Merchant wholesaler

A merchant wholesaler buys goods on its own account and resells them to other businesses. It takes ownership of the stock and bears the risk of unsold inventory, unlike an agent who mainly arranges transactions for a commission.

The wholesaler normally earns its income from the difference between its buying and selling prices, rather than from a brokerage fee. Its activities may include buying larger lots, splitting them into smaller orders, holding local stock and providing delivery or trade credit to retailers and other business customers.

For example, a business may buy 1,000 kettles from a manufacturer and sell cases of 12 to independent shops. It must fund and manage the remaining stock even if sales slow down. A wholesale broker, by contrast, can arrange the same deal without buying the kettles or bearing that inventory risk.