholesaler at the same time. In other words, Costco purchases wholesale products from the manufacturer and sells them to the end-user. However, the company also sells the same goods to other businesses under a more traditional wholesale business model.

Trafigura

Trafigura is a Singaporean commodity wholesaler that was established in 1993. The company sources raw commodities from miners and fossil fuel producers and, like Costco, supplies end-users which include power plants, construction companies, and state governments.

Despite only existing for approximately 30 years, Trafigura is the largest private metals trader in the world with total revenue for 2021 of $231.3 billion.

Sysco

Sysco Corporation is an American multinational involved in the wholesale distribution of kitchen equipment, food products, and tabletop items to restaurants, schools, and health facilities. The company also distributes products to hotels and other food services companies such as Sodexo and Aramark.

Sysco is the largest wholesale foodservice distributor in the United States with over 600,000 clients in 90 countries.

Toyota Tsusho

Toyota Tsusho is a trading arm of the Toyota Group of companies. The corporation’s primary function is to support Toyota’s automotive division and supply other vehicle manufacturers with wholesale parts.

However, Toyota Tsusho is a vast company with additional interests in metals, machinery, energy, chemicals, electronics, food and customer service, and logistics.

McKesson Corporation

McKesson Corporation is the largest distributor of pharmaceutical drugs, healthcare technology, care management devices, and medical supplies in North America. 

The corporation distributes 33% of all pharmaceuticals across the continent with the company reporting full-year revenue of $238.2 billion in May 2021.

Read Next: Wholesale Business Model.

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Connected Case Studies

Read Also: Costco Business Model

who-owns-costco
Costco runs a high-quality, low-priced business model powered by its memberships that draw customers’ loyalty and repeat purchases. Top institutional investors comprise The Vanguard Group, with 8.55%, and BlackRock with 5.39%. Top individual shareholders comprise Craig Jelinek, Charles T. Munger (Warren Buffet partner and co-owner of Berkshire Hathaway), James Murphy, and more.

Read Also: Marketplace Business Models

marketplace-business-models
A marketplace is a platform where buyers and sellers interact and transact. The platform acts as a marketplace that will generate revenues in fees from one or all the parties involved in the transaction. Usually, marketplaces can be classified in several ways, like those selling services vs. products or those connecting buyers and sellers at B2B, B2C, or C2C level. And those marketplaces connecting two core players, or more.

Read Also: Food-Delivery Business Models

food-delivery-business-model
In the food delivery business model companies leverage technology to build platforms that enable users to have the food delivered at home. This business model usually is set up as a platform and multi-sided marketplace, where the food delivery company makes money by charging commissions to the restaurant and to the customer.

Connected Business Model Types

Asymmetric Business Models

asymmetric-business-models
In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.

Attention Merchant Business Model

attention-business-models-compared
In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus having a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility. This is how attention merchants make monetize their business models.

Marketplace Business Models

marketplace-business-models
A marketplace is a platform where buyers and sellers interact and transact. The platform acts as a marketplace that will generate revenues in fees from one or all the parties involved in the transaction. Usually, marketplaces can be classified in several ways, like those selling services vs. products or those connecting buyers and sellers at B2B, B2C, or C2C level. And those marketplaces connecting two core players, or more.

Wholesale Business Model

wholesale-business-model
The wholesale model is a selling model where wholesalers sell their products in bulk to a retailer at a discounted price. The retailer then on-sells the products to consumers at a higher price. In the wholesale model, a wholesaler sells products in bulk to retail outlets for onward sale. Occasionally, the wholesaler sells direct to the consumer, with supermarket giant Costco the most obvious example.

Retail Business Model

retail-business-model
A retail business model follows a direct-to-consumer approach, also called B2C, where the company sells directly to final customers a processed/finished product. This implies a business model that is mostly local-based, it carries higher margins, but also higher costs and distribution risks.

B2B2C

b2b2c
A B2B2C is a particular kind of business model where a company, rather than accessing the consumer market directly, it does that via another business. Yet the final consumers will recognize the brand or the service provided by the B2B2C. The company offering the service might gain direct access to consumers over time.

Crowdsourcing Business Model

crowdsourcing
The term “crowdsourcing” was first coined by Wired Magazine editor Jeff Howe in a 2006 article titled Rise of Crowdsourcing. Though the practice has existed in some form or another for centuries, it rose to prominence when eCommerce, social media, and smartphone culture began to emerge. Crowdsourcing is the act of obtaining knowledge, goods, services, or opinions from a group of people. These people submit information via social media, smartphone apps, or dedicated crowdsourcing platforms.

Open-Core Business Model

open-core
While the term has been coined by Andrew Lampitt, open-core is an evolution of open-source. Where a core part of the software/platform is offered for free, while on top of it are built premium features or add-ons, which get monetized by the corporation who developed the software/platform. An example of the GitLab open core model, where the hosted service is free and open, while the software is closed.

Open Source vs. Freemium

open-source-business-model
Open source is licensed and usually developed and maintained by a community of independent developers. While the freemium is developed in-house. Thus the freemium give the company that developed it, full control over its distribution. In an open-source model, the for-profit company has to distribute its premium version per its open-source licensing model.

Freemium Business Model

freemium-business-model
The freemium – unless the whole organization is aligned around it – is a growth strategy rather than a business model. A free service is provided to a majority of users, while a small percentage of those users convert into paying customers through the sales funnel. Free users will help spread the brand through word of mouth.

Freeterprise Business Model

freeterprise-business-model
A freeterprise is a combination of free and enterprise where free professional accounts are driven into the funnel through the free product. As the opportunity is identified the company assigns the free account to a salesperson within the organization (inside sales or fields sales) to convert that into a B2B/enterprise account.

Franchising Business Model

franchained-business-model
In a franchained business model (a short-term chain, long-term franchise) model, the company deliberately launched its operations by keeping tight ownership on the main assets, while those are established, thus choosing a chain model. Once operations are running and established, the company divests its ownership and opts instead for a franchising model.
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