Wholesale:

Introduction to Wholesale Trade

A Sector at the Heart of the Economy

Wholesale trade occupies a unique position at the centre of the socialized economy, especially regarding the purchase and sale of merchandise and its prices. Problems associated with supply and demand of most goods, their prices and international trade are connected with the wholesale trade sector and its control by global monopolies and their narrow private interests.

The wholesale trade sector occupies a unique position where a public authority could confront the global monopolies and curtail their power over the economy. A public authority exercising its legal will within the wholesale sector supported by the popular will of the people could bring some coherence to the issue of pricing of goods. This could be exercised by demanding modern scientific accounting of prices of production from those companies distributing their products and an end to the interference in pricing currently exercised by the global parasites and their commodities exchanges.

From coherence in determining prices of production also arises the possibility of coherence in making government claims on the production of value to meet the country’s collective needs. This would arise from the demand for transparent and scientific accounting of all aspects of the production process. The incoherence in pricing is a problem that constantly creates crises in the Canadian economy such as now with oil prices and with the prices of most natural resources and basic commodities. For example, as U.S. Steel workers point out the price of steel has plummeted recently from $700 per ton to $350 greatly adding to the crisis in the sector. A public authority in the wholesale trade sector could bring coherence and stability to prices and use its legal authority to enforce those prices throughout the economy.

From its central position in the distribution of goods and in the determination of prices of production, a public authority would also have the opportunity to demand realization of the economy’s production of social and material infrastructure in proper exchange with the goods producing sectors. The realization of the value produced in the country’s social programs, public services and material infrastructure is at present not done by those companies that consume the value and transfer it into the commodities their workers produce. For example, the value of the public education of companies’ employees is not accounted for and realized through exchange as part of normal business practice. A public authority in the wholesale sector would identify this problem and demand a direct realization of the value of the employees’ public education consumed in the production process through an exchange with the actual public institutions involved similar to any exchange and realization of value.

A most important role for a public authority in the wholesale sector, which has the support of the people, would be to make international trade a part of nation-building in opposition to the current nation-wrecking and empire-building of private interests through monopoly-controlled free trade. The current regime of allowing global monopolies to dominate international trade does not work and does not favour the people. It has led to nation-wrecking, war and constant economic crises. All exports and imports should go through a public authority that controls prices and assures both countries involved that trade is based on mutual benefit and does not harm the interests of the people in either country but rather assists them in their development and nation-building.

A new pro-social direction for the economy is possible that guarantees the well-being and security of the people, brings coherence to prices, stability to supply and demand, and control over international trade to ensure that trade benefits both countries and their peoples. For this to happen, a serious effort has to be made to create a public authority within the wholesale trade sector. Canadians have some experience on this front with the current supply management in the dairy industry and the former Canadian Wheat Board.

The smashing of the Canadian Wheat Board by the neo-liberal government of Harper shows that to have and safeguard public control over any sector of the economy requires uniting the political forces with sufficient courage to confront and restrict monopoly right. Bringing coherence to one sector after another within wholesale trade means confronting the power to deprive of the global monopolies, which includes defeating the power of the nation-wrecking free trade agreements that the global monopolies have organized to further their narrow private interests and empire-building.

A step on the road of nation-building can be taken by bringing public authority into the wholesale trade sector to confront and curtail monopoly right.

 

Wholesale Trade at a Glance

For the information of readers, TML Weekly is reproducing below Statistics Canada’s introduction to wholesale trade and its significance in Canada. The introduction was published in Statistics Canada’s bulletin The Daily, November 27, 2015.

What Is Wholesale Trade?

Wholesale trade is a sector comprising “establishments primarily engaged in wholesaling merchandise, generally without transformation, and rendering services incidental to the sale of merchandise.”

The sector is composed of businesses that typically act as intermediaries, linking other sectors of the economy. In general, wholesalers connect the farmers or manufacturers that produce goods with the companies or public institutions that need them, such as the factories buying inputs for their industrial processes or the retailers buying finished goods to sell to Canadian households. They also import goods from other countries and redistribute them within Canada, and export goods produced in Canada to other markets.

Many wholesalers sell merchandise in large quantities to retailers as well as to other businesses and institutions. However, some sell single units of durable non-consumer goods such as heavy-duty vehicles, industrial machinery and farm equipment to the businesses that need them.

Wholesalers often provide marketing and support services such as labelling, packaging and product training to the companies they serve.

One of the main tools for measuring wholesale trade in Canada is the Monthly Wholesale Trade Survey (MWTS). This survey program produces estimates of monthly sales by province and territory, as well as Canada-wide inventory levels, for almost all industries within the wholesale sector as defined by the North American Industry Classification System (NAICS).

Three exclusions to the MWTS are: oilseed and grain merchant wholesalers; petroleum and petroleum products merchant wholesalers; and business-to-business electronic markets, and agents and brokers.

Statistics Canada gathers data for these three industries from other sources, so they are excluded from the MWTS in order to minimize the response burden on Canadian companies. These excluded industries are covered by the Annual Wholesale Trade Survey.

Why Does the Wholesale Trade Sector Matter?


Chart 1: Real GDP, all sectors.
Click to enlarge.

Based on data from the MWTS (excluding the three large industries mentioned), wholesalers sold an average of $52.9 billion worth of goods and held $65.9 billion in inventories per month in 2014. In comparison, on average, manufacturers sold $51.6 billion and retailers sold $42.1 billion worth of goods on a monthly basis during the same period.

The wholesale trade sector accounts for about 5% to 6% of gross domestic product (GDP), comparable with the retail trade sector. In 2014, wholesalers employed more than 775,000 people in an average month, or about 5.0% of all employees in Canada. In that year, on average, the wholesale sector employed a smaller share of people than the manufacturing sector (9.5%) and the retail sector (12.4%), but employed similar numbers to the finance and insurance sector (4.5%) and the transportation and warehousing sector (4.7%). People employed by wholesalers earned an average of $1,110 per week in 2014, approximately 19% higher than the national average of $935 per week and more than double that made by those working in retail trade ($542 per week).

In the area of capital spending, the wholesale sector accounted for 2.2% of non-residential building construction capital expenditures in Canada in 2013. This was a smaller amount than the shares of either the retail sector (9.6%) or the manufacturing sector (10.8%), but larger than the information and cultural industries sector (1.5%). In terms of capital expenditures on machinery and equipment, wholesalers accounted for 3.1%, similar to the retail sector (4.1%) but smaller than the manufacturing sector (13.1%).

In the same year, wholesalers accounted for 8.3% of total business enterprise research and development intramural expenditures, a far smaller share than manufacturers (42.1%), but a much larger share than retailers (0.4%).

What Do Canadian Wholesalers Do?

Wholesalers as intermediaries have relationships with most other sectors of the economy. The largest subsector in the MWTS in 2014 was the machinery, equipment and supplies subsector, with average monthly sales of $11.1 billion. Wholesalers in this subsector typically distribute machinery and equipment to a variety of businesses, including those in the construction, mining, forestry, and manufacturing sectors, as well as to farmers, retailers and public institutions. The machinery and equipment needed by Canadian businesses are sometimes manufactured in other countries, so it is common for wholesalers in this subsector to import the machinery and parts they sell.

Chart 2: Wholesale sales.
Click to enlarge.

Wholesalers in the food, beverage and tobacco subsector typically sell to retailers and restaurants, linking these companies with the farmers and manufacturers that produce the goods desired by their customers. In this subsector, wholesalers sometimes import the goods they sell, and sometimes export food harvested or manufactured in Canada to the rest of the world. This subsector sold an average of $10.2 billion worth of goods monthly in 2014.

In the motor vehicle and parts subsector, which had average monthly sales of $9.2 billion in 2014, wholesalers are involved in both exporting and importing motor vehicles, which range from automobiles to heavy duty trucks and buses, as well as their parts. These wholesalers sell their goods to a wide variety of businesses, including retailers.

The building material and supplies subsector is one of the smaller subsectors, with average monthly sales of $7.6 billion in 2014. Most of these wholesalers distribute goods to retailers, manufacturers and other businesses, but there are some that export commodities such as lumber.

The next largest subsector in 2014 was personal and household goods, with average monthly sales of $7.3 billion. With the exception of wholesalers in the pharmaceuticals and pharmacy supplies industry, wholesalers in this subsector typically import a large share of the goods that they redistribute. It is typical of wholesalers in this subsector to primarily sell to retailers.

Wholesalers in the miscellaneous subsector are a very diverse group, accounting for on average $6.8 billion in monthly sales in 2014. They sell a wide variety of products to a variety of businesses, including retailers, manufacturers and farmers, and several export their goods to foreign markets.

Finally, wholesalers in the farm product subsector, the smallest subsector covered by the MWTS with average monthly sales of $709 million in 2014, specialize in the distribution of items such as live animals and nursery stock, both within Canada and to foreign markets.

Looking at the industries excluded from the MWTS, wholesalers of petroleum and petroleum products primarily sell to other wholesalers, although they do sell to foreign firms, manufacturers and retailers too. Wholesalers in the oilseed and grain industry, similar to other wholesalers in the farm product subsector, frequently export their goods to foreign markets.

The smallest excluded industry, business-to-business electronic markets and agents and brokers, is a small but diverse group that are united by the fact that they do not own the goods they sell. Instead, they sell goods owned by others for a fee or commission.

What Does the Wholesale Trade Sector Look Like in Canada?

In 2014, the three largest components of wholesale trade on the MWTS were the machinery, equipment and supplies subsector; the food, beverage and tobacco subsector; and the motor vehicle and parts subsector. Together, these subsectors accounted for an average of 58% of monthly sales.

According to MWTS data, wholesalers are heavily concentrated in Ontario, which accounted for on average 49% of monthly wholesale sales in 2014. Quebec (18%), Alberta (13%) and British Columbia (10%) were the next largest provinces, together accounting for an average 41% of monthly sales in 2014, less than the share of Ontario alone. Wholesale sales in the Atlantic provinces and the territories combined accounted for on average 3.5% of monthly wholesale sales in Canada during the same period.

Overall, wholesale trade comprises a diverse group of businesses that perform a variety of roles; they connect foreign firms to domestic ones, and provide the links between farmers, manufacturers, retailers, public institutions and other businesses in Canada.


Left: Chart 3 — Average share of monthly wholesale sales by subsector; right: Chart 4  — Average share of monthly wholesale sales by province and for the territories. Click to enlarge.

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