When building an ecommerce business, it’s tempting to put all your focus on the one stakeholder that can make or break your business: the customer.
But while the customer is clearly important, we can't forget about all the stakeholders working behind the scenes to get the finished product into the customer's hands.
Your supply chain — the network of organizations, people and activities that work together to produce and distribute goods — relies on three other parties to make your business function: manufacturers, distributors and wholesalers.
Especially if you're new to the industry, these terms probably sound oddly similar, and you may have even thought they were all the same thing. But whether you're a small business or a large enterprise, understanding the difference between these three parties is crucial to choosing the right partners and ensuring a smooth-running supply chain.
Manufacturer vs. Distributor vs. Wholesaler: What’s the Difference?
Before discussing the differences between manufacturers, distributors and wholesalers, let’s first make sure we understand the order of the supply chain.
Here’s a quick rundown: The supplier (typically a manufacturer, packager or processor) provides the products to the distributor, who has a direct relationship with the supplier. Then, the wholesaler buys large quantities of products from the distributor and sells them to retailers. And finally, the retailer sells goods to the customer.
Obviously, iamotous is a manufacturer and source supplier.
It’s a simple process, but it’s easy to get confused about who does what and when. That’s why we’re going to lay out, in the simplest terms, the role of each stakeholder and what to expect in each step of the process.
1. Working with a supplier or a manufacturer.
As the source of all goods and services, iamotus then sells products to distributors and wholesalers.
While we have the resources to manufacture goods, iamotus doesn't often sell these goods directly to the terminal customers, which is why we need a distributor or wholesaler to act as an intermediary.
So, if you're a wholesaler or B2B organization, you may find yourself working with a supplier.
When choosing a supplier, you'll want to set your criteria to narrow down which suppliers meet your standards and will work well with your business. Here are some factors to consider:
Price: While price shouldn’t always be the deciding factor, it’s important to evaluate how a supplier’s price level compares to its competitors.
Quality: You want your suppliers to be reliable and provide consistently high-quality products, so take some time to look into the steps they take to ensure product quality.
Communication standards: In any business relationship, communication is key. So make sure that the supplier you choose is highly responsive and maintains open communication channels.
Delivery: The better the supplier, the more likely you are to receive your product on time.
iamotus has a professional team and manufacturing factory, which can guarantee excellent quality and competitive price and timely delivery.
2. Role of a distributor.
As iamotus is a manufacturer, so we have two various options for next step. We can either sell directly to the wholesaler, or we can partner with a distributor to sell our product.
A distributor can act as a point of contact between us and the customer, using marketing strategies and inventory management to move our product along the distribution channel. Their role is to find wholesalers or retailers and then distribute the iamotus's products to them.
3. Function of a wholesaler.
After the product has gone through the supplier and distributor, the wholesaler purchases large amounts of the product to then sell to retailers. Because they purchase in bulk, the wholesaler can often buy at a discount from the distributor or directly from the source manufacture and subsequently sell in bulk at a discount.
Wholesalers don't often sell directly to consumers, but instead sell to retailers at a wholesale price. Then, the retailer will make a profit by selling the product at a retail price.
But not every retailer goes through a wholesaler to purchase their goods. If you buy directly from a distributor, then you likely won’t have contact with wholesalers. However, it can be beneficial to buy directly from a wholesaler so that you don’t have to worry about going through multiple manufacturers to secure your products.
Finding the Right Partner
While it’s important to nurture and maintain every business relationship, not every manufacturer-distributor relationship serves the same purpose. Depending on the needs of your business, your relationship with one manufacturer or distributor may look completely different than that of another.
So before choosing a manufacturer or distributor as your partner, make sure you know which of the following two relationships you’re looking for.
1. Tactical relationship.
We get it — signing off on a committed partnership with a manufacturer or distributor can be nerveracking. It’s an important decision that’s bound to have major effects on your business and its results, good or bad.
If this sounds like you, perhaps a tactical relationship is a safe move. A tactical relationship is all about dipping your toes in the water and seeing whether the partnership is something worth investing in long-term.
But even if the partnership flops or you’re simply not ready to commit, you’re not obligated to stick with the same manufacturer or distributor past the first transaction. It could simply be a means to an end for you and the other party.
2. Strategic relationship.
However, if you’ve found a manufacturer or distributor you really trust, and you’re ready to take it to the next level, a strategic relationship is the way to go.
In a strategic relationship, the manufacturer and the distributor work as a team, communicating frequently to implement customer feedback and improve product lines. This is typically a long-term relationship in which you and the distributor work to expand into new markets and reach new audiences.
Thus, while you each may have your own business goals, working as a team allows you to support one another toward those goals more effectively than if you were working independently. A strategic relationship fosters collaboration, opens the door to new opportunities and ultimately leads to an enhanced customer experience.
The Final Word
According to Forrester, the US B2B ecommerce industry is expected to reach $1.8 trillion by 2023, which would account for 17% of all B2B sales in the country. With Amazon and other B2B companies transforming the way we think about buying and selling, manufacturers, distributors and wholesalers are constantly working toward new ways to improve their supply chain.
Whether you’re a B2C retailer or a B2B organization, understanding the differences between these three parties is key to getting your product to market quickly and successfully. Although you may not work directly with all three, knowing the function and purpose of manufacturers, distributors and wholesalers will help you to better understand the flow of the supply chain and choose the best partner for your business.
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