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
long analogy first, explanation second. you are likely aware of the videogame distributor steam, steam amongst other things is known for their massive sales, where 60 dollar games will be 15, 40 dollars games will be 10, etc. initially the software developers had strokes when they saw what steam was selling their games for, but low and behold something happened, the volume of sales sky rocketed, i mean through the roof, by lowering the price many more people bought it, so just for simple math, you have a 60 dollar game that only 100 people buy you made 6000 dollars, lower the game to 20 bucks and 1000 people buy it now you have 20,000 dollars, so by lowering initial profit you increased long term profit
this is the same perspective, when you sell wholesale you have to interact directly with a customer, this takes time, and money, and you can only service so many people at a time, versus by having a vendor or distributor you can now serve more people at a time but with a little less profit because you pay the vendor, this links back up to the top analogy. most companies would gladly lose 5% profit if they increase their sale numbers by 400%. more sales more money, even getting help its still profitable.
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