Merchanting

Merchanting, in a business context, refers to the activity of purchasing goods or services from one source and then reselling them to another, usually for a profit. This encompasses a range of operations, from direct sales of physical products to facilitating transactions involving intangible assets. It's a fundamental economic activity, driving trade and supply chains. Merchanting often involves managing inventory, negotiating prices, arranging logistics (shipping, storage), and establishing customer relationships. The goal is to acquire goods at a lower cost than their eventual sale price, generating revenue based on the price difference. Successful Merchanting requires market understanding, effective financial management, and the ability to mitigate risks like fluctuating prices and slow-moving inventory.

Merchanting meaning with examples

• A small business practices Merchanting by buying imported coffee beans in bulk from a distributor and then repackaging and selling them in smaller quantities to local cafes. This involves sourcing the beans, securing favorable pricing, arranging transport, and marketing to the cafes, turning a profit on the price difference.
• An online retailer engages in Merchanting by purchasing discounted electronics from various manufacturers and selling them on their website at a slightly higher price. They handle the website design, customer service, shipping, and return processes, and their profit comes from the difference between the wholesale price and the retail price.
• A commodities broker specializing in precious metals performs Merchanting by buying gold and silver from miners and selling them to jewelry manufacturers and investors. They manage the buying and selling of large volumes of the metals, taking a margin on each transaction to cover their operating costs and make a profit.
• A travel agency practices Merchanting by purchasing airline tickets and hotel accommodations in bulk at discounted rates and then selling them to customers in customized travel packages at higher prices. They manage bookings, itineraries, and customer service to profit from the service and cost differentials.
• A wholesaler engages in Merchanting by buying raw materials from various producers and then reselling them to manufacturing companies. They manage inventory, handle logistics, and provide financing options to these manufacturers, deriving their profit from the price difference and the value added by their services.