What is wholesale distribution 2024: Definition, examples, benefits
Wholesale distribution is a vital link in the global supply chain. Learn the basics of wholesale distribution and get examples of top distributors in the industry.
For wholesale distributors, the risk of disintermediation is huge. But I’ve learned that the winners are figuring out new ways they can add value to the supply chain by helping manufacturers get connected with the reality of their market.
How distributors can reinforce their value
A recent interaction I had with a roofer led me to ponder the role of wholesale distributors in the supply chain and how they can bolster their value.
I contacted the roofer to centralize the controls on my home’s three roof windows. The roofer suggested also setting up an application that also supervises CO2 inside the room and opens the windows automatically if the level is too high.
The craftsman provided an IoT kit to connect with my home’s WiFi and recommended calling the window manufacturer to complete the process. Note that the wholesale distributor was dis-intermediated in this direct to consumer (DTC) interaction.
I reached out to the manufacturer’s sales staff for support but was passed from person to person. After a few more phone calls, I was able to complete the installation. But I learned that it was not the safety device it was advertised as. Even though the roof windows were high quality, I was disappointed.
In this case, the manufacturer did the roofer a disservice by not engaging a knowledgeable, industry-specific wholesale distributor. If a wholesaler had been involved in the sales and marketing process, the app would not have been misrepresented. This would have left the manufacturer with more time to do what it does best – produce high-quality windows and controls for its customers.
Wholesale and supply chain: Distributors as service advisors
Twenty years ago, Phillippe Dugot wrote that the position of a wholesale distributor is justified by the disconnected dimensions between manufacturing and end-consumption in terms of:
- Economy
- Space
- Time
Given my roofing example, we can also add a fourth dimension that justifies wholesale distribution: the service advisor. The service advice comes from the simple fact that products and equipment are in fact more and more complex – with the aforementioned IoT connected window as an example. The distribution of knowledge is key to making products successful or even simply to ensure they’re sold to the right segment.
Knowledge that’s hard to pass directly from a manufacturer to a craftsman, or even through a platform like Amazon or Alibaba, requires special care. Otherwise there’s the risk of disgruntled customers and unnecessary product returns.
This knowledge transfer is the window of opportunity for wholesalers to remain in the value chain and avoid the danger of disintermediation. That compares with the three first dimensions, which are continuously challenged by digital e-commerce channels.
Today, we can see wholesale distributors getting stronger in the area of knowledge as a service by training more, and with more employees to add value to their customers.
Aside from becoming a service advisor, wholesale distributors can also continue to strengthen other services that are emerging, such as stock ownership.
Wholesale distribution trends: More competition, supply chain disruption
After a tumultuous couple years, what trends can wholesale distributors expect now? Watch for continued supply chain disruption, increased competition, and a talent shortage.
Wholesale distributors & value-added services
Distributors can also take on activities that neither the supplier nor the final customer want to take care of such as kitting, pre-assembly, and packaging. This way, they occupy the space in between to reinforce their position in the value chain.
The concept of value-added services is also true on the supplier relation side with data, as there is always more partnership needed to make business easier and more responsive to customer needs. A wholesaler’s access to master data, planning data, and even the data related to the end destination of the goods can add immense value to its supply chain counterparts.
The segmentation of final consumption data is gold for a manufacturer to understand its market and improve performance. Facilitating the exchange of data with manufacturers can reinforce a wholesaler’s position and help avoid disintermediation.
In this age of complex digital equipment, plenty of windows of opportunities are opening and the winners will be those able to re-direct their energy to fulfill the blank spaces left open.
