Difference Between Wholesaler And Distributor
Product purchased from any of your favourite stores often consists of distribution from a variety of stores. Selling a product to the market requires an effective channel of distribution for the companies that are selling durable goods and other manufactured products. A company supply chain is a crucial piece of the performance that may directly or indirectly play an important role toward serving the customers and consumers. A company supply chain relies on a wholesaler, distributor, or a combination of two. However, there is often confusion as to what these entities perform.
In order to understand the difference between the two and what they offer to businesses, here is some information that explains to you how wholesalers differ from distributors and what they are performing for the business.
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Who Is A Wholesaler?
A wholesaler is one who has similar products in bulk quantity. For example, imagine a textile shop that is a wholesaler and has a huge quantity of different dress materials. If retailers wish to purchase products from wholesalers, then he has to visit his shop. In large companies, wholesalers buy from distributors. They are lower than distributors in the supply chain. There may be multiple wholesalers in the same market.
Wholesale mostly sell products to the retailers and they are less likely to sell products to customers who need in bulk quantity as well. For example, a cement wholesale market sells small quantities of cement locally to meet the cement demand. The major work of wholesalers is warehousing and their margins are less but volume is large.
Distributor
Distributors are the ones who sell products to both wholesalers and retailers. They are the ones whose job is to enhance the visibility and sales of the product for which they might visit to shop and pick orders. The best example of distributors is the one selling Samsung Galaxy cell phones. You will never find a wholesaler of Samsung phones but you can find its retailers and distributors.
Transportation cost is huge for distributors as delivery of product from the warehouse to the end retailer is the responsibility of Distributors. They are never permitted to sell products to end customers as they have a product of lower price and this may decrease the sale of the retailers.
The turnover made by the retailers is the target of the distributors. A distributor is highly concerned with secondary sales i.e. the product sold by retailers to the end customer. If secondary sales do not materialise, then the primary sales may materialise i.e. the sale of the product by the distributor to retailers.
Wholesaler V/S Distributors: How Do They Differ?
Wholesalers and distributors both have the responsibility to supply products. A wholesaler is one who buys products in bulk from manufacturers and sells them to retailers in his area. He is not under contract from any company and does not hold any other responsibility apart from supplying the product at wholesale price which is slightly higher than the price at which he purchased the product from the manufacturer. A wholesaler does not get salary, commission, or fees from the manufacturers and this is why he doesn't make any efforts to indulge in promotional activities on behalf of the organization.
On other hand, the distributor is the one who is an active partner selling the product of the company to different business organizations and customers. When a manufacturer appoints a distributor, he includes his fees in the retail price as the distributor cost is nearly one-third of the retail price to the manufacturer. In return, the distributor offers his infrastructure, his network of retailers and efficiently manages and supplies products to the retailers to sell them in the market.
Distributors are usually not passive like a wholesaler, he promotes the product of the company for which he is appointed as a distributor by sending his representative to the retailer and informing them about quality, price, and other promotional schemes offered by the company. Many distributors also manage customer service and they are like active partners of the business.
Difference Between Wholesaler And Distributors: A Quick Recap
Basis For Comparison | Wholesaler | Distributors |
Meaning | A wholesaler is one who purchases the products from manufacturer or distributors in bulk quantity and resale it to the retailers. | Distributors refer to an entity that enters into a contract with the company to supply the product or services to different businesses and customers. |
Strategies | They do not adopt proactive strategies in educating resellers about new products. | They adopt more proactive strategies in educating resellers about new products. |
Contract | Do not enter into any contract with manufacturers or distributors | Has to sign contracts with manufacturers. |
Customers | Primarily works with retailers | Works with wholesalers, manufacturers, retailers, and direct customers. |
Product Types | Different types of product | Similar types of product |
After-Sale Service | Not intended to offer after-sale service | Offer after-sale service |
Promotion | No promotion | Product promotion to increase sales. |
Area of Operation | Limited | Extensive |
Channels | Retains both 2 and 3 level channel | Retains only three-level channel |
Storage | No storage of products | Tends to store products |
FAQs on Wholesaler Vs Distributor
1. What is the main difference between a wholesaler and a distributor?
The main difference is their relationship with the manufacturer. A distributor acts as a direct sales partner for the manufacturer in a specific region, actively marketing the products. A wholesaler, however, usually buys goods in bulk from either the manufacturer or a distributor and focuses on selling them to retailers, with less involvement in marketing.
2. Who comes first in the supply chain, the distributor or the wholesaler?
Typically, the distributor comes first. The usual flow is: Manufacturer → Distributor → Wholesaler → Retailer → Consumer. The distributor works closely with the manufacturer to sell products to wholesalers or sometimes directly to large retailers.
3. What are the key functions of a wholesaler?
A wholesaler performs several important functions that help the flow of goods to the market. These include:
- Breaking Bulk: Buying in very large quantities and selling in smaller, more manageable lots to retailers.
- Warehousing: Storing large stocks of goods, which helps stabilize supply and prices.
- Distribution: Transporting goods to various retailers.
- Financing: Often providing credit to retailers, allowing them to buy goods without immediate payment.
4. Why would a manufacturer use a distributor instead of just selling to wholesalers?
A manufacturer partners with a distributor to have a dedicated sales and marketing arm in a specific area. Distributors don't just sell products; they are responsible for creating and managing a market for those goods. They build relationships and manage a network of wholesalers, which is a much more active and strategic role than a wholesaler typically plays.
5. How is a distributor different from a retailer?
The key difference is their customer. A distributor sells to other businesses (B2B), such as wholesalers or retailers. A retailer sells directly to the end consumer (B2C) for personal use. For instance, a medical distributor sells medicine to a pharmacy (the retailer), which then sells it to patients (the consumers).
6. Can you provide some real-world examples of distributors and wholesalers?
Certainly.
- Distributor examples: The company that is the official partner for a mobile phone brand in a country is a distributor. They supply phones to all major stores. In the same way, companies that distribute specific pharmaceutical drugs to pharmacies are distributors.
- Wholesaler examples: The large vegetable and fruit markets in a city are classic examples. Wholesalers there buy massive quantities of produce from many farms (or distributors) and sell smaller crates to local grocery stores and vendors.
7. Is a distributor just a bigger type of wholesaler?
No, this is a common misconception. Their roles are fundamentally different. A wholesaler's primary role is transactional—they buy and sell goods. A distributor's role is more strategic and relationship-based. They are an active partner of the manufacturer, chosen to represent and grow the brand's presence in a market.
