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    1. tedstreasures's Avatar
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      #1

      Differences between Traders, Wholesalers and Distributors

      I am trying to figure out the difference between Traders, Wholesalers and Distributors. Where do the distinctions lie?
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      #2
      There are several key factors that distinguish these three key operators in the distribution chain.

      Distributor

      Typically, the distributor works out a deal with the manufacturer to sell the product, sometimes exclusively, say, for products like Apple, but the distributor cannot name their company “Apple.” They can put an “Apple” sign in their store “window” but can’t call themselves the “Apple” company.

      Often, there may be limitations for the distributor, meaning the manufacturing agreement will not allow them to sell other product lines or competing products.

      In addition, a distributor might sell to more than one company down the supply chain. Depending on the industry, a manufacturer may set up one distributor in each country that it markets to.

      Distributors typically carry a large amount of stock and have the ability to warehouse goods for up to a year. They typically sell to manufacturers or retailers.

      Wholesaler

      Wholesalers buy large quantities of goods from distributors or vendors. They warehouse the products for shorter periods of time, for example three to six months. However, they need large warehouse spaces to store the goods.

      An exception: A wholesaler who enters an agreement with manufacturers to carry non-competing goods or product lines is then deemed a distributor.

      Wholesalers are the middlemen whose main customer is the retailer or merchant, or, basically, any customer who is not a consumer. (The retailer sells directly to the consumer.)

      Trader

      At this stage in the supply chain, a trader sells smaller quantities of goods. This definition can also work to label an independent merchant who does not qualify as a typical retailer. Traders generally sell directly to the consumer.
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      #3
      The distribution chain varies within each industry; however, a general order is as follows:

      Manufacturer
      Distributor
      Wholesaler
      Trader/Retailer
      Consumer

      A lot of the time, it works this way. Name brand manufacturers differ, however, by having one distributor per country. This distributor might also ship direct to stores.

      In technology, the manufacturer might sell directly to the consumer. Take Dell Computers, for example.

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      #4
      Who would give me the best deal as a trader? The distributor or wholesaler?

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      #5
      Most people think that the distributor would offer the best price. This is not so, however. Assuming a distributor would sell to you, as a reseller, you can purchase let’s say 1000 units from the distributor. But when the wholesaler approaches the distributor to purchase that same item, they purchase 10,000 units and get a cheaper price. They have more working capital than you do and can purchase larger stock amounts.

      You could possibly get a better deal on the item purchasing directly from the wholesaler because they got a better price from the distributor.

      Another distinction to make between the distributor and the wholesaler is:

      The distributor must have a large amount of capital to invest because they buy an entire stock lot from the manufacturer or brand.

      The wholesaler can have a medium sized amount invested as capital (although amounts can be large in this instance too), and they still make a good profit off goods.

      The trader typically does not and cannot buy in bulk and therefore doesn’t need to warehouse items (nor is he typically able to). This requires little investment capital and less profit is made.

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      #6
      The wholesaler makes his profit off bulk orders. That is why you can always get a better price with a larger order and it is also why wholesalers often have minimum order restrictions.

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