"What does the middleman do but add to the price of goods in the shops?" Such remarks are aimed at the intermediate operations between manufacturers and final customers. This practice usually attracts a lot of attention from the public and the press and the operation most talked about is what is often called wholesaling.

    The wholesaler buys goods in large quantities from the manufacturers and sells them in smaller parcels to retailers, and for this service his selling price to the retailer is raised several percent higher. But his job is made more difficult by retail demand not necessarily running level with manufacturers'' production. Because he adjusts or regulates the flow of goods by holding stock until required, he frees the manufacturer, to some extent, from the effect on production of changing demand and having to bear the whole risk.

    The manufacturer can then keep up a steady production flow, and the retailer has no need to hold heavy stocks, who can call on the wholesaler for supplies any time. This wholesale function is like that of a valve in a water pipe. The middleman also bears part of the risk that would otherwise fall on the manufacturer and also the retailer.

    The wholesaler provides a purely commercial service, for which he is too well rewarded. But the point that is missed by many people is that the wholesaler is not just someone adding to the cost of goods. It is true one could eliminate the wholesaler but one would still be left with his function: that of making sure that goods find their way to the people who want them.