Financial Resources

Financial Resources

Financial Resources

Not the least factor to be considered in choosing one's distribution channel is that of available financial resources. The product manufacturer who decides to sell his wares direct to the retailer must be prepared to assume many of the responsibilities of the wholesaler. The first of these is the maintenance of sufficient stocks of his product to meet sudden demand. Where the product has a seasonal appeal this may mean holding stocks which will move only slowly at certain periods of the year and which will tie up a considerable proportion of his capital resources. Apart from the cost of the stocks, he must also invest money in warehouses and employ warehouse staff to handle a large number of comparatively small orders.

Instead of having a few wholesale accounts of good creditworthiness, the product manufacturer selling direct to the retail trade will need to open a large number of accounts with businesses whose financial viability may be questionable. He will run a greater risk of incurring bad debts. Certainly, it will be necessary for him to employ additional accounts staff to chase his customers for payment. At a time when interest rates on borrowed money are high, many shopkeepers use the credit they receive from their suppliers to finance their businesses. The manufacturer, who takes up the wholesaler's burden in this respect, will involve himself in a large outlay of capital.


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