Wholesale

For most of history, most goods were purchased directly from a local producer, such as a potter, wheelwright, or brewer. The main exceptions were exotic products that required a long distribution chain, such as silk, spices, rare minerals and metals, and a few manufactured goods with highly limited production centers, such as glass beads, manuscripts, and Toledo swords. As world exploration enlarged commercial horizons, the variety of profitable goods increased, more merchants became engaged in long-distance trade, and the trade increasingly came under the control of corporations.

The really big impetus to wholesale trade was the transportation network created by the railroads toward the middle of the 19th century. Chicago, which sat where many rail lines intersected with Great Lakes shipping, became an especially busy center of the wholesale trade. The Chicago traders handled timber from Wisconsin and agricultural products from the plains states, especially grain and livestock. Wheat, pigs, and cattle became commodities that were gathered in grain elevators and stockyards, where they were traded by wholesalers at central exchanges such as the Chicago Board of Trade. The city also was home to some of the biggest wholesalers of drugs, dry goods, and hardware.

Toward the end of the 19th century, some political and economic forces began to work against the wholesale industry. Populist movements such as the National Grange argued that farmers were being gouged for the difference between their selling prices and what their goods fetched on city exchanges; they fought for regulations on the fees charged by the railroads and warehouses. In an increasingly urban society, chain stores, department stores, and mail-order companies became big enough to be able to buy in bulk directly from manufacturers. Some large producers, such as the meatpackers Swift & Company, were able to create their own distribution and marketing networks.

These market forces still affect the wholesale trade today. Big-box stores and warehouse stores such as Walmart, Home Depot, and Costco have armies of buyers who deal directly with manufacturers. Many of them also own a network of shippers and warehouses or deal directly with the businesses offering these services. The house-brand products sold at large supermarket chains also represent this kind of arrangement. Working from the other end of the supply chain, some manufacturers such as Apple sell their products at least partly through retail stores in major cities. The role of mail-order houses in facilitating direct-to-consumer sales and distribution has largely been taken over by Web-based companies. It has become especially easy to bypass wholesalers in sales of products that can be transmitted digitally, as Amazon is doing with e-books and Netflix with streaming movies.

Nevertheless, the wholesale industry continues to do trillions of dollars of business. Wholesalers will remain busy as long as there are enough small producers, small retailers, goods that cannot be distributed digitally, and goods that people do not want to buy by mail.

The industry hit its peak employment of 6,041,800 workers in November 2007, just before the Great Recession hit. The workforce bottomed out at 5,438,500 in May 2010 and has been climbing since then.

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