The NBER Working Paper Series presents a study on the modern wholesaler, focusing on global sourcing, domestic distribution, and scale economies. The paper analyzes the U.S. wholesale market, which intermediates $5 trillion in sales from manufacturers to downstream firms. In 2012, wholesalers accounted for nearly half of all transactions in this market, up from 32% in 1992. This growth is largely driven by "superstar" firms, the largest 1% of wholesalers. The study uses detailed administrative data to show that the rise of these firms is linked to their global sourcing and expansion of domestic distribution networks, which require scale economies and lead to increased market shares and markups. Counterfactual analysis reveals that despite increased market power and markups, scale has benefits for buyers, who gain access to globally sourced varieties, nationwide distribution, and increased quality, while wholesalers reduce marginal costs. The paper explores the welfare effects of fixed costs in globalization and technology, noting that while some firms may grow and exert market power, these investments can also provide consumer benefits. It highlights the importance of scale economies in the U.S. wholesale trade sector, where large fixed investments allow the biggest firms to develop better products and reduce marginal costs. The study uses large administrative datasets to extend standard industrial organization techniques for demand and entry analysis, trading off detailed product data for administrative data on markups and cost shifters. It uses a combination of administrative sales and cost data to adjust demand estimation, allowing for counterfactuals to understand the roles played by underlying economic developments. The paper first establishes a series of facts to characterize the nature and growth of the U.S. wholesale sector, noting that nearly all growth comes from the largest wholesalers, which extract large and increasing markups. These facts are fed into a model where wholesalers endogenously enter, select attributes, and choose prices in the face of heterogeneous demand to reveal marginal and fixed costs. Structural estimation directly quantifies the changing trade-off between fixed costs and marginal costs. Large firms make increasing large fixed investments in distribution and sourcing. The estimated model is used for counterfactual estimation to understand the implications for the growth in concentration in terms of welfare. The aggregate shift in wholesale technologies from 1997 to 2007 allowed the largest wholesalers to increase markups and market concentration while reducing costs for downstream buyers. In one context, the expansion of wholesalers into international trade in 2007 saved downstream buyers 10.4-10.5% per year in procurement costs as a percentage of purchase value ($442-449 billion). However, due to large fixed costs, the largest 1% of wholesalers were able to increase their overall market shares and their variable profits.The NBER Working Paper Series presents a study on the modern wholesaler, focusing on global sourcing, domestic distribution, and scale economies. The paper analyzes the U.S. wholesale market, which intermediates $5 trillion in sales from manufacturers to downstream firms. In 2012, wholesalers accounted for nearly half of all transactions in this market, up from 32% in 1992. This growth is largely driven by "superstar" firms, the largest 1% of wholesalers. The study uses detailed administrative data to show that the rise of these firms is linked to their global sourcing and expansion of domestic distribution networks, which require scale economies and lead to increased market shares and markups. Counterfactual analysis reveals that despite increased market power and markups, scale has benefits for buyers, who gain access to globally sourced varieties, nationwide distribution, and increased quality, while wholesalers reduce marginal costs. The paper explores the welfare effects of fixed costs in globalization and technology, noting that while some firms may grow and exert market power, these investments can also provide consumer benefits. It highlights the importance of scale economies in the U.S. wholesale trade sector, where large fixed investments allow the biggest firms to develop better products and reduce marginal costs. The study uses large administrative datasets to extend standard industrial organization techniques for demand and entry analysis, trading off detailed product data for administrative data on markups and cost shifters. It uses a combination of administrative sales and cost data to adjust demand estimation, allowing for counterfactuals to understand the roles played by underlying economic developments. The paper first establishes a series of facts to characterize the nature and growth of the U.S. wholesale sector, noting that nearly all growth comes from the largest wholesalers, which extract large and increasing markups. These facts are fed into a model where wholesalers endogenously enter, select attributes, and choose prices in the face of heterogeneous demand to reveal marginal and fixed costs. Structural estimation directly quantifies the changing trade-off between fixed costs and marginal costs. Large firms make increasing large fixed investments in distribution and sourcing. The estimated model is used for counterfactual estimation to understand the implications for the growth in concentration in terms of welfare. The aggregate shift in wholesale technologies from 1997 to 2007 allowed the largest wholesalers to increase markups and market concentration while reducing costs for downstream buyers. In one context, the expansion of wholesalers into international trade in 2007 saved downstream buyers 10.4-10.5% per year in procurement costs as a percentage of purchase value ($442-449 billion). However, due to large fixed costs, the largest 1% of wholesalers were able to increase their overall market shares and their variable profits.