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People who are setting up a retail business need to understand supplier vs. distributor vs. wholesaler as part of the product distribution process. Each of these three parties helps businesses to secu
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Product Distribution Strategy
September 5, 2019
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Supplier vs. Distributor vs. Wholesaler: What’s the Difference?

People who are setting up a retail business need to understand supplier vs. distributor vs. wholesaler as part of the product distribution process. Each of these three parties helps businesses to secure and distribute their products. However, the nature of how they are involved in the product distribution process is slightly different with each one. It's important to know the function of a supplier, distributor, and wholesaler so that you understand how they might fit into your supply chain. There are certain reasons that you might work with one party over another, or why more than one could prove useful for your business.

There is no need to be confused about which one does what when considering the roles of supplier vs. distributor vs. wholesaler. A distributor has a direct relationship with manufacturers, while a wholesaler buys large quantities of products from the distributor. Suppliers are those who supply the products, including manufacturers, packagers, and processors.

What Is the Role of a Supplier?What is the Role of a Supplier

A supplier is an individual or group that acts as the source for goods and services. The supplier provides the products from the manufacturer, and sometimes the manufacturer and the supplier are one and the same. A supplier works with distributors and wholesalers to get them the goods that they need. Without suppliers, no retailers would have access to the products that they want to sell. A business might work with a supplier if they decide to run a wholesale business or be a B2B company. If working with a supplier, you will be less likely to be selling straight to consumers.

A supplier can manufacture or produce goods, but they don't have the resources or channels to sell them to retailers or their customers directly. Distributors, on the other hand, have the right channels and marketing abilities to distribute their products to wholesalers and sometimes directly to retailers too. Suppliers are essential to the distribution process, ensuring other parties have access to the goods or services that they require. The supplier is at the top end of the supply chain, with usually at least one intermediary between the supplier and the retailer. Suppliers can't take their products forward after producing or packaging them, so they require the help of a distributor to get their products out.

Working with a Supplier

There are several reasons your business might work directly with a supplier. You might require the supplier to supply the raw materials that you need to manufacture your products, or your business might act as a distributor of goods. When working with a supplier, you first need to know how to find the best supplier for your business. It's also essential to know how to work with them and how to get the most out of your business relationship.

To work well with a supplier, you need to ensure you understand their business, and what they can and can't do for you. Your relationship is sure to run more smoothly if you're not making unreasonable demands. Another important thing to focus on is the communication between you and your suppliers. Poor communication can cause a number of problems, so keeping your communication channels open is vital.

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Of course, choosing the right supplier is crucial if you want to get the most from your working relationship with them. Use these tips to find the best suppliers for your business:

  • Look for suppliers that offer the best price, but don't place all your focus on the cost
  • Find suppliers that you can rely on, with good reviews and testimonials for being punctual, quality products, and more
  • Choose stable suppliers that have been in business a long time so that you know they have a good reputation
  • Consider location when choosing a supplier - the closer they are to you, the sooner you might be able to receive your goods

Examples of Suppliers

Suppliers can include a number of different businesses, including manufacturers, processors, and packagers. They might supply raw materials to manufacturers or even small makers and crafters. For example, a timber company could be a supplier to a carpentry business. Suppliers might also manufacture or prepare products to sell to distributors, so the carpentry business itself could be a supplier.

What Does a Distributor Do?What Does a Distributor Do

A distributor can be seen as the point of contact between the supplier and either a wholesaler or a retailer. They serve as the intermediary that helps give retailers access to the products and services that they want to sell. Their job is distributing products to those that want to sell them, whether they will then be sold to consumers or to other businesses. A distributor will often enter into an exclusive buying agreement, which limits how many can sell the goods. Distributors might also be responsible for a specific geographic area, acting as the liaison for that area, and requiring them to remain in that location. Distributors will often help with international distribution and shipping for companies. They might be responsible for distribution to a particular country or region.

Distributors don't usually sell goods directly to customers, although they can sometimes do this. They are more likely to work with wholesalers or sometimes sell straight to retailers. Their job is to distribute products among those who will sell them to the consumer. As well as distributing products, it is the job of the distributor to replace any products that arrive damaged to the wholesaler or retailer and to provide reliable customer service for all of the entities that they distribute to.

Distributors use various distribution channels to find the right wholesalers and retailers, forming an essential link between the market and the consumer. After the supplier, goods move to the distributor so that they can keep moving through the distribution process to wholesalers and retailers. They have the tools and marketing strategies necessary to connect with those who will be selling products to customers so that manufacturers and suppliers don't need to.

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Working with a Distributor

Your business might work with a distributor as a manufacturer or supplier, or perhaps as a wholesaler or retailer. Working with a distributor helps a business to grow, either by allowing them to distribute their products further or by helping them expand the products that they sell as a retailer. When working with a distributor to get your products out on the shelves of retailers, or less directly sell them to wholesalers before they reach consumers, it means they will be buying your products. You will be selling directly to them, which makes them your customers - although they will also want to know about how you will market your product to wholesalers, retailers, and consumers.

When you are looking for the right distributor or distributors for your products, there are several steps that you should take to ensure you have a good business relationship:

  1. Have your product ready for market - it needs to be ready to sell, and you should know how to price it for distributors, how to package it, and how to market it too.
  2. Make sure you understand your distributor - you will be selling your products to your distributor, so it's essential to understand them and prepare your products in the right way.
  3. Find your target market - be sure that you choose a distributor that can sell to your target market.
  4. Look for references - when you're choosing a distributor, collecting references from retail buyers at trade shows can help you to find the right distributor to work with,

Examples of Distributors

There are several different types of distributor that you can use, depending on your business's goals. Exclusive distributors are the only distributor within a certain region, while intensive distributors help companies to cover a lot of territories quickly. Direct distributors sell directly to stores, and selective distributors allow brands to be more specific about where they want their products to sell. A distributor might help a food and drink manufacturer to get their products on the shelves of supermarkets or into local stores. Or they could find the right wholesalers for a fashion designer to sell their products.

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Function of a WholesalerFUNCTIONS OF A WHOLESALER

A wholesaler buys a large quantity of a product to then sell to retailers. They usually buy directly from distributors, although they might rarely buy straight from the supplier or manufacturer. Buying products in large amounts allows wholesalers to save money through the discounts that distributors are able to offer them. Wholesalers buy in bulk, and they also often sell in bulk, which allows them to offer lower prices too. A wholesaler will often require a business to register with them, to ensure they are buying as a business and not a consumer and might be selective about who they work with. Wholesalers don't have direct contact with consumers. They sell to retailers at a wholesale price, who will then make a profit by selling the products at a retail price.

Working with a Wholesaler

Your business might work with a wholesaler to help distribute your products to retailers and consumers. Wholesalers can also be useful for you are a retail business owner or even for securing materials if you buy wholesale supplies. If you choose to work with a distributor to sell your products, you likely won't have any direct contact with wholesalers. However, you also have the option of working directly with a wholesaler. When developing a product, you should have a wholesale price and a retail price, if you will be selling directly to retailers too. Selling directly to retailers is something that some small businesses might do, especially when working with other small businesses.

If you want to find the right wholesaler to help you sell your products, there are many things that you might consider. Firstly, you need to find a wholesaler that is right for your brand. Many wholesalers will specialize in a certain industry, such as fashion or food and drink, but others might have a broader scope. To choose a wholesaler that works for your business, you might want to select one that knows your industry and that targets retailers that are specifically looking for products like yours. As well as selling to businesses, wholesalers might sell their products directly to the public. You can consider whether you want a wholesaler that sells to businesses or one that sells directly to consumers.

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When selling your products to wholesalers, you will be selling at a wholesale price. The markup between wholesale and retail price varies, but selling your products wholesale means selling more units at once. Wholesalers will get your products out there, selling to retailers and getting them into stores.

For more information about wholesale distribution, check out our Advantages of Wholesale Distribution article.

Examples of Wholesaler

There are various types of wholesalers in the product distribution process. Some wholesalers sell direct to consumers, and they might require customers to be members to buy products. These include brands such as Sam's Club, which sells directly to the public. Other wholesalers sell their products to businesses and ask these businesses to register with them. Wholesalers can include online marketplaces such as AliExpress or the UK fashion brand Parisian.

How Does Each Party Fit Into the Product Distribution Process? HOW DOES EACH PARTY FIT INTO THE PRODUCT DISTRIBUTION PROCESS

Suppliers, distributors, and wholesalers don't necessarily fit into the product distribution process in a perfectly neat line. However, there is a general order in which they sit in the chain of distribution. Understanding the product distribution process helps businesses to set up the right product lines and ensure the best outcomes when they sell products.

Each party fits into the product distribution process like this:

  • Suppliers are at the top of the chain and give them products to distributors
  • Distributors take products from suppliers and sell them to wholesalers and retailers
  • Wholesalers get products from distributors to sell them to retailers or sometimes directly to consumers
  • Retailers get their products from wholesalers or from distributors

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Another thing to consider is that sometimes, one party might act as more than of these things. This can depend on the size of the business. A manufacturer or maker might also act as a distributor or wholesaler. Some businesses might choose to sell directly to retailers and their customers after manufacturing their products, rather than using any intermediaries. However, suppliers and retailers are unlikely to have direct contact with each other because neither has the resources to do so. Retailers don't usually have the logistics and finances to deal directly with suppliers, and suppliers don't have the necessary structures and channels to deal with retailers.

You might also wonder how distributors make their profit, especially when selling to wholesalers who both buy in bulk and sell in bulk. Typically, distributors make a certain percentage from the revenue stream. They earn money based on the volumes that they sell. For example, a distributor could make $100 for every 1,000 units of a product that they sell. By working with wholesalers, they can sell more units, which both benefits them and benefits the suppliers, helping to provide a solid source of revenue.

Retailers benefit from working with distributors and wholesalers because they can access a range of products at once, rather than attempting to source the products that they need individually. Manufacturers and other suppliers benefit from using distributors to help them get their products out to wholesalers and retailers. While some larger businesses might handle distribution themselves, it can be difficult for smaller businesses to manage this while also taking care of manufacturing, marketing, and other essential parts of the business.

For businesses that want to create another source of revenue and expand their sales, finding the right distributor can often be the first step. Choosing a distributor means that another party can handle the hard work of securing wholesalers and retailers, quickly helping to get your business's products into stores. Suppliers, distributors, and wholesalers all play different parts in the product distribution process and might be able to help your business in different ways. Understanding how they all fit together makes it easier for your business to create a distribution plan.

Need Help Distributing Your Products?

If you need help distributing your products or with order management, finding the right distributor is vital. You need to choose a distributor that understands your market and knows your target customers.  Product distribution strategy shouldn't be difficult, and it isn't something that your business needs to handle without any assistance. Now you know the difference between a supplier vs. distributor vs. wholesaler, it will be easier for you to find what you're looking for.

When you need help with distribution, you can rely on services from R+L Global Logistics to help you get your products to where you want them to be.

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