What is the difference between a distributor and a wholesaler? For quite some time, these two are mistaken for each other as tons of business terminologies make the distribution hierarchy murkier. It’s actually easy to discern upon reading a few points.
Here, I discussed the difference between the two in the simplest way possible. If you’re an aspiring distributor or a wholesaler, you should know this before signing up for an investment.
In the supply chain, the distributors are the ones in contact with the manufacturers. Sometimes, the manufacturers are their own distributors too. Let’s take the fictional ClockWork timepiece company as an example. ClockWork acquires its products through a spare parts manufacturer that includes an assembly factory. The business of ClockWork to its manufacturer falls on a “Private Label” nature.
Once the timepieces are done, different distributor agents from branches of ClockWork will have to manage the products. They will be the one to talk to the wholesalers about a possible bulk purchase. Distributors rarely deal with customers directly because of the massive amount of products they have at hand. These distributors could also be accredited agents of ClockWork that came from a different wholesale platform. It’s safe to say that distributors are also the suppliers.
After the distributors acquired the products, they will market it to the wholesalers. One way to what is the difference between a distributor and a wholesaler is that the purchases of wholesalers are in bulk. Some wholesalers go directly to the manufacturers but this is a rare case. Factories don’t usually process bulk orders or keep records of a wholesaler. They only deal with the production work and the selling is in the hands of the distributor.
So to make it simple, here’s the actual hierarchy: manufacturers – distributors – wholesalers – retailers – consumers. This is the complete cycle of the supply chain but it’s not necessary that there will always be a wholesaler or a distributor in between. Some retailers take the hassle of going directly to the manufacturers. But like what I said, this is a very rare case.
Wholesalers can get a wide variety of products from electronics, clothing, games, and cosmetics from multiple distributors. Most of the time, this is intended for the retailers to buy. So you ask, why don’t retailers just go straight to the distributors?
Retailers are usually small businesses that also sell a wide variety of products. The fictional ClockWork timepiece can be sold in a jewelry store together with more pieces that came from a different manufacturer, brand, distributor, and wholesaler. Sometimes, retailers don’t have the means to reach out to distributors which could be operating internationally.
What is the difference between a distributor and a wholesaler?
Wholesale As The Bridge
Wholesalers’ only goal is to satisfy the needs of the retailers. Of course, they have to go through advertising and building a clientele to have a constant clientele for their products. They aren’t responsible for having the products sold to the customers or whether the retailers would sell them all. One advantage of being a wholesaler is you get to adjust your products to whatever the retailers need. This doesn’t mean wholesalers are immune from financial losses due to inability to sell, but their disposition is somewhat flexible than the distributor.
In short, wholesalers act as the bridge between the retailers and distributors. The latter can’t manage to deal with retailers that will only buy a few pieces at a time. Wholesalers take advantage of this opportunity. They earn profit from the hefty discounts they get from bulk purchases. Once they sell the products per piece to the retailer, it would have a higher price range than how they get it from the distributor. This is one of the main determinants if you’re thinking about what is the difference between a distributor and a wholesaler.
Distributor As The Sales Representative
One task that distributors have to do is to convince a certain wholesaler that his product is worth the purchase. If a ClockWork distributor has to sell his product, he should convince The Wholesaler that his product is better than Timepiece 2. There’s so much marketing involved here that the distributor would ask the manufacturer for a cut for every tier he would sell.
Unlike wholesalers that only solve the order of a retailer; a distributor has to prove to a wholesaler that there is an actual demand for his product. Otherwise, he will fail to sell and earn a profit. They are directly involved in promoting the company’s product, in this case, the fictional ClockWork timepiece. Whereas a wholesaler has nothing to do with the product sales as long as it’s purchased by a retailer.
Which Is Preferable?
If you’re planning to be involved in the product supply chain, being a distributor might be a bit challenging. You need smart marketing strategies to make your way through the tight competition. You would also need to have a wide network of wholesalers who have potential to patronize the product. As per the income, it depends on the sales you’ll be able to close.
Being a wholesaler, on the other hand, is easier than being a distributor. As long as you have retailers asking for certain products, you have a constant source of income. The only risk here is the failure to sell the bulk purchases that will result in financial losses or delayed ROI. You should also have strong haggling skills to have a bigger cut on every bulk orders you’ll place.
Knowing what’s better depends on your skills and the nature of selling that will work for you. It’s important that you invest wisely. Have a good grasp of what’s in demand and what will be a big hit on the shelves.
After all, it’s easy to know what is the difference between a distributor and a wholesaler. These points would surely help you in determining where you can actually grow as a businessperson. Do you have thoughts about these two roles in the supply chain? Let us know below!