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Why do people keep talking about distributors "buying" from manufacturers?
Anonymous5 views2 answers
Distributors charge service fees as a percentage of sales, e.g. 5-10%. Why do people keep talking about distributors as if they are regular wholesalers? Do distributors have two methods of function, or what?
I see the term for distributor used in the context of they buy from the supplier/wholesaler the goods then sell them. I see a percentage of sales more in sales rep contracts.
Nicole Lee CiufiWills and Living Wills LawyerNew York, NY ·
As you are probably already aware, a wholesaler specializes in purchasing products in bulk from one or multiple manufacturers. Then, the product is sold at a price lower than what would typically be found at a retail location.
A distributor is traditionally more of a middleman between the manufacturer / wholesaler and the retailer.
However, the difference between wholesale and distribution is often blurred in the industry. Many people use the term interchangeably (for example, "wholesale distributor"). Further, distributors can buy the product that the manufacturer makes and sell it to individuals or businesses.
As for service fees, you are correct that distributors charge service fees. Wholesalers typically don't charge a fee for ordering from them, however, as I mentioned before, the lines can be blurred with respect to nomenclature, so I would look to the specific terms of a contract to determine what role a company is performing.