A number of important functions are served by a whole saler. Factories and retail stores often have limited storage space, because space costs money. In the case of a retailer, the primary allocation of space in the business is to goods on display for sale. Manufacturers prefer to allocate space to floor operations. A wholesaler, on the other hand, has large warehouses designed for storage. Retailers can purchase products in smaller lots from a whole saler than they can from a producers, allowing them to purchase only what they need in quantities they need.

Economically, a whole saler helps a factory to quickly turn a profit by buying goods from the factory. Once the goods are out the door, the producer no longer needs to be concerned about recouping the expenses of making them. In some industries, this system is varied slightly, and the whole saler does not actually buy the goods from the producer, although the whole saler does store them. In these instances, the whole saler gets contracts for purchase of the goods from retailers, and receives a commission. The whole saler, in turn, sells the goods to retailers, thus ensuring that the space taken up by the products is paid for as soon as they leave the storage warehouse. Final disposition of the goods is ultimately up to a retailer.

In addition to selling ready products or raw materials to retailers, whole salers also sell to institutions and professional groups. A University, for example, may need large stocks of paper, which it purchases directly through the wholesaler in order to receive a discount. Likewise, large offices need supplies which they can order directly from whole salers in large lots. These lots are still smaller than lots of goods directly from the manufacturer. A whole saler also sells materials used to make goods to other producers, establishing itself, for example, as a boat supply whole saler selling boat components.

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