Distribution Methods
Wholesalers and Jobbers
A wholesaler, or jobber, is a firm that typically buys
goods from manufacturers and resells them to retailers.
A wholesaler stocks goods from many different manufacturers
in one or more warehouses and ships those goods as one
combined order under one invoice.
In highly competitive industries, such as those selling
consumer products through retailers, several wholesalers
might stock identical merchandise, putting much pressure
on profit margins. As a result, wholesalers are unlikely
to offer ancillary services to you, such as advertising
or sales solicitation and service unless you pay for these
services in addition to the basic wholesaling charges.
So, selling your product to a wholesaler doesn’t
necessarily mean your merchandise will automatically end
up on a store shelf. You and your sales force and/or independent
representatives will have to take on the responsibility
of creating order demand.
Wholesale, however, does have advantages. Retailers hesitate
to buy direct from new, small vendors and just feel safer
purchasing from established wholesalers. Even if you offer
a very deep discount, retailers won’t be anxious
to buy from you direct. They won’t see any value
in processing the paperwork associated with establishing
and doing business with a small account.
Distributors
Distributors usually serve a multipurpose role. They
will perform in a manner similar to that of an independent
representative in that they will solicit orders from the
retailer for your products. They also act as wholesalers
in that they stock your merchandise, too. Distributors
may provide other services as well, such as catalog creation,
trade advertising, and trade-show representation. Usually
distributors represent manufacturers on an exclusive basis
only within their territory. In many industries a distributor
will also sell to wholesalers in addition to retailers.
In this case, the distributor is called a master distributor.
Because a distributor acts as your “salesperson”
and often sells to both wholesalers and retailers, it
will require a deeper discount rate when purchasing your
merchandise than would be the rule with a wholesaler.
Most manufacturers don’t use distributors. They
prefer to sell direct to wholesalers, retailers, consumers,
or some combination of all three. However, a good distributor
can be an excellent way for a small firm to instantly
establish credibility and a presence within either their
industry’s domestic or foreign marketplaces.
Importers
The term importer means different things to different
people. Often it is used to describe a firm that serves
as an exclusive distributor to an overseas territory and
provides sales solicitation, warehousing, and invoicing
services.
Sometimes it refers to a firm that arranges to buy merchandise
from a foreign manufacturer and resells the merchandise
to one or more distributors who then handle the domestic
sales functions. Typically, the importer will arrange
to have the merchandise cleared through customs, and may
also arrange for shipment from the country of origin.
By Streetwise Small Business Start-Up
