Difference Between Manufacturers, Wholesalers, Distributors & Retailers
Updated: Dec 5, 2020
Products purchased from your favorite stores often involve distribution from a variety of sources. Getting a product to the market largely requires an effective marketing channel for companies that manufacture durable goods and other consumer products. A supply chain typically features various middlemen between the manufacturer and the consumer. The most common in the supply chain are manufacturers, distributors, wholesalers and retailers. The difference between them involves several factors, but can be described simply as a difference in the number of one product they have on hand.
Distributors Work With Manufacturers
Distributors frequently have a business relationship with manufactures that they represent. Many distributors maintain exclusive buying agreements that limit the number of participants or enable distributors to cover a certain territory. The distributor is the manufacture’s direct point of contact for prospective buyers of certain products. However, distributors rarely sell a manufacturer’s goods directly to consumers. Due to the very large amount of each product they have on hand or are able to acquire from manufacturers, distributors tend to work with wholesale representatives that will buy large quantities of one product. Sometimes, though, distributors work directly with retailers.
Wholesalers Buy from Distributors
Wholesalers buy a large quantity of products directly from distributors. High-volume purchase orders typically improve a wholesaler’s buying power. Many distributors provide discounts for a certain number of items purchased or the total amount spent on merchandise. Wholesalers acquire all types of merchandise, ranging from phones, televisions and computers to bicycles, clothing, furniture and food. The goods are frequently destined for retailers, than can be either brick-and-mortar stores or online e-commerce enterprises.
Retailers Sell to Consumers
Retailers consist of small and large for-profit businesses that sell products directly to consumers. To realize a profit, retailers search for products that coincide with their business objectives and find suppliers with the most competitive pricing. Generally, a retailer can buy small quantities of an item from a distributor or a wholesaler. For instance, a retail merchant who wanted to purchase a dozen lamps could contact lighting distributors to inquire about pricing.
Points to Consider
Raw materials that become finished products are an important aspect of a manufacturer’s operation, but the selling process must stay on pace with the production schedule or the manufacturer could end up with too many items. Distributors often place large orders for some items, such as bicycles or infant car seats. The main differences among wholesalers, distributors and retailers are based on the entity’s business model and objectives toward merchandising.
Some business operations may manufacture and sell products on a retail basis directly to consumers. Cutting out parts of the supply chain, like the distributors and wholesalers, can save money and time. This is the case with two brands JDI Distribution owns, Bakell (www.bakell.com) and Brew Glitter (www.brewglitter.com). In both cases, both brands manufacture and sell "edible" consumer products as well as sell products on a retail & wholesale basis directly to consumers.