Manufacturers vs Distributors vs Wholesalers vs Retailers

Though buying any product has become easy with the advent of supermarkets and online stores, the journey of those products to consumers has become longer. A supply chain must meet the demand for any product in the market. This supply chain consists of manufacturers, distributors, wholesalers, and retailers. This is the route through which products reach the consumers.

Each stop in this route has its unique features and contributions, which lead to a smooth flow of supply. So, let us learn about the mechanisms involved among manufacturers, wholesalers, retailers, and consumers, their interdependence, along with other important aspects like wholesale and retail definitions.

Comparison Table: Manufacturers, Distributors, Wholesalers, and Retailers

	Manufacturers	Distributors	Wholesalers	Retailers
Definition	These are companies that are the producers of goods and supply those products directly or indirectly to consumers.	These companies come after manufacturers as they purchase goods from them and sell them to retailers or consumers.	These companies purchase directly from manufacturers in high quantities and sell them to retailers or consumers.	Companies that may purchase goods directly from manufacturers, distributors, and wholesalers and then sell them to consumers.
Customers	Other businesses, distributors, wholesalers and retailers, consumers	Other businesses, retailers and consumers	Other businesses, retailers and consumers	Consumers
Contract	They mostly have contracts with wholesalers and distributors.	They have different types of contracts with manufacturers and retailers	They may build contracts with manufacturers but typically not with consumers	They may have contracts with distributors, manufacturers and wholesalers and may also with consumer
Promotion	Promote their products by entrusting their quality and features to gain more customers.	Distributors emphasise promoting their services to other companies like wholesalers and retailers.	They focus on promoting wholesale goods to retailers and consumers	Promote their goods and services only to consumers.
Competing Items	Sell self-produced licensed items or products	Sell products manufactured by different companies	The difference between distributors and wholesalers is little here, as wholesalers sell products manufactured by different companies.	Sell products manufactured by different companies
Distribution Channel	Distribute to distributors, wholesalers and retailers and may also, directly to consumers	Distribute to retailers and consumers	Distribute to retailers and consumers	Distribute directly to consumers
Business model	They behave as a source in the market. Everything is integrated, from processing raw materials into products to sales.	They behave as a medium between manufacturers and retailers or consumers	They behave as a medium between manufacturers and retailers or consumers	They sell products directly to consumers at a retail rate.

What is a Manufacturer?

A manufacturer can be an individual, a group of individuals, or an organisation that produces sellable products by processing raw materials. The number of workers, the machinery used, the raw materials used, and the quantity of products made, make a manufacturer big or small. However, to be a manufacturer, one must transform raw materials into finished products. The manufacturing company determines everything related to a product, like its raw materials or ingredients, quantity, features, packaging, and so on.

Manufacturers play a crucial role in nation-building by contributing through taxes, providing employment, and creating essential goods and services. Various other components in the supply chain, like distribution, wholesale and retail, depend strongly on manufacturers. The raw materials needed to make products are supplied to manufacturers by their producers or other companies called sub-contractors. Manufacturers must face and overcome many challenges like forecasting demand in the market, keeping their products relevant to people, maintaining quality and safety, making their products cost-effective, and innovating by adopting newer technologies.

Also Read: What is SME?

What is a Distributor?

A distributor is a company or a business that acts as a medium between manufacturers and retailers or consumers by purchasing goods from manufacturing companies and selling them directly to consumers or retailers. They strengthen the supply chain by acting as middlemen, enabling efficient and smooth delivery of products and services to consumers.

The mechanism of a distributor involves buying products in bulk or high quantities from manufacturers. The rate or price of the product for a distributor is lower. They buy at a discounted rate and then sell to consumers or retailers at a higher rate, ensuring their profit. They provide essential services in the supply of products like storage, marketing, and sales. Manufacturers often rely on distributors for inventory management and risk mitigation of product stocking. Timely delivery of goods and services is an important objective of distributors. Various other factors, like distributing relevant products, studying market trends, noting consumer preferences, and adopting newer technologies, provide significant growth for distributors.

What is a Wholesaler?

A distributor is a company or a business that acts as a medium between manufacturers and retailers or consumers by buying goods in bulk from manufacturing companies and selling them directly to consumers or retailers. Wholesalers invest in high amounts by buying in bulk and selling them to retailers at higher rates, by which their profit margin remains high. They may also sell directly to high-end consumers at a wholesale rate.

Wholesalers play a vital role in shaping the market. They bridge the gap between manufacturers and consumers and let the manufacturer focus on production by handling the far-off distribution and supply business. Wholesalers operate across various niches, such as food, beverages, groceries, apparel, electronics, etc. A wholesaler's success depends upon understanding the market and customer needs or preferences. They must have a strong distribution network and follow timely delivery with maintained product conditions.

What is a Retailer?

Retailers are enterprises that directly sell goods only to high-end consumers. Retailers can present themselves to consumers in many forms, such as shops and online sites. They obtain profit by purchasing from wholesalers and distributors at lower rates and selling to consumers at around the maximum retail price. The wholesale retail difference is that their purchase quantity is much less compared to distributors and wholesalers. This is how the wholesale trade and retail trade differ.

Retail trade is crucial for a country’s economy as it is highly distributed everywhere and the closest to consumers. Retailers need to buy the right products by analysing consumer needs and preferences and appealingly displaying them. Maintaining good behaviour and relations with customers plays an important role for retailers. With new technologies and the internet, retail has changed a lot. E-commerce apps pose some challenges to retailers, but with their core principle intact, offline retailers are still going strong as in the past.

Also Read: Impact of GST on Wholesalers and Retailers

Factors to Consider When Choosing a Supply Partner

Choosing the right supply partner is essential whether you are a manufacturer, distributor, wholesaler or retailer. So, here are a few factors that you must keep in mind before choosing your supply partner:

1. Product or Service Quality

The quality of the products or services from a supply partner is the most essential factor to consider. The packaging and condition should be fine. However, quality standards depend on target consumers, industry, and regulations.

2. Products or Service cost

Each component of a supply chain drives the market. But, without profit, they cannot function. Hence the cost of products or services is important as it determines the profit margin of the respective supplier.

3. Capacity for growth

When looking at long-term association with a supplier, one must consider whether the supplier is self-sufficient and has enough scope and plans to grow. And if they can supply goods at the same rate despite seasonal changes.

4. Trust and experience

Trust and experience of a supplier are essential factors to consider. One should check whether the supplier's product(s) have a good reputation in the market and have positive user reviews.

5. Sustainability

Along with various other factors, a supplier must be sustainable. It should take initiatives to make its processes environment-friendly and reduce environmental impact. Sometimes, this becomes an important feature for products that customers opt for.

6. Communication

It's imperative to have good communication with a supply partner. Your meeting of deadlines is indirectly dependent upon the supplier. Thus, any hindrance or problems should be communicated properly to arrive at better solutions and keep the business steady.