SPPI FOR WHOLESALE TRADE IN ISRAEL Ruth Vizner

SPPI FOR WHOLESALE TRADE IN ISRAEL Ruth Vizner Central bureau of statistics 23 rd Voorburg Group meeting Aguascalientes, Mexico 22 -26 September 2008

Topics l l l Output definition Market condition Classification National accounts Pricing methods Quality adjustment

Definition of the service (1) l The resale (without transformation) of goods from manufacturer to a third party: retailers, industrial, commercial, institutional or professional users or other wholesalers, or involves acting as an agent or broker in buying goods for or selling goods to such companies.

Definition of the service (2) Related services l Transportation l Warehousing l Promotions l Marketing l Packaging l Assortment building l Other services

Definition of the service (3) Two types of wholesalers: l Merchant wholesalers Buy and sell goods on their own account (wholesale merchant or jobbers, industrial distributors, importers, exporters and cooperative buying associations) l Agents and brokers Receive a commission or fee

Type of wholesalers Wholesale on a fee Wholesale that take title or contract basis to the goods Agents and brokers Manufacturer’s sales and branch offices Wholesale merchants

Origin and destination of goods Intermediate buyer: Local manufacturer Retailer Industrial institutional Other merchant Wholesale trade Final Customer import International manufacturer export International customer

Market Conditions (1) In 2007 l Industry revenue US$ 55 billion l 22, 733 dealers l 17. 7 percent of revenue in all industries l Market share of big companies ~70% (3. 5 percent of dealers with revenues US$ 40+ million accounted ~ 70% of revenue)

(Market Conditions (2 Wholesale trade includes domestic as well as international wholesale trade In 2005 l Import of goods ~ 25% of revenues l Export of goods only ~ 4% of revenues

First group to develop 512 - “wholesale trade of agriculture raw material, live animals, food, beverage and tobacco” 5121 - Wholesale of agricultural raw materials and live animals includes: grains and seeds; oleaginous fruits; flowers and plants; unmanufactured tobacco; live animals; hides and skins; leather; agricultural material; waste, residues and by-products used for animal feed 5122 - Wholesale of food, beverages and tobacco includes: fruit and vegetables; dairy products, eggs and egg products; edible oils and fats of animal or vegetable origin; meat and meat products; fishery products; sugar, chocolate and sugar confectionery; bakery products; beverages; coffee, tea, cocoa and spices; tobacco products

Group 512 In 2005 l The biggest, ~ 27% of revenue l US$ 11, 591 million Special conditions l Fluctuations in the prices of goods in global markets l Changes in exchange rates l Competition l Mergers and acquisitions l Globalization and new technologies

Classification ISIC Rev 3 51 512 Wholesale trade Wholesale on a fee or contract basis Wholesale of agricultural raw materials, live animals, food, beverages and tobacco 513 Wholesale of household goods 514 515 Wholesale of non-agricultural intermediate products, waste and scrap Wholesale of machinery, equipment and supplies 519 Other wholesale

other Classification (ISIC Rev 4) 46 Wholesale trade 461 Wholesale on a fee or contract basis 462 463 464 465 466 469 Wholesale of agricultural raw materials and live animals Wholesale of food, beverages and tobacco Wholesale of household goods Wholesale of machinery, equipment and supplies Other specialized wholesale Non-specialized wholesale trade

other Classification (CPC) 6111 6112 Wholesale trade services, except on a fee or contract basis of agricultural raw materials and live animals of food, beverages and tobacco 6113 of textiles, clothing and footwear 6114 6115 of household appliances, articles and equipment of miscellaneous consumer goods 6116 construction materials and hardware 6117 of chemical and pharmaceutical products 6118 of machinery, equipment and supplies 6119 of other products

Classification l l Detailed information and description of products and services. Distinction between wholesale trade on own account and on a fee or contract basis. Classification according to the function and kind of product (food, household, machinery). Distinction between specialized and non specialized wholesale trade (in ISIC rev 4).

National accounts issues l How to measure prices of output for subsidiaries units of a manufacturing enterprise? (Units that sell manufactured products made by the parent company ). l How to estimate export in wholesale trade ? (export of services / export of goods).

Pricing methods Gross margin price. The difference between the acquisition price from the supplier and the selling price to the next buyer. There are some cases: (I) the average gross margin per unit for a particular customer class and/or supplier class for all sales within a product group. (II) the average gross margin per unit for a particular customer class or supplier class for a specific kind of product. (III) the average gross margin for all customers and/or suppliers for all sales of a particular product. (IV) the average gross margin for all customer and/or suppliers for all sales of a product group. (V) margin price for an item / transaction.

Margin Price

Quality adjustment methodology Price determining component include l Product information - Type of product - Unit of measure - Origin of product - Additional services l Transaction information - Type of costumer - Type of supplier - Size of transaction

Example of service description component Buying price Selling price product Feed wheat Unit of measure 1 ton bag Supplier/ costumer Russian wheat company Israel Wheat mill Country origin Russia Size of transaction 1 container Additional services Warehousing Distribution

Another example component Buying price Selling price product Milka milk chocolate package Unit of measure 100 gr Supplier/ costumer Kraft company Chain store Country origin Belgium Size of transaction 1000 packages Additional services Marketing Co-op Promotion Distribution Warehousing Product management