What is Wholesale Distribution?
December 16, 2014 By Stacey Woods
As a business owner or individual, you may have a firm understanding of the importance of working with wholesale distributors to provide quality products in a timely manner. While you may have a decent understanding of which wholesale distributors are trustworthy and provide merchandise with proven quality- in an ever-changing market, it is always helpful to have clear insight of what wholesale distribution is. So what does this term really mean?
Wholesale Distribution, What is it?
The primary difference between the operations of wholesale and distribution can be somewhat of a gray zone being that the terms have been used interchangeably, adding to the confusion. The term wholesale refers to the action of a business purchasing a product directly from the source manufacturer or wholesaler in bulk, who in turns resells the items to retail stores at a discount price. Distribution is the intermediary process in which a distributor acts as a middleman in the supply chain between the manufacturer and another entity such as a reseller. While distributors play certain overlapping roles to a wholesaler, they can also take on more diverse operations. These range from the basic services of managing payments and procurement, to creating outsource channels on behalf of vendors, as well as external processes such as educational and marketing services.
A true wholesale distributor with proven certification works directly with the manufacturer and the distributor. The wholesale distributor manages all operations relating to the handling of shipments from the source manufacturer, or could also take on the joint role of manufacturer and wholesaler. A joint operation involves a company who merges the roles of wholesaler and distributor. With ownership of manufacturing and a distribution center(s); wholesale distributors are the primary players in which retailers prefer to do business with without the need for a middleman. They are the only industry player who offer true unadulterated prices, given they are the source supplier. In addition to storage, shipping and selling, wholesale distributors also execute internal management operations involving, for example logistic services for manufactures.
Why is Wholesale Distribution Important?
Wholesale distributor operations are vital to maintaining competitive prices for retailers for the following reasons:
- Influences market stability in supply and sales – the presence of centralized locations increases distribution efficiency, translating into a reduction of mid-pipeline operators and potential for confusion in supply and sales.
- Heightened accessibility to market information – the centrality of transactions in wholesale markets boosts the rate of collection and quality of market information distribution. This allows for investors to make better decisions, as well as provides for a better picture of the health of various markets.
- Enhanced competition and trader specialization – refined efficiency in resource allocation and pricing, coupled with the separation of the wholesale industry from retailers, encourages trader specialization resulting in reduced distribution costs.
The main role of a wholesale distributor is to send merchandise to department stores and/or directly to individual customers provided drop shipping is an available option. While discovering distributors who offer dropshiping can be tricky at times, uncovering wholesale distributors who perform this service for online businesses can be an even bigger hurdle. While there remains a list of wholesale distributors who remain hesitant to join the online community; the good news is that with e-commerce growing at a steady rate. With this trend, there exists a long list, being in the tens of thousands of certified Wholesale Distributors who do business with online sellers.
Wholesale distribution is important for reducing errors in shipment as well as inventory costs for businesses. It has the ability to moderate supply and demand fluctuations, and has the capacity to adjusting the distribution of market goods from areas of potential deficit to positive returns. Therefore, if you haven’t considered considered using with wholesale distributors, now is the time in order to help your business grow.
If you are interested in learning more about what wholesale distribution is, how it can benefit your business, or have any further questions please let us know. We would be happy to hear from you!