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.
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, 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 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 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 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 is the largest distributor of pharmaceutical drugs, healthcare technology, care management devices, and medical supplies in North America.
Read Next: Wholesale Business Model.
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