What is wholesale distribution? It’s the sale of products to retailers, industrial, commercial, institutional, or other professional business users. Wholesale distributors buy products from manufacturers or suppliers in large quantities and sell them at wholesale prices to customers, which are often commercial establishments, business professionals, or retail stores.
The wholesale distribution industry acts as a vital link in the global supply chain and is responsible for distributing the majority of products between business partners around the world.
In 2022, the U.S. wholesale industry market size was $12.2 trillion, and it’s increasing faster than the economy overall.
Distributors come in all shapes and sizes. From Top 10 Forbes companies to small businesses, there are several millions of distributors in existence today.
Let’s discuss what the wholesale distribution is, the industry, and how to identify a wholesale distribution company.
What is wholesale distribution: Definition and a breakdown of the lexicon
Wholesale distribution is the sale of products to retailers, industrial, commercial, institutional, or other professional business users. In general, it’s the sale of goods to anyone other than a standard consumer.
Of course, language can get confusing, so here’s a rundown of other common names for wholesale distributors:
- Wholesaler
- Distributor
- Supply house
- Importer/exporter
- Master distributor
- Buying/selling group
- Trading companies
Wholesale distribution channels
Wholesale distributors hold strong relationships both upstream and downstream of the supply chain.
Upstream, distributors hold relationships with their suppliers, which are often the manufacturers of the products that they warehouse and distribute.
Distributors typically buy items in bulk from manufacturers and suppliers, break down large quantities of goods, store the goods in a distribution center, and finally sell and distribute the goods downstream to various businesses, contractors, hospitals, restaurants, and retail stores at wholesale prices.
Wholesale distributors will generally offer a catalog consisting of a wide range of diverse product lines along with customer service.
Many also offer services to become a value-added distributor (VAD). This extends a distributor’s role beyond simply picking, packing, and shipping products by offering differentiating services and solutions that provide additional benefits to their clients. Examples of value-added services include kitting, installation, service, and maintenance of the goods sold.
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.
Benefits of wholesale distribution
The benefits of wholesale distribution are apparent throughout the value chain, including manufacturers, retailers, and supply chain.
Benefits of wholesale distribution include:
- Simplified processes and operations: Manufacturers and retailers can streamline their business operations thanks to wholesale distribution. Rather than coordinating with countless distributors to handle all of the logistics of large orders, manufacturers can instead work with wholesale distributors to minimize thrash and complexity. Retailers can simplify ordering and get a handle of costs by working with wholesale distributors.
- Reduced operating costs: Simplification is the name of the game when it comes to wholesale distribution – and the benefits to the bottom line are an additional benefit. With fewer organizational resources required for operations, operating costs are reduced. Retailers note that buying from wholesalers has additional cost-saving benefits: often wholesalers pay lower prices compared to buying directly from manufacturers.
- Boosted selling and market reach: Market expansion for manufacturers gets easier with wholesale distribution. Since wholesalers are responsible for both expanding markets and selling, manufacturers can invest in other areas critical to their industries rather than selling.
- Faster delivery, more locations: Warehouse capacity is far more extensive for wholesalers, reducing shipping charges and improving delivery time, while also removing the need for retailers and manufacturers to maintain massive amounts of products in stock.
- Supply chain stability: Wholesalers are responsible for buying and maintaining inventory, thereby reducing shortage risks in the supply chain.
Supply chain challenges can make for a wild ride. Get advice, best practices, + predictions from top experts HERE.
What is wholesale distribution: Examples
Distributors often specialize in a product, industry category, or subsegment. Each subsegment has its own challenges, regulatory requirements, and operational nuances, but they all face the same market pressures.
The four major subsegments of the wholesale distribution industry include:
- Food and beverage: Food and beverage wholesalers are experts in compliance and requirements when it comes to the food and beverage industry. From distribution to storage to seasonal shifts, they’ve got you covered.
- Healthcare: The healthcare and life sciences industries have many moving parts that require extensive knowledge of regulatory guidelines and compliance. Manufacturers can focus more budget and time to improve their products and processes, since wholesalers are responsible for customer interactions and the logistics of delivering medicine, supplies, and equipment.
- High-tech: The high-tech industry has high stakes, and wholesale distribution can tame the complexity of supply chain logistics, shifting demands, and retailer expectations.
- Industrial: Wholesale suppliers manage inventory for B2B retailers, manufacturers, and industrial customers.
Cost management: Tackling wholesale distributor challenges
Cost management is a top wholesale distributor challenge. How can distributors streamline management of the cost of goods sold (COGS)?
Here are examples of wholesale distribution companies across each major subsegment:
- Food and beverage distribution: Brakes Bros. is the leading B2B wholesale foodservice supplier in the UK and the catering and food suppliers of choice for thousands of chefs in the catering industry.
- Healthcare distribution: Founded in 1833, McKesson Corporation is the oldest and largest healthcare company in the United States. It partners with biopharma companies, healthcare providers, pharmacies, manufacturers, foundations, and governments to deliver medicines, medical supplies, and healthcare services to the patients who need them, when they need them.
- High-tech distribution: Insight was founded in 1988 as a global technology solutions provider. Today, they offer IT solutions and services to state, local and federal government, healthcare, higher education, K-12 education, along with other major global corporations.
- Industrial distribution: Productos Metalúrgicos S.A. (PROMESA) has been a leading distributor of tools, hardware, and automotive products in Ecuador since its founding in 1962.
As you can see, wholesale distribution is a thriving, multi-faceted industry. Check back here for future posts where we’ll examine wholesale distribution’s role in the global supply chain and the challenges distributors face.
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