Functions of credits to retailer and wholesalers. - SS2 Commerce Lesson Note

Functions of Credit to Retailers:

Inventory Acquisition: Credit allows retailers to acquire inventory from wholesalers or manufacturers without immediate payment. This enables them to stock a variety of products and maintain adequate inventory levels to meet customer demand.

Cash Flow Management: Credit helps retailers manage their cash flow effectively. They can sell the purchased inventory and generate revenue before making payments to suppliers, allowing them to cover expenses and reinvest in the business.

Seasonal and 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 use credit to fuel business growth. They can invest in expanding their physical stores, opening new locations, increasing marketing efforts, or diversifying their product offerings. Credit provides the necessary capital for expansion 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.

Functions of Credit to Wholesalers:

Inventory Purchases: Credit enables wholesalers to purchase inventory from manufacturers or suppliers without immediate payment. They can acquire goods in bulk and maintain a stock of products to meet the demands of retailers and other customers.

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. They can invest in additional inventory, expand their product range, enter new markets, or enhance their distribution network. 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.