Marketing - Distribution
Distinction Between Distribution Methods

Distinction Between Distribution Methods

A wholesaler, or jobber, is a firm that typically buys goods from manufacturers and resells them to retailers. A wholesaler stocks goods from many different manufacturers in one or more warehouses and ships those goods as one combined order under one invoice.

Because wholesalers stock items from many different manufacturers, they have no particular incentive to push your product to their accounts, versus your competitor’s products.

In highly competitive industries, such as those selling consumer products through retailers, several wholesalers might stock identical merchandise, putting a lot of pressure on profit margins. As a result, wholesalers are unlikely to offer ancillary services to you, such as advertising or sales solicitation and service unless someone, typically you, pay for these services in addition to the basic wholesaling charges.

So, selling your product to a wholesaler doesn’t necessarily mean your merchandise will automatically end up on a store shelf. You and your sales force and/or independent representatives will have to take on the responsibility of creating order demand.

So, why wholesale? Retailers hesitate to buy direct from new, small vendors and just feel safer purchasing from established wholesalers. Even if you offer a very deep discount, retailers won’t be anxious to buy from you direct. They won’t see any value in processing the paperwork associated with establishing and doing business with a small account.

It may be essential for you to have your goods stocked at a wholesaler in order to conduct business with retailers. And you may still have to solicit the orders yourself.

With the worldwide trend in retail merchandise management moving towards Electronic Data Interchange (EDI) and just-in-time inventory practices, retailers are, more and more, relying heavily on wholesalers.

Distributors

Distributors typically serve a multipurpose role. They will perform in a manner similar to that of an independent representative in that they will solicit orders from the retailer for your products. They also act as wholesalers in that they stock your merchandise, too. Distributors may provide other services as well, such as catalog creation, trade advertising, and trade-show representation. Usually distributors represent manufacturers on an exclusive basis only within their territory.

In many industries a distributor will also sell to wholesalers in addition to retailers. In this case, the distributor is called a master distributor.

Because a distributor acts as your “salesperson” and often sells to both wholesalers and retailers, it will require a deeper discount rate when purchasing your merchandise than would be the rule with a wholesaler.

Most manufacturers don’t use distributors. They prefer to sell direct to wholesalers, retailers, consumers, or some combination of all three themselves. However, a good distributor can be an excellent way for a small firm to instantly establish credibility and a presence within either their industry’s domestic or foreign marketplaces.

Importers

The term importer means different things to different people. Often it is used to describe a firm that serves as an exclusive distributor to an overseas territory and provides sales solicitation, warehousing, and invoicing services.

Sometimes it refers to a firm that arranges to buy merchandise from a foreign manufacturer and resells the merchandise to one or more distributors who then handle the actual domestic sales functions. Typically, the importer will arrange to have the merchandise cleared through customs, and may also arrange for shipment from the country of origin.