Wholesale distributors act as an intermediary between the manufacturers that create a product and the retailers that sell the product to the end user. In some cases, wholesalers sell directly to the public, but most often, they will sell only to a business that sells such items. The main advantage of wholesalers is that they can buy large quantities of a product at a reduced price because they are buying enough to satisfy the needs of many stores or retailers. Such distributors are a common part of the sales chain in many different industries.
The primary function of wholesale distributors is to serve as a go-between for manufacturers and retailers. Manufacturers are companies that make a product. This includes molding, forming, or machining specific parts such as screws, bolts, trim pieces, or sheet metals. It also includes farmers who produce food products. Other manufacturers purchase from these two types of businesses and then produce a finished product, be it a radio or a frozen burrito.
Retailers are companies that sell to the general public, either consumers or other businesses. This includes retailers that have brick-and-mortar stores, such as grocers, department stores, and card shops. It also includes virtual businesses, such as online retailers.
In order for the public to buy a given product, the product must somehow make its way from the manufacturer to the retailer. In many cases, however, the retailer is too busy to manage relationships with many individual manufacturers and unable to pay the higher costs associated with buying in small quantities. Manufacturers frequently face a similar problem. They are too busy to manage many small relationships and would greatly prefer to move large quantities of product at one time than to ship small orders over a period of time. This is where wholesale distributors come in to play.
Wholesale distributors can negotiate a deal to purchase large quantities of goods from a manufacturer at a significantly reduced price. This makes the manufacturer happy because it frees up storage space in the warehouse and gives the manufacturer the working capital needed to produce more product. It also allows the manufacturer to manage only a small number of wholesaler relationships rather than a vast number of retailer relationships, freeing time to focus on core competencies involved in making product.
The involvement of wholesale distributors makes life easier for retailers, too. Retailers are also relieved of the burden of managing many relationships, creating more time to focus on selling. They are also able to take advantage of the cost savings obtained through bulk buying, allowing them to either reduce the customer's cost and hopefully sell more product or to earn higher margins on the product they sell.
While wholesale suppliers make a living by marking up the product before selling it to the retailer, the depth of the wholesaler buying discount is such that the price is usually still far lower than what a retailer could negotiate on his own. Wholesale distributors are common in a number of industries. These include clothing, electronics, food, tools, household chemicals, office supplies, and more.