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Wholesalers and Dominance

 


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There is a debate to be had about whether the dominance of one particular wholesaler in the market is really a desirable outcome for all the parties concerned. The creation of dominance is normally associated with monopolies. In turn the growth of monopolies invariably leads to a situation where the consumer has very limited choices and has to put up with the marketing policies of the companies. From a macroeconomic policy point of view it would seem that the dominance of one group of wholesalers is not a particularly welcome development. The acquisition of the dominance of wholesalers might also be interesting from the perspective of trying to improve the market dynamics.

Wholesalers might acquire dominance as a result of the size of their transactions. Once the wholesaler is in control of a significant proportion of the market activities then we can start talking about dominance and monopolies. Some countries within the European Union have signed up to bilateral agreements which identify potential monopolies and prevent them from developing further. There have also been certain punitive measures against those companies which deliberately build a monopoly status for themselves. Such measures might include fines or even jail terms for the company directors.

Customers can also contribute to the dominance of wholesalers in the market. If one is to believe in capitalism in its basic forms, the consumers will determine the companies that are successful through selective purchasing practices. Thus the wholesalers that can deliver the items that the customers want will have a better prospect of surviving the market. This is said to be a very efficient system of weeding out the companies that are not doing a good job in terms of providing customers with the products that they need. That means that consumers might indirectly create a monopoly by supporting a particular group of wholesalers.

The dominance of wholesalers can have some benefits for the market if they invest the profits in the improvement of their products. In a rather brutal reality check it might be in the best interests of the market that the most efficient companies are the ones that are left to operate instead of carrying all the failing organizations. In effect the dominance of certain wholesalers will act as a cleanout process for the entire family of companies that work within that sector. This is the market at its very best and it has been the foundation of many great economies.

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