There’s a lot that goes on between a product being manufactured and a customer purchasing it. Successfully getting a product to market requires a supply chain with various middlemen, but what exactly is the difference between wholesalers, distributors, and retailers?
Let me take you through what you need to know.
What is the Difference Between Wholesalers, Distributors and Retailers?
Here are the main differences between these three middlemen.
Distributors work alongside manufacturers, helping them find prospective buyers within specific territories. These buyers are never the end consumer, though. Distributors can work with retailers but mostly with wholesalers.
Wholesales place high-volume orders with distributors. In general, the larger the volume, the higher the discount a distributor can offer. Wholesalers deal with all types of merchandise that are then sold to retailers. This includes both online and physical retail stores.
The final middleman is the retailer, who sells to the end consumer. Retailers work with wholesalers to source competitively priced products that line up with their business goals. However, some retailers work directly with distributors – it really depends on the size of the store.
In some instances, retailers can also be manufacturers – they are called OEM companies. Basically, the retailer manufacturers their own products and sells them under their own brand.
In the end, the main differences between wholesalers, distributors, and retailers lie in their business model and merchandising requirements.
Related: What Is The Meaning Of MOQ
What is the Difference Between a Distributor and Supplier?
Those who are new to the world of retail and merchandising often confuse distributors and suppliers, so let me explain the difference.
The Role of the Supplier
Wholesalers and manufacturers rely on suppliers to help them source the goods they need. Ultimately, without suppliers, retailers wouldn’t have access to the products they want to sell.
Suppliers also manufacture and produce goods, but most of the time, they need wholesalers and distributors to reach retailers and customers directly.
You would work with a supplier if you require assistance with the manufacturing process or sell products under your own private label brand (like us).
A timber company could be a supplier to a furniture business. However, the timber company could also manufacture their own furniture, which they would sell to distributors.
In our case, we work directly with suppliers. In a legal sense, we are actually classed as the manufacturers for our products; although a factory created them on our behalf, the product’s responsibility lies with us.
As a private label Amazon seller, it can get confusing. We are the retailer for our own products, and we are the manufacturer in terms of product responsibility. Hopefully, that makes sense.
The Role of the Distributor
A distributor is a middleman that connects suppliers and wholesalers or suppliers and retailers. As the name suggests, a distributor gets the products to those who want to sell them. Generally, distributors sign exclusive buying agreements that help control the different territories.
There are also different types of distributors you can work with depending on what you want to achieve.
Exclusive distributors cover certain regions, while intensive distributors work quickly across multiple territories. Direct distributors work exclusively with specific wholesalers or stores.
What is a Wholesale Distribution Company?
What about a wholesale distribution company? This type of wholesaler purchases large volumes of products directly from manufacturers instead of distributors, reselling them to retailers and eCommerce stores.
Is It Better to Be a Wholesaler or Retailer?
This depends entirely on your business goals. Retailers have more control over their products and can sell them at higher prices. However, retailers have to deal with a fair amount of competition and deal with the end consumers.
Wholesalers, on the other hand, only need to deal with their retail customers. However, with enough quality retail customers, profit margins can be high.
Joining the Retail World
Every part of the supply chain has a role to play, but as you can see, there are different ways you can set up your retail or eCommerce business. Remember to take your business goals, budget, and availability into consideration when deciding.
It is possible to cut out parts of the supply chain, such as wholesalers, to save time and money, but whether or not it will ultimately be worth it is up to you.