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Changing Face of Wholesale Business

-By Anooj

Sometime back, we had heard that the wholesalers’ of Butwal had requested the companies and dealers not to go for direct retailing in the market. Their sole demand was that the companies and dealers should sell their products only to wholesalers and that the wholesalers should sell the products to the retailers. It was of course a wise decision and a genuine demand, which had to be taken due to uncertain and insecure business environment. The market had become too competitive and the wholesalers were not making any profit out of their businesses.

Almost at the same time, wholesalers of Kathmandu had registered an association called ‘Nepal Beverage Distributors Federation’. They formed a committee to work on behalf of wholesalers and wholesaling business as a whole. Their objective was to make the wholesaling business a recognized one. Without any doubt, the wholesalers are very much an integral part of business, especially in distribution. With these steps not only did they show their existence in the market, they also wanted to make the companies or dealers aware of their strength and unity. Considering that a voice would be more powerful and action more effective if people work in a group for a common goal, they also carried out some activities and also obtained partial success. Due to the lack of professional thinking and managerial ability, the association, however, could not sustain. Dissolving the initial committee, they formed a new committee. Of course, there were also some other reasons like emphasis on personal interest and benefit by some of the leaders, and tough competition in distribution business and unorganized distribution system.

Now, after a long silence, a new kind of proposal has come out. Until the time they were fighting each other and losing their profit. They would sell the goods at prices below those officially fixed. If their margin was 3% they were just taking 1% or even less, leaving the rest to the retailers. As a result they were not making the profit they deserved. Some of them were in bad shape and a few even quit the business. As a result, retailers had started getting higher margins and there was mushrooming of retail outlets. Now the wholesalers in Kathmandu seem to be committed to their profession. They have agreed to sell the products at fixed and uniform rates. The selling price is almost equal to the retail price as fixed by the manufacturers. If the plan works, they will obviously be in a better position.

The wholesalers have started working in a united way for a good reason. It will obviously make them strong and their business profitable. If they carry on in a systematic and organized way they could be in a better position to bargain. They can put forward their demands before the manufacturers and importers not to sell their products directly to retailers. In this situation, they can secure their business and profit.

The current change in the wholesalers’ mind may be a result of VAT implementation. Since the government implemented VAT last year and decreased the threshold to two million rupees this year, many business houses have registered under VAT. In this way even small traders with a business of Rs. 6,000 per day, have to be registered with VAT. There is no point for the wholesaler to be out of the reach of the VAT net as the size of business of each one of them crosses the limit. There is a risk of government raid all the time and when it happens, another hassle of valuation of existing stock has to be faced. If the current style of selling products at below the official rate continues, the wholesalers will not be able to pay the tax dues.

However, there are still some improvements needed in the current development. They can cope up with the current government’s economic policy if they follow the idea. They can be a major force and establish themselves as an influential worth to be listened to while taking major decisions by the company or the government. Only thing they have to do is to include all types of wholesalers in their association who may be involved in different types of products and dealing with different people in different places.