Difference Between Wholesaler and Distributor

Wholesaler: What is it?

A wholesaler is an individual or business that buys goods in bulk and resells them to retailers. Although they occasionally buy directly from manufacturers, wholesaler's normal function in the supply chain is to acquire items via distributors. Wholesalers can buy goods at a reduced cost and profit from their resale when they sell in large numbers. Sales of the items to merchants in smaller or individual packaging are their next phase, after which shops resell them to customers.

Wholesalers may get buy orders from institutions like companies, hospitals, or government agencies in addition to merchants. Certain wholesalers focus on a certain industry, such as the food or fashion sectors. Furthermore, unlike distributors, they are permitted to purchase equivalent items from other manufacturers and resell them as well. But because they keep the goods they buy, intend to sell, and assist the manufacturer in reaching customers in other regions, they provide some of the same advantages as distributors.

Illustration of a Wholesaler

Organizations that fall under this category may also be distributors or retailers since wholesale lies in between.

Costco is one example of a wholesale business that simultaneously offers memberships to consumers. On their websites, several direct-to-consumer sellers, such as Copper Cow Coffee, provide wholesale gateways for retailers to purchase goods from.

Notably, Sysco is a distributor and wholesaler at the opposite end of the spectrum.

Distributor: What is it?

An organization that delivers a manufacturer's goods to market settings is referred to as a distributor. They serve as a middleman in the supply chain of the producer, which is the route taken by products as they are made and sold. The manufacturer, who creates the items, is the first link in a supply chain. The manufacturer and distributor then collaborate to market and sell the items to other supply chain participants, such as wholesalers or retailers. Customers are able to buy the goods once they arrive in stores.

There are several advantages that distributors may offer to producers. For example, they store the goods they want to sell, which is one aspect of their storage responsibilities for manufacturers. Additionally, distributors frequently support marketing and sales initiatives. With the help of several distributors and their established retail connections in different regions, manufacturers may collaborate to market their goods across several locations.

Illustration of a Distributor

Although most people don't know anything about distributors, the following famous businesses do:

• MSC Industrial Supply is a distributor of industrial tools.
• Sysco is a distributor of food products.
• Cardinal Health company is a distributor of pharmaceuticals.

Difference Table

Distinctions Between Wholesalers and Distributors

Although wholesalers and distributors play similar roles in supply chains, there are some distinctions between the two. Some instances of these variations are as follows:

Consumers

In supply chains, both the distributors and wholesalers work together to bring goods to market for final purchase by customers. They do, however, concentrate on various client entities throughout the chain. Retailers stand in for wholesalers' physical and online consumers. Distributors and producers collaborate to offer goods to a variety of clients. Wholesalers frequently sell straight to retailers. Distributors assist in getting manufacturer items into the hands of customers, while wholesalers supply shops with goods to sell.

Connection to Manufacturers/ Producers

Although distributors regularly purchase goods directly from producers, a contract is often required for this arrangement. Wholesalers are, therefore, able to purchase rival goods from different producers. A distributor may focus on shoes from a particular brand, for instance. At the same time, wholesalers are able to buy shoes from many producers and sell them to different shops.

Usually, through contracts, distributors collaborate directly and indirectly with producers. These agreements might change. Within a certain zone, for instance, the contract can provide that the distributor is allowed to deliver products to stores. Frequently, unlike wholesalers, the contract prohibits the distributor from trading rival goods. In the scenario mentioned above, a distributor with a focus on footwear may only collaborate with one footwear manufacturer to supply wholesalers and retailers with their merchandise.

Services

By selling their goods to shops, wholesalers assist producers in bringing their goods to market. Order fulfillment for many shops is the lifeblood of their business. In a similar vein, distributors offer additional services in addition to assisting in the identification of distribution channels for producers' products.

Distributors and manufacturers get into contracts and establish commercial ties, as previously noted. Because of this arrangement, they function as paid staff members and aid in the promotion of the manufacturer's goods in order to increase sales. Distributors may, for instance, engage in pitching and marking to persuade retailers or wholesalers to buy the items. These services are not offered by wholesalers.

Channel of Distribution

A product travels along a distribution channel before reaching the market. Before reaching the ultimate customer, the product is handled by a number of parties. One-level, two-level, three-level, direct, or zero-level channels are among the several categories of distribution channels. Only the three-level channel is home to distributors; the two- and three-level channels are occupied by wholesalers.

Within the two-tier business model, the producer sells its goods in large quantities to a distributor, who then distributes them to stores where customers can buy them. The distributor in the three-level channel collaborates with the producer to distribute the goods within a designated region and establishes connections with wholesalers or retailers. To reach customers, wholesalers once more sell their goods to retailers.

Earnings

Distributors and wholesalers make money in different ways. The overall earnings a firm makes from its main operations are represented by its revenue. Wholesalers sometimes get discounts from manufacturers or distributors when they buy big amounts of goods in bulk. Retailers purchase those goods in smaller amounts from wholesalers at an increased price since they are broken down into smaller portions. The amount they (wholesalers) earn from selling products to retailers constitutes their revenue, which is the difference between the amounts they spend for the product order.

In between producers and wholesalers or retailers, a distributor serves as a middleman. Distributors are sales representatives for manufacturers, and they usually are paid a portion of the manufacturer's net sales. They may receive a certain amount of money per unit sold when selling to wholesalers; for instance, they might get $150 for every 1,500 units they sell. Due to their ability to select what things to buy, from whom to buy them, and at what price to sell them to retailers, wholesalers have greater control over their earnings.

Scope

Distributors operate on a larger scale than wholesalers, whose operations are more restricted. As previously stated, wholesalers usually sell to retailers only. These companies often deal with smaller firms or low-volume buyers because they often fill bulk or large-quantity orders. Once more, distributors sell to wholesalers in addition to retailers. These organizations also seek new market prospects from companies of different sizes as they can act as sales representatives of manufacturers.