The role of the distributor in selling goods from the manufacturer to the consumer

Modern trade is a complex and multifaceted process involving many participants. Distributors are an important link that ensures the efficient movement of goods from the manufacturer to the end consumer.

Distributors, just like resellers, dealers, or retailers, act as intermediaries that help manufacturers achieve their business goals and consumers receive goods in a convenient and affordable way. Their activities maintain stability and continuity of supply, as products are made available in different regions, on store shelves and online platforms.

Let's take a closer look at who distributors are, what they do, what types of distributors they are, and how their earnings are formed.

Who is a distributor and what does he do?

A distributor is a business entity that is licensed to supply a manufacturer's products. It is an authorized representative of a company or brand in a particular region. He signs an agreement directly with the manufacturer, buys goods from him at a special price, and undertakes to comply with sales standards, product range, etc.

The distributor's responsibilities include purchasing goods from the manufacturer, controlling storage in the warehouse, organizing logistics, and selling goods to retailers or directly to end consumers.

What types of distributors are there?

There are several types of distributors:

• An exclusive or official distributor is the only representative of a company that has the exclusive right to distribute goods in a particular region. This allows the manufacturer to focus on production, leaving the entire sales process to the distributor.

• A selective distributor is an organization or person selected by a manufacturer based on certain criteria, such as reputation, market coverage, specialization, specific delivery terms, etc. Selective distributors provide high quality service and sales.

• Intensive distributor — has the right to sell goods to numerous retailers without restrictions. This type of distribution is used for consumer goods.

Who is involved in the supply and sale of goods other than the distributor?

In addition to the distributor, there are others involved in the supply and sale of goods:

✓ Manufacturer: produces goods and ensures their quality and compliance with standards.

✓ Logistics companies: are engaged in the transportation of goods from the manufacturer to the distributor and then to retailers or end users.

✓ Retailers: retail chains that buy goods from distributors and sell them to end consumers.

✓ Consumers: end users of goods who make purchases for personal use.

What is a distributor responsible for?

✔️ Purchase of goods from the manufacturer on special terms. Keeping records of invoices, settlements with manufacturers and end customers or consumers.

For this type of work, both the distributor and the retailer need a reliable accounting system that will record all the terms of delivery, the quantity and cost of the purchased goods, and their movement across points of sale.

✔️ Storage of goods: the distributor is also responsible for the proper storage conditions in the warehouse. 

Thanks to automated warehouse control and accurate accounting, you will avoid a large number of errors in calculations, shortages of relevant or excess illiquid goods, and reduce the risk of theft, as all goods and their movement are recorded.

✔️ Logistics: the organization of transportation of goods from the manufacturer to the final points of sale or consumers.

The distributor is as interested as the manufacturer in the stable and safe delivery of goods. Therefore, its task is to minimize possible difficulties at this stage. Software accounting is one of the tools for fast and high-quality logistics.

✔️ Sales: the sale of goods to retailers or directly to end consumers. A distributor can sell ordered consignments of goods in two ways:

- use a trusted network of dealers and resellers and pay them an additional commission for intermediation,

- sell goods through their own sales channels.

It should be remembered that supply plans, terms of sale, delivery costs, wholesale prices and the price fork to the end user are described in the distributor's agreement with the manufacturer.

✔️ Marketing and promotion: conducting marketing events, promoting goods on the market.

To be successful, an intermediary needs not only to maintain its existing sales network, but also to expand it. To do this, it will be necessary to develop and agree with the manufacturer on a promotion strategy that will include various sales channels: from printing brochures and flyers to longer-term marketing methods, such as engaging bloggers, participating in specialized events, exhibitions, etc.

✔️ Financial control: managing financial transactions, including payment for goods, keeping records of sales and expenses.

The distributor will also have to take on the role of a financial manager, responsible for the profits and revenues of the business he represents. For this purpose, a reliable financial control and analysis tool is indispensable. 

What does a distributor's income consist of?

The distributor's earnings are formed by:

• Marginal profit: the difference between the purchase price of goods from the manufacturer and the selling price of goods to retailers or end users.

• Commissions: in some cases, the manufacturer may pay the distributor a fee for selling goods.

• Logistics services: additional services for storage, transportation, keeping records of goods and other important procurement data, settlements with retailers may be paid separately.

• A distributor may also receive income from marketing services, such as product promotion, advertising, participation in exhibitions, and other activities that help increase sales.

Thus, the distributor plays an important role in the supply of goods from the manufacturer to the consumer, ensuring the availability of goods and their proper quality.