Wholesalers vs Distributors vs Supplier what is the mission of each one?
The consumer sees a product, then he likes it, and finally, he decides to buy. It looks simple and easy, but indeed, there is an unrevealed scenario behind the product transformation from just an idea to a real thing that gets sold to the public, and perhaps most customers don't consider these back scenarios. This process is known as a supply chain that refers to some steps or phases that the product or the required services go through with the contribution of manufacturer, supplier, distributors, and finally, wholesalers or retailer's role comes.
Indeed, the supply chain or product distribution cycle goes through a system that isn't necessary to be symmetrical but needs to be organized and run in a hierarchy. However, it is undeniable that the dysfunctionality or the undermining of one of the aforementioned phases will truly trigger the whole process of averting product delivery to the consumer. This is the last thing that any producer or supplier might want to happen because if the customers didn't find the product as they expected, from whatever the store or the place that they go to take this product, he will surely pick another brand name. Therefore, differentiating between the roles of suppliers, manufacturers, distributors, and wholesalers would be highly effective in case you want to run your business properly. Or if you have just decided to start your occupation in the supply chain, this arctic is a must-read.
Who is the supplier?
You might be wondering about the difference between suppliers and manufacturers. Fundamentally, a Supplier is a person or entity that provides raw materials for manufacturers to transform into a product. In other cases, huge manufacturers don't need suppliers to contact them; they do this process by themselves instead. We can say that suppliers are the key to the product distribution cycle to be run. So why don't the suppliers do all the stage by themselves! Actually, suppliers, unlike distributors, don't have the capacity or the required tools to distribute goods to wholesalers or retailers. Consequently, the Supplier contracts with distributors to get the job done.
Before you start searching for a supplier for your business, you need to know that no one role can appeal to all suppliers which are truly convenient. suppliers' roles depend extremely on the product line or the industry that they serve, and understanding the nature of the industry will truly save you from repeating others' mistakes. So how you can contact suppliers!
In fact, finding Suppliers' data is not that hard as you can find it simply on the internet, or asking persons who work in the same niche. The point is how you can get the right supplier! Predominantly, some people consider getting true reviews or feedback as a future breakthrough that saves them from getting malfunctioned while having a bulk order that they need to produce or distribute. Because high expectations candidly get corporations and entities down. Therefore, searching for old reviews of the available supplier can be easily known by asking and analyzing the available suppliers' data.
There is some information that needs to be considered ahead of dealing with suppliers. To clarify, If you set your strategic plan then probably you have a deadline that the supplier must know and go in line with the timings of your plan, so it is important to know the capacity that the supplier can produce in the current moment and the future, and the number of the employees the supplier hires. Also, knowing the number of other entities or people that the supplier contracts with will give you a vivid vision of how the future deals will go which helps you set a perfect plan for your business.
Distributors vs suppliers
The product has been manufactured then comes the logical question: how the product is delivered to wholesalers or retailers! Apparently, Distributors have the potential and resources to take products and deliver them to wholesalers with the right channels due to clear agreements with the suppliers. Their role is beyond price, they help producers to outspread their products to the potential customer at the right time, in other words, distributors are capable of expediting customer's acquisition of the product.
Also, distributors have effective networks that enable producers to deliver their products to the right wholesalers who buy these products at Ex-factory prices. distributors are intermediaries between wholesalers and suppliers.
Considering the four types of distributors: exclusive distributors, intensive distributors, direct distributors, selective distributors will help you to know which type you need particularly if you are new to the market.
Exclusive disruptors
Exclusive distributors work solely with certain entities provided that both parties have to sign a contract saying that the second party, the supplier, is the only authorized delegate to distribute these products within a specific region. Namely, it is a contract to tell the world that X distributor is the representative or the ambassadors to market or sell first party's products, so both names of the manufacturer and distributor are related connotations to each other. Therefore, it is necessary to select Exclusive distributors wisely as they will reflect or represent your prestige. Exclusive distribution can be advantageous if the entity produces excessive quantities that need an entirely-engaging distributor.
Selective distributors
Subsequently, selective distributors are highly needed when it comes to specific categorization. Strictly speaking, Selective distributors help you to specify where and when your products can be sold. This approach is effective if your product line has a low-interest rate, or that your product demand is greatly related to geographic segmentation.
Intensive distributors
Unlike selective distributors, intensive distributors contribute to product outspread expeditions in different countries. Intensive distributors deal with suppliers who have different product lines that get produced in huge quantities. Intensive distribution is extensively preferred in products that can be sold everywhere: kiosks, booths, mini- supermarkets, etc.
Direct distributors
Direct distributors function differently from the others, they deliver the products to the end customer without the need to second parties. This means that direct distributors have the required resources and logistics to do so. It's widely endorsed that direct distribution contributes to the process of customer feedback obtainment, so entities can know people's opinions about their products in an easier way for enhancement and development purposes.
Apparently, dealing with distributors depends on the niche of your industry, the size of your market, and finally the target customers. To illustrate, the niche of your industry, or the type of line that you serve, limits the way that you market for your products, hence the type of the distributors. The market size tracks the speed of your movement and your rank between other competitors, market size affects your decisions greatly. Finally, where your customer is located triggers your choices. For example, when you decide to start distributing your products, you have to consider planning product distribution worldwide with some countries that have a demand for your service, otherwise, you will decide that selling locally will be sufficient for you.
The main bodies involved in the product procurement cycle are suppliers, distributors, wholesalers, retailers. We already tackled both suppliers and distributors, so what is about wholesalers and what do they do? Basically, Wholesalers act as a linkage between distributors and the end customers or retailers. Wholesalers receive the product from the said distributors, upon agreements, and they deliver it to retailers with the said quantities.
Is the wholesale business profitable?
The more quantity wholesalers buy, the more they gain. Wholesalers buy in bulk with the factory prices and then they add a sum of money for the retailers upon their services, so they can come up with the profit. So, their profit depends predominantly on the quantity. That's why you can see a lot of people buying directly from wholesalers because of the low prices that they can retain. Recently, This has become quotidian particularly on social media. As some people decide to make a profit by taking small quantities from the wholesalers and then they buy it for the end-user at a slightly higher cost.
It may seem a long cycle, however, everything would be crystal clear after tackling the main types of wholesalers., because Knowing the types of wholesalers will greatly impact your realization of the market. wholesalers can be classified into two main categories: specialization and geographical points.
Different types of wholesalers according to specializations
Merchant wholesalers
All rolled into one, Merchant wholesalers work in all categories and have more access to more geographical places and more industries. Accordingly, they work more with entities that produce different product lines, for example, food companies may produce oils, butter, and sweets that can be baked with their raw material as a kind of advertising for their quality. So, if you have a specific segmentation, Merchant wholesalers may not be what you are looking for.
Specialty wholesalers
Unlike merchant wholesalers, Specialty wholesalers focus on very specific merchandise that they can sell directly to the meant retailers. They may even specialize in only one item in the whole line
Mail-order wholesale
They are super internet users; Mail-order wholesalers are highly needed when the item that you are looking for is produced precisely for a very narrow category. They use the internet perfectly to get your needs right to your door.
Wholesalers type according to location.
Local wholesalers
Local wholesalers' capacity or networks is very limited to certain districts or cities. The local distribution approach is commonly known in small villages particularly in the beverage industry or daily needs.
Sectional wholesalers
Sectional wholesalers operate more widely than local wholesalers, they are responsible to take the products from the distributors and provide them for some stores in one state and they may enlarge their work in the surrounding states.
National wholesalers
They usually have access to all the country's governorates and cities. In other words, they somehow dominate all the country.
International wholesalers
If the producers are globally known and their products are needed worldwide. international wholesalers facilitate the global exports process giving privilege to retailers by offering the shipping method that retailers want.
However, there are some brands or entities that can do almost this cycle solely by themselves. For example, a factory may supply, produce, and distribute its product directly to its prospective audience without the need to search for some distributors or wholesalers to hire.
Communication matters!
Lack of communication is a business' monster particularly when it comes to supply chain occupations as mentioned before, the product procurement cycle will never go seamlessly unless everyone knows exactly the capacity or the services that the other party can serve. as any error that may happen in the hierarchy would lead to business downfall. And actually, this is a fact endorsed by many entrepreneurs and manufacturers around the world.
Accordingly, it is necessary to regulate the relationship between you and the other party by having a clear communication system. However, following a system is not that complicated, as you might think, a system, in some cases, may refer to a specific person that you can contact when you need to send a message to the other party or you want to update some agreements, delegates are usually informative of all the information and details that occur between two parties, or more. Additionally, considering the time zone difference, if you operate your business globally, will essentially save you a lot of effort to know when and how you can contact the other party properly.
Different occupations of the Supply chain will never lead to the same results or the same profits. There is always a subtle difference between industries that are regulated in the first place by market demand that clarifies the segmentation that is willing to buy your product. So, understanding the nature of each industry will be a huge plus for anyone who wants to come a long way.
Moreover, you may need to understand that supply chain businesses don't generate leads out of luck. In fact, manufacturers and producers need to exert effort in detecting the best strategies that all parties can follow to come out with the best results. However, people who are still taking their first steps in the supply chain industry, have to consider the ups and downs that may occur in the market at any time to create plan B that undeniably cannot be undermined for any reason.
Summing up, the difference between suppliers, manufacturers, and wholesalers is clearly vital to the economy and the whole society. And to make profits, you need to follow and understand the previous cycle of conducting the communication system properly between you and the other parties.
