Undoubtedly, one of the advantages of a wholesale apparel company is that it does not have to be involved in the manufacturing of its products. As Peter & Donnelly (2000, p. 166) note, wholesalers are mainly involved in buying and reselling or distribution of goods in bulk quantities to retailers or business organizations, who will in turn sell these goods to end consumers. Hence, a wholesale apparel company does not need to invest as much capital as a manufacturer does on fixed facilities such as plants and equipment and labor costs. Another advantage of a wholesale apparel company is that management and operating costs are relatively more simple and cheaper since the company only acts as an intermediary between manufacturers and retailers.
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However, a disadvantage of wholesaling is that wholesalers usually carry the risk of carrying large inventories of an assortment of products which may be subject to price reductions when not sold in a timely manner. Likewise, a wholesale apparel company will also face competition from other clothing wholesalers who may carry the same products from the same manufacturers. Compounding this problem is the fact that wholesalers will have difficulty in establishing differentiation since they have little control over the marketing mix of products particularly in pricing and promotion (eg. branding) since these are usually determined by manufacturers and the market. Clothing retailers’ increased ability to buy directly from manufacturers is also likely to undermine wholesalers’ position in the distribution channel (p. 168).
Meanwhile, a distinct advantage of a vertical apparel company is that it has greater control on the supply chain. This is because a vertical apparel company is engaged in the manufacturing to the the distribution and retail of its products, which gives it greater control in the management of the supply and value chain of its business (Peter & Donnelly, 2000, p. 166). Having greater control of the supply and distribution channels enables the company to benefit from higher profit margins as a result of economies of scale and low transaction costs through direct product retailing to consumers. A vertical apparel company also has an increased ability to compete with other manufacturers and retailers since it is directly involved in the promotion, pricing, and distribution of its products. On the other hand, the disadvantages of a vertical apparel company is that it requires costly investments in fixed facilities and also entails a more complex management system involving the entire supply and value chain. Clearly, wholesalers are at a disadvantage vis-à-vis vertical apparel companies since the former have minimal control over the marketing mix unlike the latter. In contrast to wholesalers, vertical apparel companies have the ability to increase demand and visibility for their products utilizing various marketing and distribution strategies, and benefit from their greater control over the supply and value chain.
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