Hello!
Please explain me this because I can not figure out!
As I see producers sell their stuff to wholesales. Wholesales gather a bunch of different things and then sell it to retailers who communicate with the costumers and sell it to them.
For example a wholesale of stationery gathers pencils, papers, toners etc. Then they sell these in smaller amounts to retailers who after that deliver directly to the offices (to the costumers).
Why don’t wholesale just sell and deliver right away to the costumers and gain the extra money the retailers basically live on?
In: Economics
Often they do. Sam’s Club and Costco basically sell wholesale goods to consumers.
Sometimes manufacturers or wholesalers have agreements with retailers that they *won’t* sell their products, however, or won’t sell them at wholesale prices, so they aren’t competing with the retailers who agree to sell their products. (There are many benefits to having a retailer sell your products for yo, so this kind of sacrifice may be worthwhile to manufacturers.)
Other times they just don’t bother with it because the costs of hiring a sales team and marketing directly to consumers aren’t worth the extra revenue they’d make when they already have retailers doing that for them. Retailers take a cut of the sale price, but in a way they also take some of the burden off of the manufacturers, allowing them to specialize in just producing while the retailer worries about the selling. This is pretty much how the auto dealership industry came about. Auto manufacturers didn’t have to worry about building showrooms and hiring sales reps when they could just let dealerships do that in exchange for a cut of the money.
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