How Wholesale Came To Be

Posted by Clearance Wholesale 08/04/2015 0 Comment(s)

The history of wholesale is quiet a young one still, albeit its pervasiveness in today’s modern business world. Prior to the first Industrial Revolution in the 18th Century in Europe, wholesaling is non-existent. Producers directly sell their products to individual consumers.  Even with the improved production techniques in the pre-Industrial Revolution agrarian societies, the concept of bulk production and selling was never given a thought.

This all changed when people began to discover machines. While the original intent was just to find ways to make things easier than they are at that time, people and businesses also discovered that machines can speed up the production process and allow them to produce more for a given time. It was here that the first concept of wholesaling was conceived, triggered by both the huge demand as production areas buy more raw materials and the record volume of supply produced in machine-aided farms and factories. But the concept of “wholesale” was never given a thought even then. There were middlemen who consolidated produce and sold these either in bulk to factories or per piece to individual consumers.

Since the 18th Century up until the earlier part of the 20th century, around the late 1920’s to be exact, middlemen were seen as villains in the business world and the society. The ideal distribution was to find the shortest route from the producers to the consumers. Mainstream schools of thought often promoted the idea that the presence of middlemen, who did bulk business that time, contributed to the inefficiency of the market distribution system.  This practice thus, had to be eliminated. Moves to link first-hand producers and the individual consumers were often advocated. Middlemen were seen as the group that hinders the realization of this distribution model.
However, even after two centuries of criticism, the role of the middlemen persisted. Farmers or individual producers, while fully aware that bigger revenues can be had if products are sold directly to consumers, would often opt to sell in bulk to a middleman at a lesser price. This is because this saves them time and they can go back to the task that is within their field of expertise, which is production. 
Most often, producers and companies that are into production do not have knowledge nor the infrastructures for retail selling. On the other side of the chain, as individual consumers do not buy more than what they consume for a certain period of time, retail selling is needed. Oftentimes, retailers do not have the necessary capital and facilities to handle bulk products from farms and factories. Thus, the role of a person or an entity that consolidates products, and ration these in the desired quantities to retail sellers persisted, despite being seen as a factor leading to inefficiency.

The persistence of this role in the distribution system is not because middlemen are stubborn or because they have grown to become a powerful sector in the industries. It is because of the fact that a mechanism at the middle of the system is indeed necessary. This gave way to the development of thought that came to be known as the wholesale theory in the 1940s. Unlike in the previous times, where middlemen are seen as evil and ought to be eliminated, both scholars and business practitioners began to discover the value and the crucial role played by the middlemen, especially in wholesaling.

In wholesaling, middlemen provide the necessary link between producers and consumers.  Contrary to earlier beliefs, they enhance efficiency. Wholesalers know how and where to channel bulk produce in order to bring this to where the demand is high and minimise spoilage, especially for perishable goods such as agricultural produce. Simple processing and value adding activities such as drying of the products in order to prolong its useful life or to shorten the processing at the factory floor were common practices of wholesalers. 
Wholesale has since been considered as a special business process. Wholesaling became one of the popular areas of research in the field of entrepreneurship and business management. The growing markets and the economic booms in many countries around the world cemented the role of the middlemen in the global marketplace.  With the rise of global trading, the importance of wholesalers in the supply chain is not about to change anytime soon.   

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