The Difference Between a Wholesaler and a Distributor – Which works better for your business?

Wholesalers and distributors both buy and sell goods in bulk. Wholesalers buy goods either directly from manufacturers or via distributors. They are, however, completely independent from their suppliers.

Distributors only buy goods directly from manufacturers with which they have an agreed contract. This distinction has several implications. To explain the difference, Claire Shaw of SOS Wholesale shares her insight to why these two roles are quite different.

Distributors get stock before wholesalers

If manufacturers choose to work with distributors then the distributors will get the goods literally straight from the factory. They are therefore only going to suffer from supply-chain issues if their partner manufacturer is having difficulty producing the goods. Even when this is the case, the effect on distributors is going to be less than it is on wholesalers.

When products are in short supply, for whatever reason, a distributor will decide who gets their orders fulfilled before whom. Depending on a distributor’s agreement with their customers, this could mean that retailers (especially larger ones) actually receive their supplies before wholesalers do.

Wholesalers can offer more choice

Distributors may not be directly employed by any given manufacturer. The nature of their business, however, means that they become a stakeholder in the manufacturer’s business. As such, also acting as a distributor for a key competitor would create a conflict of interest.

Wholesalers, by contrast, are completely free agents. They can have two arch-rival brands literally sitting beside each other on their shelves.

In principle, manufacturers/distributors could refuse to sell to wholesalers if they stocked competitor brands. In practice, this would be a very high-risk gamble and, in some locations, might create legal issues.

Distributors can offer the best prices

Buying direct from the distributor is as close as any non-distributor can get to buying directly from the factory. Even the biggest wholesalers will have to pay more for the goods than the distributor precisely because the distributor needs to make a profit.

On the other hand, just because a distributor can offer the best price, it doesn’t mean that they will. The smaller the order you want to make, the less of a difference there may be between buying from a distributor and buying from a wholesaler.

Wholesalers can streamline your buying process

As previously mentioned, the nature of the distribution business means that distributors tend to have a smaller range of goods than wholesalers. In some cases, there can be a significant difference.

This may not be an issue if the distributor can fulfil all your needs. If, however, they can’t, then you would need to use other distributors and/or wholesalers.

The more suppliers you need to use, the more administration you have to manage. Additionally, you will have to ensure that you can fulfil minimum order thresholds.

It can be much easier just to look for one or two wholesalers who can provide all the stock you need. This will keep your administration to a minimum and make it easier for you to fulfil minimum order thresholds.

It might also result in you developing a better relationship with your suppliers. This can be very beneficial to both of you.

Distributors can have more product knowledge

Because distributors work in partnership with manufacturers, they tend to have extensive product knowledge. If there is something they don’t know, they will usually have a direct line to the manufacturer to get the answer to their question.

Wholesalers are less likely to have this. In fact, they’d probably take their questions to a distributor.

Wholesalers can be objective

By the same token, however, the fact that distributors work in partnership with manufacturers means that they are effectively salespeople for the brand. They may help you to choose between different products from the same manufacturer.

They are not, however, going to recommend a competitor brand even if it would be a better fit. A wholesaler could do this without hesitation.

Disclaimer: The views expressed here are of the contributor and do not necessarily represent or reflect the views of thelocalbrand.com