There are many terms which people think are interchangeable just because they seem similar. The more a person becomes familiar with a topic, the easier it gets to differentiate between whom does what. In commerce, this is the case with distributors and resellers. Someone who is new to business and looking for an intermediary to sell products further must know the difference between the two and choose the right type of collaboration.
A distributor is an economic entity which helps a producing company move goods and get them on the market. There is a variety of services which a good distribution system includes: a distributor buys products and resells them to retailers by providing manpower, promotional support, branding, after-sale services etc. Most distributors will stock up on the products of the manufacturers they work with, meaning that they need great logistics, storage spaces, a good investment in the products and people to handle the storing, shipping and branding to ensure that everything reaches the shelves and flies right off them as well.
A reseller is an economic entity which purchases products and services with the purpose of selling them and obtaining profit. They will act as middlemen for the goods they are trying to move, but they will not stock up on any of them. Their main purpose is that of finding retailers. Their input is limited, but they work for good profit margins. This is a simple service which brings together the manufacturer or service provider with the retailer.
Distributor vs Reseller
So, what is the difference between distributor and reseller?
While one is sort of a partner, the other is more of a middleman. It depends on how far along your business is, how many business relations which enable you to take care of things yourself you have established, and how many of the extra services you need, when it comes to choosing one over the other. A distributor offers a new company the distribution service it needs to get the product into the hands of the client. It mainly does everything in this respect. A reseller will only act as an intermediary.
No doubt, the difference in services will show in costs as well. A distributor’s services are more complex, as they are designed to step in and to make sure that a product without sufficient backing from the manufacturer has the same chances on the market. This implies higher margins and less profit for the manufacturer. A reseller makes no commitment and only plans on moving along products that have already made a name for themselves. They do not stock up; they do not provide additional services. The product’s name has to carry this load all by itself but the margins are lower.
Although a distributor is more expensive than a reseller, new companies need the support system provided by the first, while bigger companies can rely on the popularity of their products and services and only need basic resale services.
|An economic entity with great manpower and logistics||A company or an individual|
|Offers many additional services in order to helping the market movement of goods and services||Only acts as a middleman|
|Higher margins||Lower margins|
|Better suited for new companies starting out and unknown products||Better suited for companies which are already known and do not need great support|