*Accelerated Analytics publishes resources like this to provide insights to different analytical metrics, data points and formulas. POS Analytics. Please be aware, this doesn’t mean that our product will this metric, data point or formula. To learn exactly what our reporting covers, please feel free to schedule a demo or give us a call. Thanks for understanding.
If you’ve ever shopped on the internet to buy a product, it’s highly likely the product you purchased wasn’t produced by the retailer you purchased it from. Many businesses throughout the world use wholesale distribution sources to buy products in bulk (usually discounted) and they turn around to sell them to customers.
Product supply chains have middlemen between manufacturers and consumers, these “middlemen” are usually wholesale distributors.
What Is A Wholesale Distributor?
A wholesale distributor is a person or company that buys products in bulk quantities directly from manufacturers and redistributes the products, most commonly to retailers.
There’s 3 key pillars to the supply chain, the manufacturer, the wholesale distributor and retailers. All three interact in different manners, here’s how;
- A manufacturer is the one that makes the products they sell and often lacks the time or resources to put those products in the market.
- Wholesale distributors purchase directly from manufacturers in bulk and at low prices, then they distribute those products to the next link in the chain, usually a retailer.
- The retailer sells directly to customers.
Each link in this chain sells the product for a slightly higher price than the last, hence the way each can make profit.
How Does Wholesale Distribution Work?
In simple terms, the wholesale distributor is the middleman between the manufacturer (produces the products) and the retailer (who sells those products). Wholesalers that use dropshipping will ship items directly to the customer, as directed by the dropshipping seller.
Now, some distributors may be associated with the manufacturer under the same company. Other distributors have a partnership with manufacturers.
The “big idea” behind wholesale distribution is buying high-demand products at a low price. After all, that’s how they make their money. Low prices can be achieved but the volume has to be high. By purchasing products in bulk, wholesale distributors can usually get a great deal from manufacturers. In most cases, manufacturers don’t have the resources or bandwidth to sell a lot of product. Rather than investing time, money and effort trying to sell their products, they can reach out to wholesale distributors, give them a good price and sell it in large quantities at once.
Wholesale distributors know how to sell to retailers for a slightly higher price and keep the difference as profit. This is why you’ll find wholesale distributors in furniture, electronics, office equipment, clothing and groceries.
Who Would Use Wholesale Distributors?
In most cases, wholesale distributors are used almost exclusively by retailers who need to purchase products in bulk to fill the shelves of their stores. Retailers seek out wholesale distributors all the time to provide them with bulk quantities of what they need, and have their orders shipped to them to keep in stock, whether it’s for a brick and mortar shop or a distribution warehouse for an online store. This business model is still going strong today, but a wholesale distributor’s role has expanded, especially in the digital age.
Some wholesalers have jumped at the opportunity to sell directly to customers themselves. After all, that’s a powerful position to be in when you can sell your products at wholesale and still make profit. The customers get to enjoy the additional savings purchasing directly from the wholesaler and distributors in turn are able to raise prices slightly higher to maintain a profit.
Dropshipping has become very popular over the years, it’s a great way to utilize the low prices that are offered by wholesalers. Dropshippers usually operate online and like retailers, they will partner with wholesalers as this gives them access to great bulk deals on products.
While retailers have to purchase their products, dropshippers do not, they don’t keep any inventory on hand that they sell. When a customer places an order, the dropshipper will send the order to the wholesale distributor. The distributor then processes the order and is responsible for shipping it out to the customer.
For those that are interested in selling online, you’ll need to locate a wholesale distributor to provide you with the products you want to sell. The first step to making money online is to find the right distributor for your business. Fortunately, it’s quite easy as there’s a number of wholesale distributors online today.