Wholesaler vs Distributor vs Supplier
Wholesaler. Distributor. Supplier. You’ve probably heard these words mentioned by any of your favorite store when they explain to you why they don’t have any stocks of your items yet.
“Our distributor has not updated us with the prices for the new products.”
“Our supplier is still working with our distributor to get the products.”
“The wholesaler still needs to be updated with the distributor.”
But is there a difference between Wholesaler vs Distributor vs Supplier?
Let’s go define the three facets: wholesaler, distributor, and supplier.
Distributors are people who have a direct business relationship with manufacturers, and sometimes, they represent the manufacturers in one way or another. Distributors often enter into exclusive buying agreements that limit the number of participants or enabling distribution to cover certain territories. Ergo, a distributor needs to stay within their area. The distributor then becomes the manufacturer’s contact point or liaison for said area.
With that said, distributors rarely sell a manufacturer’s goods directly to the customers. They rely on wholesalers and retailers to resell the manufacturer goods.
A distributor simply DISTRIBUTES, hence, the name. They distribute the manufacturer’s goods to the respective authorities – a.k.a. the stores that carry the manufacturer’s brands. They can either supply the store directly or they can act as the middle-man between producers and consumers.
Wholesalers buy large quantities of products directly from distributors – rarely from manufacturers. These high-volume orders can improve a wholesaler’s buying power because distributors can provide discounts for a required number of items purchased or total amount spent on the merchandise.
For example, a wholesaler can enjoy a 20% discount if they purchased 20,000 units of clothes.
Wholesalers are bulk buyers – this is one thing to note when knowing the difference between wholesaler vs distributor vs supplier. Like distributors they can also act as middlemen for consumers and manufacturers, but again they are just going to refer them to the distributor for their concerns.
Wholesalers, like distributors, can also provide stores with their items for resell, or items to sell at retail price. Wholesalers do not have direct contact with customers too. They simply provide the goods and products to retailers.
Suppliers are individuals or groups that provides the source for goods and services. They provide the product to consumers – i.e. the wholesalers, the distributors, and the retailers. Suppliers are the manufacturers, packagers, processors, dealers, and merchants.
A supplier is one who works closely with the distributors so he or she can provide them with the goods that they need for their wholesalers. Suppliers and distributors belong in the higher part of the supply chain and they need to work together to meet the product demand and supply of consumers within a particular area.
What is the difference between supplier and distributor?
Suppliers and distributors are two different parts of the market because they serve functions that allow them to play key roles in the market – and one of them is to meet the product supply and demand. Without suppliers, there would be no one to supply the demands.
The difference between a supplier and distributor is that the supplier is the provider of the product or service coming from the manufacturer themselves (sometimes, the manufacturer is dubbed as the supplier) while the distributors are those that purchase products from the supplier and then resells them to retailers and wholesalers.
To understand the difference between Wholesaler vs Distributor vs Supplier, one needs to understand that a supplier may not supply the product directly. They can only manufacture or produce, but not forward it.
What do I mean by this?
They do not have the means to sell their goods directly to the stores or even to the customers. It would be right to assume that the distributors are the key personnel in making the transition of products from the supplier’s warehouse to the store’s outlets.
Suppliers can produce, manufacture, and import them from other sources while distributors work with channels to distribute the products, as well as having the right marketing strategies that allows them to link themselves between the market and consumers.
The role of a supplier and distributor are often confused as one and the same thing, but in reality, they are two different roles with two different functions in the market.
To make things simpler – suppliers supply and distributors distribute. Suppliers provide products to distributors, distributors buy products from suppliers, distributors sell products to retailers and wholesalers.
What’s the difference between a wholesaler and a distributor?
Distributors and wholesalers are two peas in a pod that often get confused as similar parts of the market. Au contraire, distributors and wholesalers are two different parts of the market having both same and different functions.
A wholesaler is the middleman between retailers and customers and assumes the role of none other than satisfying retailer demands. A distributor is a wholesaler’s provider of products and is the middleman between a wholesaler and the supplier and manufacturer.
This is where people get confused between wholesaler vs distributor vs supplier, so allow me to illustrate by starting with the end of the chain:
- Retailers sell products to customers in outlets and online stores
- Retailers get their products from wholesalers
- Wholesalers get the retailer’s products from the distributor
- Distributor gets the retailer’s products from the supplier
Why did I start from the very end?
A retailer, when they no longer have stocks of their products to sell, will request from their wholesaler for more products. But why doesn’t the retailer go directly to the distributor? A distributor could, but due to the purchasing agreements made between them and the manufacturer, can only process and receive orders.
Once the wholesaler gets the order for the products, the wholesaler gets in touch with the distributor to order the items that the retailer wants.
The distributor then gets in touch with the supplier for the orders and the supplier will process the orders. The supplier will then provide the product to the distributor and then the distributor will provide the product to the wholesaler and the wholesaler will provide the product to the retailer.
But why can’t retailers go directly to the suppliers?
As explained, retailers do not have the logistics and finances to deal directly with suppliers. Suppliers have the same problem. They only manufacture or produce the products. They don’t have the necessary functions to carry out direct deals with retailers.
If a wholesaler buys and resells in bulk, how does the distributor make money?
The revenue stream of the distributor comes from a net percentage of products sold from the supplier. Ergo, they are reliant on the products that they distribute and release to the wholesalers. That’s why they are volume-centric.
For example, a distributor earns a total percentage of $100 per 1000 units sold. A distributor has to sell 1000 units or 1000 pieces of items to make $100. A wholesaler places an order of 3000 units to accommodate three orders from three different retailers. So with one wholesaler, a distributor earned $300 in net percentage from the supplier. What if a distributor has 100 wholesalers? That’s close to $30,000 in income.
This is all hypothetical maths, as the exact percentage that distributors get from suppliers varies and it’s sometimes one of the best kept secrets.
Now you know the difference between Wholesaler vs Distributor vs Supplier. Do you have any questions about the article? Let me know in the comment section below.