Why Are There Distributors?

In the coming weeks, we will be focusing on a series of topics surrounding distributors, what issues their sales are facing, and what could be done to stand out.

Kick-starting this week, the very reason why distributors exist in the market. It all boils down to the basic of justifying their very existence.

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Why are manufacturers or brand principals not selling directly to the end users? Why do they need to share their profits with distributors? What is the difference between a wholesaler and a distributor?

Let's answer the easiest question - difference between wholesaler and distributor.

A Wholesaler :

- only fulfills orders from retailers

- assumes no role other than satisfying retailer demands

- view retailers as their key customers

A Distributor :

- executes received orders

- acts as a sales representative for the manufacturer / principal

- actively looks out for orders

- manages returns

- actively involved in promoting a company’s products

Now that we know the difference, it is appalling to see that some sales in distribution houses actually work and engages just like a wholesaler! We shall discuss this in detail in another article.

So why do we need distributors in the market in the first place? Many people see the need for distributors for key reasons like :

- credit facilities offered to retailers and resellers ;

- their logistical network and spread in various regions ;

- their portfolio offerings to the retailers and resellers networks.

However, there is one main reason, beyond those mentioned above, that is vital to the existence of a distributor - COSTS! Imagine if the manufacturer or principal where to do the exact same thing that a distributor does. The cost of marketing, partnering with complimentary brands, looking for end users etc... The cost of doing this will be too high. This is especially so if the product going to the market is perceived as a commodity. The amount of effort does not justify a direct sales engagement. Which is why distribution products are usually seen represented with distributors where costs are lowest and skills required to acquire products are easiest.

And with today's digital trends, we are seeing more e-stores popping out from the manufacturers or principals themselves. This is another channel route to market with minimum cost.

Thus, products that are new and require high skills to engage and implement are commonly seen in a direct channel engagement with end users.

So we have it - the reason why distributors exists. It is now your turn to share your thoughts. We want to hear from you.

Next week, we shall look at the different types of distributors in the market., Till then, Cherry-O!

#Awareness