What does a distributor do in the wholesale to retail trade?

Posted by Tom LarsenJan 29, 2014 Marketing, Operations, Organization 0 Comment

Many folks have a belief that a distributor, that has sales people, will be all that is required to put products into retail stores. Nothing could be farther from the truth.

First, the role of a distributor; A distributor provides a relatively seamless method to flow products both electronically and physically into a retail chain without the retailer needing to setup a new vendor. It reduces the retailer risk of shipment mistakes. It also allows the retailer to place orders from assorted vendors on a more frequent basis. The retailer then places one much larger order with the distributor, consolidating lots of vendors into one shipment and then one invoice and one payment – to the distributor.

Depending on the retail channel, the distributor receives from 5-30% discount on the products it purchases from the vendor and then matches the wholesale price to the retailer.

Even though the distributor has a team of people called sales people, that should not be mistaken for a team of salespeople out promoting your product. The primary responsibility of the distributor sales person is relationship management; the relationship between the retailer and the distributor. What that comes down to is making sure the retailer is continually satisfied with the performance of the distributor and the EXISTING items in the store.

What is generally lost on a new vendor is that there are hundreds of vendors and thousands of products already in the distributor’s product range, with many of them already in the retailer’s store. In order to place your new product in the store, space may need to be gained from some other product. Retail is a zero sum proposition, that is, the store is already full of products so to add yours requires something else to be bumped. What should it be? The distributor wants it to be some other distributor’s product, but, not their own product.

The distributor’s fear is that what is bumped is something else the distributor is already selling. In that case, your “new sale” is the distributors “lost sale” replaced by your “new sale”. That equals no growth in sales for the distributor (unless the price is higher or the sales volume is greater).

In the end, the primary way a vendor gets product into stores is by selling it to them, through sales people or directly. That does not mean that the vendor will ship it to the retailer (which is determined by the retailer), or that it will invoice the retailer, only that the “deal” was made by the vendor. The distributors are not in the “deal” making business, nor are they typically very effective at initial “placement”. To tell the story of the brand or product there is no substitute for the vendor or the vendor’s sales person. To get shipments to the store and service the needs of the retailer after placement, that’s the distributor’s role at which they are very good.

It’s painful to think that the sales people are not really selling. But, thinking of it differently, once your product is in the store, thanks to your sales efforts, the sales people of the distributor will be charged with keeping your space. If you can get it in, the distributor will work to keep it in.

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