The ultimate goal of the producer is to reach the end users and earn profit. Additionally, they must have distribution channels to reach out in the market. A manufacturer can choose one of the following channels depending on their nature of business:
- A zero-level channel lets the manufacturer directly come in contact with its users.
- A one-level channel lets the manufacturer contact a retailer, who then sells the product to the consumers.
- A two-level channel has an intermediary link between the manufacturer and the retailer – a wholesaler.
- A three-level channel has a wholesaler and distributor who works with manufacturers to deliver goods to retailers and consumers.
Who is a Wholesaler?
A wholesaler is an intermediary link between the manufacturer and retailer. Additionally, they are a company or an individual that buys the product bulk from the manufacturer and sells them to retailers at a volume discount or fixed price. Because of bulk purchases, they save costs and any upfront charges.
You are a wholesaler if you sell wholesale T-shirts in Miami in bulk. Moreover, you would need a warehouse to store these products to gradually sell them at a discounted price.
- A wholesale business does not require any unique marketing strategies. Additionally, they save costs on advertising and other promotional methods.
- They face almost no competition. It is because a wholesaler deals with manufacturers and sells their products to already determined clients.
- Moreover, they get discounts and possibly generate additional revenue if they manage to sell efficiently. Buying in bulk saves them additional costs.
- No special skills are needed to make sales. You have no access to direct consumers, and retailers are ready to buy products from you at affordable prices.
- Since it is a bulk purchase, a wholesaler would need warehouses to store away the products. In addition, they would have to worry about a product’s shelf life and overall lifecycle.
- A wholesaler cannot dictate the pricing strategy to the end user. Therefore, they make a fixed profit out of their sales, unlike a retailer.
- Additionally, a product can deteriorate with time. Therefore, a wholesaler has to constantly worry about restocking and emptying the inventory.
Who is a Distributor?
In contrast, a distributor is in close contact with the manufacturers. They are also called channel partners. A distributor is an individual or company that sells goods and services of one company to another. Moreover, they use a company’s name to sell the products. They can also promote, resell with value addition, and transport goods of a company.
You are a distributor if you make door-to-door sales, use an e-commerce website, or have a limited sales outlet in certain places.
- They have a huge customer base. They know whom to reach out to and who are the potential buyers, making them quick to react to changes in the market.
- If you want to sell overseas, a distributor can do it efficiently. You only need to outsource your international operations, and you will have a huge overseas network!
- Direct distribution can let manufacturers keep an eye on their consumers’ buying patterns. They can then formulate a product according to consumer preference.
- They can also assist you in logistics and shipping. Therefore, you can save costs on fuel and freight/shipping charges.
- Sometimes, a distributor likes to keep things private and confidential. It is because their business model does not favor most of the manufacturers.
- Distributors need to have a selling style. And it is this style that defines the number of sales you make every year. A wrong selling pitch can cost you a lot!
- Distributors are susceptible to competition. Other distributors can sell different and better value-added products, making you lose your edge.
Now that we know the job description of each type of seller, it is time to examine the differences between them:
|Sells the items in small units.||Sells them throughout the entire market.|
|A wholesaler does not make a contract. Instead, they have products from various manufacturers.||A distributor makes a contract with a manufacturer to sell the goods.|
|Region-specific. Therefore, they operate in local areas.||They have a wide area to work with. Additionally, they can go overseas.|
|They do not require marketing or promotional strategies.||A distributor has to have a selling pitch and some marketing tools.|
|No direct contact with customers.||Direct contact with customers.|
|Present in both two and three-level channels.||Present in only a three-level channel.|
Several factors come into play when choosing a wholesaler or distributor. If you are area specific, then wholesale is the best bet. For example, you can sell wholesale T-shirts in Miami. But if you want to go big, reach out to a distributor who sells your T-shirts in Canada!
Moreover, if you want an expanded target market, then a distributor can do the job for you and help you with expansion. At the same time, a wholesaler can target specific markets.
Lastly, a distributor is the safest option if you have value-added products. However, a wholesaler can distribute even your meager products efficiently.