What is a Merchant?

MerchantWhat's the meaning of merchant?

The word ‘merchant' is believed to be derived from the Latin word “mercari” meaning traffic and the French word “mercis” meaning wares.

A merchant is a company or individual who sells a service or goods. An ecommerce merchant is someone who sells exclusively over the Internet. A merchant will sell the goods to the customer for a profit, and by law, will have a duty of care to the customer due to the knowledge of the products he has for sale.

A merchant can be a wholesaler or a retailer, and the products can be sold from any one source to any other source. A merchant is a non-specific term for anyone who sells anything, the only determining factor being that the product or service for sale is being sold for a profit.

Historically, a merchant is anyone who is involved in business or trade. During the 16th century, merchants included local traders such as bakers, grocers, shopkeepers as well as others who imported and exported goods over vast distances, and offered value added services such as credit and finance.

Over the years, the reputation of the merchants has varied. In ancient Rome and Greece, merchants may have been wealthy but were awarded a high social status. And, in the Middle East, the merchants enjoyed high status. The present scenario has changed a great deal. In modern times, a merchant is someone who does activities solely for the purpose of generating profit, cash flow, and revenue.

What are the different types of merchants?

There are basically two types of merchants – wholesale and retail. Apart from these, newer types of merchants known as the ecommerce merchants have also emerged and earned a place in this digital age.

A wholesale merchant or wholesaler will typically purchase goods in bulk and redistribute the products to retailers in smaller quantities. Wholesaler suppliers are effectively both a reseller and a merchant because they buy goods from manufacturers and then resell these goods to retailers, hence they act as a link between the producers and retailers.

Usually, a wholesale merchant would operate out of a large establishment such as a warehouse in order to store stock before distributing it to retailers and individuals, however, it has become common for a wholesale merchant to act as a broker without physically dealing with the stock; the term for this is dropshipping.

A retail merchant or retailer buys merchandise from wholesalers and sells them to end-users or consumers, usually in small quantities. In a way, they act as middlemen between the producers and consumers.

Manufacturers are deeply involved in designing and developing a product, while the retailers are deeply involved in reaching out to the customers and selling these products. Both manufacturing and marketing are two different things and are hard to achieve, yet they both need each other to sustain.

Retailers are maestros in marketing, sales and customer service. After purchasing the merchandise from wholesalers or manufacturers, they sell it at slightly higher prices in the market. Note that the wholesale price is always less than the retail price. The difference in prices is considered as the cost of marketing/advertising.

An ecommerce merchant or an online merchant is someone who sells products or services exclusively over the Internet. There is a huge difference between an online seller and an online merchant. An online seller just buys products and then sells them to generate profit, while an online merchant has more responsibilities than that.

An ecommerce merchant is not only in charge of his store’s inventory but also of the financial process, promotion of his products and even building the brand identity.

Ecommerce and internet-based business are high-risk activities. The boarding process undergoes a series of credit checks and underwriting before a payment gateway is deployed. Friendly fraud and stolen credits is an issue these merchants have to tackle.

An affiliate merchant is a company that wishes to drive traffic and generates leads to their website or sales of their product through ads and links placed throughout a network of affiliates. A merchant may run their own in-house affiliate program or they may use an affiliate network. These affiliate networks charge merchants a membership fee and also take an additional commission from every sale so it is more economical to run their own in-house affiliate program.

Many companies have decided to incorporate both the traditional roles of retailers and manufacturers. Apple, for example, is both a manufacturer and retailer of its products. Hence Apple has eliminated the role of wholesalers here.

Some other companies like Samsung give their products to wholesalers or distributors. This distributor is solely responsible for order picking, delivery, training sales associates, promotions etc for the Samsung brand. This distributor is called a full-service wholesaler. Some wholesalers start service-related businesses and provide services for the products they are selling. As a result, they get both – sales and service orders.

Companies like Best Buy are the biggest retailers in the world. They purchase products from manufacturers like Sony and LG at wholesale price and sell them to consumers at a higher price.

All kinds of merchants exist in this economy, either it could be purely wholesaling or retailing or it could be a blend of both. However, ecommerce is rising and there is now a lesser demand for wholesale in developing economies. Ecommerce will soon take over the market and dropshipping will be a game changer in the coming years.

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