Functions of credit to the wholesaler and retailer. - SS2 Commerce Lesson Note

Functions of Credit to the Wholesaler:

Inventory Purchases: Credit allows wholesalers to purchase inventory from suppliers without immediate payment. They can acquire goods in bulk and maintain a stock of products to meet customer demand.

Cash Flow Management: Credit provides wholesalers with flexibility in managing their cash flow. They can sell the purchased inventory and generate revenue before making payments to suppliers, allowing them to align their expenses with their sales.

Business Expansion: Wholesalers can use credit to expand their operations by investing in additional inventory, expanding their product range, or entering new markets. Credit enables them to take advantage of growth opportunities without requiring substantial upfront capital.

Supplier Relationships: Credit helps wholesalers establish and maintain good relationships with their suppliers. Timely payments and consistent credit usage can lead to favorable terms, discounts, or extended credit limits from suppliers, enhancing the wholesaler's purchasing power.

Customer Support: Wholesalers may extend credit to their customers, such as retailers, by offering trade credit terms. This supports retailers who may require time to sell the products before making payment, fostering strong business relationships.

Functions of Credit to the Retailer:

Inventory Acquisition: Credit enables retailers to acquire inventory from wholesalers or manufacturers without immediate payment. This allows them to maintain a diverse and well-stocked product offering to attract customers.

Cash Flow Management: Similar to wholesalers, retailers can utilize credit to manage their cash flow effectively. They can generate revenue from sales before making payments to suppliers, enabling them to cover expenses and reinvest in the business.

Seasonal or Promotional Sales: Credit provides retailers with the opportunity to offer seasonal or promotional sales, where customers can make purchases on credit terms. This strategy can boost sales during peak periods or attract customers who prefer deferred payment options.

Business Growth: Retailers can leverage credit to expand their business by opening new stores, increasing inventory levels, or investing in marketing initiatives. Credit facilitates the necessary capital for growth without depleting cash reserves.

Customer Satisfaction: Offering credit to customers improves their purchasing experience and can increase customer loyalty. Retailers can provide flexible payment options, such as installment plans or store credit cards, to accommodate customers' financial situations and preferences.