In this publication I will tell you, who is a distributor, what are the specifics of distribution activities, and will also dwell in more detail on how to become a distributor and build your business on it. Surely many of you have heard phrases like “official distributor”, “cosmetics distributor”, etc. in advertising, so after reading this article you will have a complete understanding of what this means.
Who is a distributor?
So, the very concept of “distributor” is borrowed from the English language (distributor) and in exact translation means “distributor”, and in literary translation it means “distributor”.
A distributor is a legal or natural person who is an official representative of the manufacturer’s company and performs the functions of distributing goods from the manufacturer to wholesalers or retailers - dealers and retailers, or to end consumers. In fact, the distributor acts as an intermediary between the manufacturer and the seller of the product, and in some cases, even between the manufacturer and the buyer directly.
A distributor can be either a huge company with a regular turnover of millions, or an individual who from time to time distributes the products of a certain company.
The main feature that distinguishes a distributor from other intermediaries is that he has the exclusive right to present the products of the manufacturer and distribute the products at the price set by the manufacturer without any markups. The distributor's income is a discount on the purchase of goods, which is set for him by the manufacturer.
You can create several chains of goods passing from manufacturer to buyer. The most commonly used scheme is:
Moreover, there may be several dealers in it (large and small). This option is also possible:
Or a direct sales option, used, for example, in:
Differences between a distributor and a dealer.
A distributor differs from a dealer in that it acts on behalf of the manufacturing company and receives goods for sale according to strictly specified rules (including those relating to the price of the goods), while the dealer acts on his own behalf, purchases goods at his own expense and independently sets the desired level of trade margin for further resale.
At the same time, it should be noted that this difference is rather conditional in nature, and more precisely, the functions, rights and obligations of the distributor or dealer are stipulated in the contracts concluded with them. For example, it happens that distributors purchase goods from the manufacturer at their own expense, just like dealers.
The main function of the distributor is not the final sale of the product, but the creation and development of its distribution network, promotion and promotion of the trade brand, while the dealer is responsible for the direct delivery and sale of goods to end consumers.
One manufacturer can cooperate with many distributors, and one distributor can cooperate with many manufacturers.
It often happens that the founders of distribution companies are the manufacturing companies themselves. In addition, they can provide individual intermediaries with “VIP statuses”, which provide extended rights: official distributor, exclusive distributor, etc.
How does a distributor work?
All the distributor’s work comes down to expanding the sales network and promoting the brand of the manufacturer’s product. He independently searches for dealers, sellers-retailers or end consumers of products (depending on the situation), then sends an order to the manufacturer for the required batch of goods, receives this product for sale at a fixed price or buys it at a discount, sells it and gives the proceeds to the manufacturer minus his own commissions.
Most often, only large distribution companies are allowed to take goods for sale, while small ones, as a rule, have to purchase products at their own expense, or at the expense of funds collected from buyers (as, for example, happens in network marketing).
Now that you have some understanding of what a distributor is, let's look at how to become a distributor.
To become a distributor of a certain product, you must sign an agreement with the manufacturer, which is usually called a “distribution agreement.” The distribution agreement specifies all the rights and obligations of the manufacturer and distributor, the conditions for the transfer and acceptance of goods, and other operational issues. In this case, it is issued distributor certificate with the seal of the manufacturing company and the signature of the general director, who confirms the rights to officially present the company's products.
Every manufacturer is always interested in having as many distributors as possible, because they work to promote his product and expand the sales market. But not every distributor will be able to offer the most favorable terms of cooperation.
Very often, the distributor’s commission income and the terms of transfer of goods (for sale or prepayment) depend on the sales volumes that the distributor provides: the larger they are, the softer the conditions and the higher the income, and vice versa. Therefore, it is likely that you will first have to work for your name, show good results, which will definitely work for you later.
You can work with several manufacturers at the same time, perhaps this will affect the increase in turnover, and therefore income, but this is not necessarily the case. Sometimes large-scale cooperation with one large manufacturer and representing only its interests is more profitable for the distributor.
For people who do not have a lot of initial capital and the ability to open a distribution business, you can consider the option of becoming a distributor from scratch. To do this, you can start “from the bottom”: get a job in a distribution company, start with lower positions, for example, with a sales agent, then, showing good results, move up the career ladder to a supervisor, regional representative. At the same time, save the income you receive to open your own business. This way you can collect some knowledge and, importantly, gain experience working in a distribution company.
If you want to engage in distribution activities on a more or less large scale, you will need to incur significant costs:
– rent warehouse space and equipment for storing goods;
– purchase or rent freight transport for transportation;
In other words, it will require well-thought-out and extensive sources of funding.
The good thing about the distribution business is that there is room in it for both very large and very small distributors, and there is always room for development.
How to find manufacturers for cooperation?
If you are thinking about how to become a distributor, the first thing you need to decide is the products of which companies you would like to represent on the market. You can search for manufacturers in different ways:
1. Through business directories. By looking through the catalogs of manufacturers of certain products, you can contact directly those that interest you and find out from them the terms of cooperation, choosing those companies where the conditions will be optimal for you.
2. Via the Internet. Simply by typing “looking for distributors” or “searching for distributors” in the search, you will be taken to many pages of companies wanting to build and develop their distribution networks. Choose those that are most interesting to you and act.
How to find dealers, sellers and buyers for cooperation?
The second important issue that needs to be considered before becoming a distributor is finding ways to sell the product. Here, too, you can act in a variety of ways:
– Through company catalogs;
– Through direct contacts to retail points of sale;
– Through your own website or online store;
– Through colleagues, acquaintances, relatives;
– Through advertisements in print media, etc.
Now you know who a distributor is and how to become a distributor. Let's summarize.
Distribution activities are a good option on a variety of scales: from small work for yourself to generate additional income to building the largest distribution networks and businesses with million-dollar turnover. Everyone will be able to find something of their own in it, based on their initial capabilities and goals. A distributor's earnings largely depend on his ability to sell and his diligence. Therefore, go for it, and you will certainly be able to achieve good success in this business!
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Currently, many of the largest corporations, for the convenience of organizing sales and optimizing the delivery of their own products to end consumers, organize sales networks that include several additional links in addition to the standard “seller-buyer”. In particular, distributors are direct representatives of the company who make shipments directly from the supplier’s warehouses.
If we consider the entire chain through which the movement of goods produced by large holdings occurs, we can identify several of its main participants. These include, in addition to the enterprise that produces the product, dealers and distributors. This provides a high degree of convenience for customers and allows you to maximize the geography of the company’s clients. There are a few key differences between the two dealerships here. The dealer, in particular, deals with the product directly to its consumer. Products are supplied to him by an official distributor, who, in turn, purchases them directly from the manufacturing company. Thus, the dealer has the opportunity to communicate directly with the end buyer, carrying out both wholesale and retail trade. Its capabilities allow it to study the consumer market in detail, identifying both positive and negative opinions about the proposed product. And distributors are companies engaged exclusively in wholesale sales, shipping products only to dealers. The task of a representative with this status is to globally expand the sales geography of the manufacturing company and search for organizations to which finished products can be shipped wholesale.
In order to become a distributor, you will need to enter into a contract directly with the manufacturer of the product. Typically, this type of agreement contains certain conditions, the fulfillment of which allows you to obtain the coveted status from the manufacturer. These usually include such things as the minimum volume that the representative will have to ship monthly, as well as payment options for the goods received. Often the manufacturer provides a deferment on payments, but it can be minimal and not exceed 3-5 days. In addition, a company that produces its own products officially gives its representative the right to use the registered brand of the product, ready-made and any other privileges that ensure the distribution of the product in various regions.
Thus, distributors are official representatives of the supplier company who have the ability to make shipments directly from the manufacturer and have certain privileges to use the company’s goodwill in relation to the goods sold. Its main task is to expand the geography of products shipped under a distribution agreement and search for new dealers and sales points.
Sociological surveys of the population revealed a high level of literacy of the average Russian in the field of economic issues. One thing is that not every person can name the difference between a distributor and a dealer and characterize these terms. According to statistics, the above terms are used quite often both in business and in everyday life. Today we propose to consider how a dealer differs from a distributor and discuss the meaning of these concepts.
There are two types of companies in the international trade market: distribution companies and dealer companies
Understanding the essence of concepts
It is quite difficult to explain the difference between the terms under consideration in simple language. The difference between distribution and dealership is best understood by specialists in the field of economics and wholesale trade. The ability to distinguish between representatives of a given profession can help in everyday life. Quite often, these terms are applied to the packaging of various commercial products. Knowing the terms “dealer” and “distributor” will allow you to know the origin of the selected goods.
Who is a distributor
In order to compile a list of differences between a distributor and a dealer, you should familiarize yourself with both concepts. A careful analysis of these terms will reveal the differences and their scope of application. The term "distribution" has English roots and means "distribution". This means that a distributor is a person who distributes or distributes commercial products. In order to better understand the meaning of the term in question, you should familiarize yourself with the functional responsibilities of this business entity.
Official is an individual or legal entity that sells commercial products. These products are supplied to distributors by the manufacturer himself. This means that the distributor is an intermediate link between the manufacturing company and small retail chains. It is important to note that in this chain there are no other intermediaries between these links.
As a rule, persons involved in distribution purchase wholesale quantities of inventory items for the purpose of subsequent sale. Various distribution channels are used for this purpose. It is necessary to highlight the fact that distributors do not work with end customers. From a legal point of view, the distributor has no restrictions on its activities. This person can independently set the price for the goods offered, since he acts exclusively on his own behalf.
In order to become a distributor, you must enter into a bilateral contract with a manufacturing company.
This agreement must contain information about the size of the territory with which the distributor plans to work. In simple terms, a distribution company establishes a monopoly in a chosen city or region. When considering the question of what distribution is, you should pay attention to the risks associated with this type of activity. According to established rules, the distributor bears full responsibility for the products offered. This means that in the event of selling a low-quality product, the person in question will be held accountable to the law. You can relieve yourself of such responsibility only if you have a certificate from the production company.
Next, we suggest considering the issue related to the payment procedure. As a rule, distributors pay for delivery immediately after receiving the ordered shipment of goods. Much less often, the parties enter into an agreement between themselves to make an advance payment or provide a short deferment. Also, the distributor has every right to contact a banking organization in order to obtain a credit loan. Many financial institutions offer their clients to use the Factoring service. When using this form of lending, the bank pays in full for the ordered goods, after which it temporarily transfers the rights to the purchased products to the distributor.
A distributor acts on his own behalf, distributing a product of a company It should be noted that a company engaged in the distribution of commercial products can simultaneously interact with several production organizations. Among the functional responsibilities of people involved in distribution, the following should be highlighted:
- Constant analysis and assessment of the selected market segment.
- Conducting promotional events and creating a marketing strategy.
- Creation of main and additional channels for the sale of existing goods.
- Consulting services.
In order to gain a foothold in this business, you must have a high rating among business partners and be able to promote brands. In order to increase sales volume, it is necessary to create a large dealer network that allows one to individually set prices for a certain range.
Who is a dealer
Next, we suggest moving on to the question of what dealership is. The answer to this question will help you learn about the difference between distribution of goods and dealership. It should be noted that these persons work exclusively with large quantities of commercial products. The main difference is the interaction pattern of these links of one chain. After a person acting as a distributor purchases a batch of goods and materials, the resulting products are distributed through a network of small intermediaries. It is in the role of these intermediaries that dealers act, who sell goods to end customers.
It is important to note that the dealer works on behalf of the manufacturing company and represents its interests. This means that these persons are engaged in promoting commercial products and conducting marketing activities. Some dealer networks provide warranty service and repair products. This commercial entity puts a lot of effort into promoting the product and promoting it on the market. Growing consumer interest allows you to significantly increase the number of potential customers.
Considering all of the above, one can ask a completely logical question: why don’t dealers interact directly with manufacturing companies? This factor is explained by the fact that the distributor company establishes a monopoly in a specific region. Since this person is a key link in the chain, the dealer simply does not have the opportunity to contact the manufacturer directly. It should be noted that, despite all the above nuances, companies acting as dealers enter into a contract with a manufacturing company. This contract outlines the rights and responsibilities of each party, and also sets out their level of responsibility in various situations.
Dealers act on behalf of the manufacturer and always sell the manufacturer’s products to specific consumers, regardless of whether they are individuals or legal entities. It should be emphasized that dealers are the same independent entity as distributors. This factor allows such companies to independently set prices for the goods they offer. Based on the foregoing, we can conclude that the source of income for this business entity is the commodity markup established on available goods. In addition, the dealer’s income item includes financial bonuses for a large volume of goods sold and expanding the base of regular customers. Some companies receive additional revenue through warranty service of goods.
Quite often you can hear the question: “Who is the dealer?” In order to better understand the meaning of the specifics of a given commercial entity, you should familiarize yourself with the functional responsibilities of this link in the trade chain. A company acting as a dealer has the legal right to engage in the acquisition of commercial products, securities and other material assets for the purpose of further resale. In simple terms, dealers act as small intermediaries between the distribution company and end consumers. As a rule, these persons divide large quantities into small product groups, which are sent to various retail outlets.
The question of who Forex dealers are deserves special attention. Forex is one of the most popular currency exchanges where transactions with securities are made. The interests of each trader are represented by brokers who deal directly with transactions. A Forex dealer is a person who also acts as a trader's partner. It is important to note that dealers earn money from the trader’s expenses, which at one time became the reason for the need to adopt a law regulating the work of these individuals.
Let's look at what a Forex dealer does. This person provides traders with a cent account that allows them to enter into low-cost trades. In addition, such companies provide large leverage, which allows you to conclude transactions on more favorable terms than when interacting with brokerage houses.
The main differences between a distributor and a dealer
Before talking about the differences between dealership and distribution, you should familiarize yourself with all the links in the chain, from manufacturers to end consumers. This step is necessary to explain the difference between a wholesaler and a distributor. Ignorance of this difference can lead to various force majeure events. Companies engaged in wholesale sales interact with manufacturing enterprises without a contract. As a rule, the parties enter into a one-time transaction for the sake of mutual benefit . It should be noted that serious manufacturing companies never work with wholesalers.
The main task of the dealer is to find and interest the consumer However, those enterprises that experience difficulties in selling existing goods are ready to cooperate with various intermediaries. Thanks to this factor, the end consumer has the opportunity to purchase a little-in-demand product at a low cost. Working with distribution companies implies the presence of guarantees from the manufacturer.
It is the guarantee of the quality of the product that increases its final cost several times.
There are also a number of differences to consider between intermediaries and distribution companies. In marketing and business textbooks, you can find information that distributors are independent wholesale intermediaries. If we accept this statement as an axiom, then there is no difference between intermediary firms and distribution companies. However, in practice there are companies that engage in small-scale wholesale sales both among individuals and among enterprises. Such companies cannot be called distributors due to the nature of their field of activity. In simple terms, distributors belong to the category of intermediaries, but they have their own specific differences.
Dealer and distributor, what is the difference:
- The first one independently forms a customer base, and the second one uses the created network to sell commercial products.
- Dealers enter into contracts with distribution companies, and these companies enter into contracts directly with manufacturers.
- Dealers have a significantly lower sales volume compared to other levels.
- Distributors have absolute freedom of action, but despite this they are responsible for the quality of the products offered.
- Only dealer companies provide warranty service for goods, due to which they receive financial bonuses from the manufacturing company.
Unlike a distributor, a dealer can engage in market research, product advertising, product servicing, and so on. Conclusions (+video)
Summarizing all of the above, we can conclude that the concepts under consideration differ in the degree of responsibility to the end buyer. Dealers are not official representatives of the manufacturing enterprise. This means that these persons are not responsible for the quality of the products offered. The ability to distinguish the meanings of the terms in question can significantly simplify doing business. An entrepreneur planning to do business with such companies should be aware that these individuals provide other people's products, acting as intermediaries.
Not only is society itself today developing by leaps and bounds, but new specialties and new terms are appearing. And the average person cannot always correctly understand what this or that profession means. Moreover, it has become so fashionable to call everyone using English words.
Until recently, we understood that traders or sellers work in the field of trade. But modern market relations represent different distributors of goods, and they are called differently. Are there any differences between them? What is the difference between a distributor and a dealer? We will talk about each of them separately to understand whether there are differences between them, and if so, what they are.
Differences between a dealer and a distributor
Dealer
Translated from English, this word is translated as “agent”. It can be an individual or a large company. In the “manufacturer-buyer” chain, which is now much longer, this specialist occupies the last link before the final buyer. In other words, this is a seller.
A dealer is an individual or company that purchases goods in large wholesale and sells them at retail.
He can purchase goods either directly from the manufacturing company itself or from a distributor. The quantity of a product depends on the demand for it. The source of profit is a discount from the manufacturer. The higher the turnover, the higher the income.
Dealer functions
Many large manufacturers enter into contractual relationships with distributors or dealers, who are responsible for selling the goods. But at the same time they have strict requirements:
- price determination;
- dimensions of warehouse premises;
- reporting form;
- own symbolism.
Functions
- Planned purchase. By entering into an agreement with a manufacturer or distributor, the dealer agrees to buy a certain quantity of goods at a certain time. The main point in the contract is the acquisition of goods, and not its subsequent actions.
- The contract specifies implementation area which must be adhered to. This may be a city district or a separate region.
- Product promotion. This function is equally important for both the agent and the intermediary. Only their marketing tools are different. For the dealer, this is an advertising campaign.
- Sales of goods only from this manufacturer.
- Dealers not only resell the product, they create its consumer value. Therefore, they offer additional services. They provide consultations, provide repair services, and sell related products.
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Mutually beneficial long-term cooperation with the manufacturer gives it clear advantages. He may receive the right only to represent this company in a particular region, or even in a particular country, that is, he becomes an exclusive dealer.
Distributor
Again an English word that can be translated as “distributor”. A distributor can also be an individual who can make a one-time purchase, or an organization that constantly buys goods from the manufacturer.
Distributor is an official person. He represents the manufacturer in the relevant market and distributes the goods to sellers. And sellers can be wholesale or retail.
In other words, it is an intermediary between the company producing the product and the retailer. There are distribution companies with huge turnover. Most often, such companies receive the right to be the sole distributors of the manufacturer’s products at his own price. The larger volumes the intermediary sells, the greater the income of his company.
Now let's look at the schemes according to which the product reaches the end consumer. There are several of them.
- First Of these, several intermediaries are provided:
Manufacturer – Distributor (intermediary) – Dealer (agent) – Retailer (retailer) – Final buyer (client). - Second scheme:
Manufacturer – Distributor (intermediary and agent rolled into one) – Retailer (retailer) – Final buyer (client). - Third The scheme is mainly used in network business:
Manufacturer (seller) – Distributor (intermediary) – End consumer (client).
Functions
Distributor functions
The task is to expand the sales network, promote a product or service of the manufacturer. To do this, the distributor finds dealers, analyzes the market and demand for these products. And after that, he calculates the volume of goods for sale. The products are either purchased by them or taken for sale. But the second option is used by manufacturers only for large distribution companies.
Differences between the two professions
And now that we have found out what exactly each of them does, let’s look at how a dealer differs from a distributor. To a non-professional it will seem that their functions are almost the same. They are promoting a product. But there is a difference. They use different tools for promotion and sales.
We have looked at the patterns of movement of goods. The first one is used most often. The intermediary takes large wholesale products from the manufacturer. The agent buys from him and resells.
Currently, the Russian language contains many borrowed expressions, in particular from English. This trend especially concerns the sphere of economics and business: various phenomena come to us from America and Europe, so it is not surprising that a recently emerged concept becomes sensational and gains popularity over the years. This term is “distributor”. Previously, a person with such a profession or a company with such a line of activity was equal to something unearthly, but nowadays anyone who wishes can become one.
Distributor is an intermediate link between manufacturer and consumer
Who is a distributor and what does he do?
A distributor is an individual entrepreneur or legal entity engaged in large purchases of goods from the manufacturer for the purpose of further sale (through agents and other intermediaries or independently). The goal of doing business is to provide the world with information about your manufacturing partner, presenting him in a favorable light, and then offer to get acquainted with his products through seminars, master classes, exhibitions, and presentations.
It would seem that the profession is simple, but in it, like in any other, there are many pitfalls that are important to take into account. Firstly, this is the need to have experience working with people, communication skills and, in some cases, NLP (not our option). In fact, distribution is very interesting because it has a direct connection with the salesperson's ability to find common language, constantly get to know someone and have a wide range of responsibilities.
Main functions of a distributor
The duties of a representative of this profession begin from the moment of purchasing goods from the manufacturer (most often this is a foreign person). The fact is that concluding an agreement with foreign companies is of sufficient interest for the new consumer market. Previously, many had no idea who a distributor was or what he did, but now this area is gaining popularity.
Operation scheme
The principle of operation is quite simple:
- Purchasing a large batch of goods from the manufacturer at a reduced price.
- Sales of products through independent efforts, as well as networks of dealers, agents and other companies.
- Opening companies in other countries, if necessary and financially possible.
Historical facts
In the 1990s, the then unknown Invite powder began to be produced, and the manufacturing company managed to bring the product to consumers only due to the fact that it knew about distribution activities. This scheme allowed the company to distribute its products throughout the world and became the pioneer of the efficiency of the distributor scheme.
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If a foreign company has an official distributor in Russia, this indicates an increase in its sales volume in the near future, since the Russian consumer market is huge. There are successful examples from the owners of large companies and corporations, as well as cosmetic companies.
Documentation for distributor work
It is necessary to conclude an official contract with the manufacturer of the product, which clearly stipulates and provides for all points and rules of sales. Distribution activity is a wonderful opportunity to establish relationships with large foreign companies, which has a good effect not only on the well-being of the participant himself and his customers, but also on the economy of the state as a whole.
Please note: An importing company engaged in independent sales of products in other countries is called a general distributor. Exclusive distributor - a person participating in a scheme in which the supplier cannot sell the product to third parties, and the distributor buys the product exclusively from this supplier.
All these aspects are stipulated in the contract drawn up - the distribution agreement. After passing the official procedures, the distributor receives from the general director of the supplier a certificate of the appropriate type, which indicates the type of intermediary organization.
How to obtain distributor status
Many compatriots are concerned about the question: how to become a distributor. This procedure is carried out in just a few steps, during which the person involved in the implementation receives a new status.
- Selecting a manufacturing company. At this stage, you need to prepare a commercial proposal, which includes detailed information about the company, area of work, mobility, etc. An overview of the product market, estimated product sales volumes, and competitor analysis is provided.
- Organization of contact, for example, at one of the company exhibitions. Once communication has been established, it is necessary to begin correspondence with a proposal for negotiations. At this stage, an agreement is concluded and all formalities are settled.
Once you understand these instructions, you will be able to achieve your goal in a short time.
Upon completion of all formal procedures, the distributor receives a certificate
Distribution scheme options:
- Purchasing from the manufacturer at a discount and providing the latter with promotional materials free of charge.
- Creation of an enterprise with equity participation of several persons. Both of these options are popular today.
Distribution advantages:
- Possibility of receiving an unlimited level of income. It all depends on how well the supply chain and sales system are established.
- Availability large quantity free time. This is most important for women, because in this way they will be able to pay more attention to their family.
- Remote employment. There is an opinion that a distributor is a person who takes a large checkered bag and goes to visit all his friends, trying to sell a product. In fact, due to the development of modern technology, many workers conduct their activities on the Internet.