Wholesale marketing

The consumption and production of marketed food are spatially separated. Production is primarily in rural areas while consumption is in urban areas. Agricultural marketing is the process that overcomes this separation, allowing produce to be moved from an area of surplus to one of need. Food reaches the consumer by a complex network, involving production, assembly, sorting, packing, reassembly, distribution and retail stages. In developing countries the linkage between the producer and the retailer is still usually provided by assembly and wholesale markets, where wholesale marketing takes place using a variety of transaction methods. Recent years have seen an expansion of wholesale marketing in E. European and former CIS countries. On the other hand, the growth of supermarkets in many regions has seen the development of direct marketing and a reduced role for wholesale systems.

Wholesale markets can either be primary, or terminal, markets, situated in or close to major conurbations, or secondary markets. The latter are generally found only in larger developing countries where they are located in district or regional cities, taking the bulk of their produce from rural assembly markets that are located in production areas The distinction between rural assembly markets and secondary wholesale markets is that secondary wholesale markets are in permanent operation (rather than being seasonal in nature or dealing in specialized produce), larger volumes of produce are traded than at the rural assembly markets and specialized functions may be present, such as commission agents and brokers.

Terminal wholesale markets are located in major metropolitan areas, where produce is finally channelled to consumers through trade between wholesalers and retailers, caterers, etc. Produce may also be assembled for export. In some countries, such as India and China, terminal markets also supply other parts of the country. For example, New Delhi serves as a distribution centre to the south of India for apples grown in the Himalayan foothills. The problems of terminal wholesale markets are usually ones of congestion caused by an unsuitable location or by an inappropriate mixture of wholesale and retail functions. Traditionally, wholesale markets were built adjacent to city centres, located at a focal point of the inter-city transport facilities and close to the main retailing areas. Population growth, changes in urban land-use patterns and the development of modern transport systems have all influenced the suitability and functionality of existing sites.

Wholesaling facilitates the economic function of buying and selling (usually termed as "price formation") by allowing the forces of supply and demand to converge to establish a single price for a commodity. The wholesaler may also perform storage and warehousing functions, as well as allowing economies of scale to be obtained in the transportation of produce from farm to market. The people involved in wholesaling can act simply as merchants, buying and selling produce, can be brokers dealing in orders rather than goods, or can be commission agents. Prices are normally established by negotiation but some wholesale markets use the auction system. The auction is compulsory in all wholesale markets in big cities in Japan. A comparison of the Japanese system with that in Brisbane, Australia, found that prices moved more frequently and with a greater degree of volatility in Japan than those at Brisbane.

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