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What is a Wholesale Distributor?

Aug 22, 2007
The wholesale distributor is so vital to manufacturers and retailers that they simply could not exist nor survive without them. So, what are they, how do they work and how do we tell if they are legitimate or not?

Many do not know exactly what the wholesale distributor is, what makes them so important, to the whole process of creating and selling a product to the customer. The answer to this question is very simple, and understanding the answer will provide you a chunk of knowledge that will aid you in the search for your first or next wholesale distributor.

The wholesale distributor buys from the manufacturer at the lowest price available to them through negotiation and long-time exchange. One example of this would be an electronic mp3 player. The manufacturer produces the mp3 player in mass quantity. They focus mostly on creating the best mp3 player on the market. They spotlight making it better, faster, have more storage, have better audio and many other details.

After the item is produced, the wholesale distributor comes in and negotiates the price. This is so important to the entire process as this is how the product reaches the public consumer. This gives the wholesale distributor some bargaining ability to get a very good price. The manufacturer acknowledges that they could not make it without the wholesaler.

Once the deal is made, the wholesale distributor takes their large purchase and integrates it into their massive inventory consisting of many other related products. This expands their line of goods to make them more attractive to the retailers.

The wholesale distributor then begins promoting this new electronic mp3 player by contacting their retailers and offering them deals, specials or whatever it takes to get the new product onto the retail market. They sell these new items to the retailers for an increased price to allow the wholesale distributor to make a profit. However, they attempt to keep the price low enough to be competitive and to enable the retailer to purchase the product at a fair enough price to allow them to be profitable as well.

Most of you reading this are not wholesale distributors; you are most likely to be retailers looking for product sources. This is where you come into the process. You will contact the wholesale distributor to obtain a wholesale price list. There are many ways to go about this, but remember, the majority of wholesale distributors will want to verify that you are a legit business before the reveal their inventory and their wholesale pricing.

To verify that you are a legit business to the wholesale distributor, you will most likely need a business license from the state that you operate within and an EIN number given to you by the IRS. These two items make you a solid and trustworthy business. This is a positive thing when the distributor verifies this information. If they will sell to those that are not legitimate businesses, they are not legitimate wholesale distributors. They would simply be middle-men placing themselves between you and the true wholesale distributor.

To clarify a bit more about the exact definition of a wholesale distributor, remember that according to U.S. Industry and Trade Outlook, published by The McGraw-Hill Companies and the U.S. Department of Commerce/International Trade Administration, wholesale trade includes establishments that sell products to retailers, merchants, contractors and/or industrial, institutional and commercial users. Wholesale distributors do not sell to consumers. If you observe that you have a potential wholesaler that does sell to the consumer, drop them like a bad habit.

Why would I advise you to run from the above scenario in which the wholesale distributor is selling to the public? Well, how can you compete? In all actuality, you will be purchasing products at a discount and not wholesale. It would be like shopping at a sale at your local retail store. You are not getting the best price and therefore are not going to make the profit necessary to maintain a solid business.

A true wholesale distributor could possibly offer their products to the consumer. This does happen at times. Ensure that you examine this practice closely. About the only situation that I may do business with a wholesaler that retails is when they offer their products to the public at bulk buy rates. I would ensure that they would still offer my retail company a significant better deal than the consumer is getting. Otherwise, the profit is not there.

There you have a good understanding of the wholesale distributor. You know what the function is and how they fit into the commerce process. You now know to do a bit of research into things such as the pricing of the wholesale goods, whether they sell to the public and whether they verify your company as a legit business.
About the Author
William "Cole" Doggett is an entrepreneurial fanatic and guru. He is an expert in the fields of drop-shipping, online retailing, wholesaling and entrepreneurship. He runs an informative blog on Wholesale Merchandise at Wholesale Merchandise to aid you on the path to success.
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