What is Wholesale Trade?

280 reads · Last updated: December 5, 2024

Wholesale trade is an economic indicator that measures the value in U.S. dollars of all merchant wholesalers' sales and inventories. Wholesale trade is one component of business sales and inventories. Only those firms that sell to governments, institutions, and other businesses are considered part of wholesale trade.

Definition

Wholesale trade is an economic indicator that measures the dollar value of sales and inventories of all wholesalers. It is a component of business sales and inventories. Only companies that sell to governments, institutions, and other businesses are considered part of wholesale trade.

Origin

The concept of wholesale trade dates back to the formation of ancient markets and trade centers, where merchants began purchasing goods in large quantities to resell to retailers. With the advent of the Industrial Revolution, wholesale trade significantly developed, becoming a crucial part of the modern economic system.

Categories and Features

Wholesale trade can be divided into two main categories: goods wholesale and services wholesale. Goods wholesale involves the sale of physical products such as food, clothing, and electronics, while services wholesale includes software licenses and professional services. The characteristics of wholesale trade include large transaction volumes, lower prices, and typically not being directly aimed at end consumers.

Case Studies

A typical case is Walmart, which through its wholesale division Sam's Club, provides bulk goods to small businesses and institutions. Another example is Costco, which offers wholesale-priced goods to businesses and individuals through a membership model, helping it expand globally.

Common Issues

Common issues investors face when analyzing wholesale trade include accurately assessing inventory value and the impact of market demand fluctuations on wholesalers. A common misconception is equating wholesale trade with retail trade, whereas the customer base and sales strategies of the two differ significantly.

Suggested for You

Interest Rate Future

An interest rate future is a futures contract with an underlying instrument that pays interest. The contract is an agreement between the buyer and seller for the future delivery of any interest-bearing asset.The interest rate futures contract allows the buyer and seller to lock in the price of the interest-bearing asset for a future date.

Historic Pricing

Historic pricing is a unit pricing method used to calculate the value of an asset using the last valuation point calculated. Historic pricing is used when the value of an asset does not update in real time.

Rational Behavior

Rational behavior refers to a decision-making process that is based on making choices that result in the optimal level of benefit or utility for an individual. The assumption of rational behavior implies that people would rather take actions that benefit them versus actions that are neutral or harm them. Most classical economic theories are based on the assumption that all individuals taking part in an activity are behaving rationally.

Discrete Distribution

A Discrete Distribution, also known as a Discrete Probability Distribution, refers to a probability distribution in statistics and probability theory where the random variable can take on a finite or countably infinite number of specific values. Common examples of discrete distributions include the binomial distribution, Poisson distribution, and geometric distribution. In a discrete distribution, each possible value has an associated probability, and the sum of these probabilities is equal to 1. Discrete distributions are widely used in finance, insurance, engineering, and other fields to describe and analyze the probabilities of discrete events. For instance, the number of times a stock price changes, the number of insurance claims, and similar discrete occurrences can be modeled and analyzed using discrete distributions.

White Elephant

A white elephant is something whose cost of upkeep is not in line with its usefulness or value. From an investmentperspective, the term refers to an asset, property, or business that is so expensive to operate and maintain that it is extremely difficult to actually make a profit from it.White elephants also tend to be illiquid assets, meaning they cannot be easily or quickly exchanged or sold for cash without the seller experiencing a significant loss.

Lehman Formula

The Lehman formula is a compensation formula developed by Lehman Brothers to determine the commission on investment banking or other business brokering services. Lehman Brothers developed the Lehman Formula, also known as the Lehman Scale Formula, in the 1960s while raising capital for corporate clients.