Difference Between Dealer and Distributor

Often the products that you buy from your neighbourhood super-mart or purchase on online shopping sites involve a long chain of distribution from many sources. Delivering goods to the final destination, say the supermarket in your area ,requires several channels, involving dealers and distributors. This long chain is called a supply chain, and it comprises a number of intermediaries, between the manufacturer and the customer. 

Though there are a number of differences between dealer and distributor, the difference can be expressed in terms of the number of goods each of them have on hand.


Who is a Distributor?

A distributor is a person, entity or selling agent who works independently to sell the products of a manufacturer, and is bound by a financial contract. They act as the middleman in the entire supply chain process and are directly connected with the manufacturer.

To explain further, it is essential to understand the process of distribution first.


What is Distribution?

A particular company, brand or manufacturer’s products and services are made available for purchase to customers through various means. These could be online e-commerce sites, telemarketers, multiple retailers or a real storefront, like the supermarket mentioned above.

The entire process involves many individuals and agents, who ultimately ensure that the product is successfully delivered to or purchased by a customer. A distributor makes sure all goods are supplied to the whole market.

He or she acts as an agent who has direct contact with the manufacturer or brand entities. Finally, they purchase these products from the manufacturers and sells them to various other buyers which include retailers and other parties in the supply chain.

It is useful to know that a distributor is usually appointed to work, by the manufacturing companies themselves. This is part of the marketing strategy, which also authorises these middlemen to act on their behalf in specified geographical areas. Products and services are usually bought in bulk, and a distributor then sells them to other businesses and retailers.

Along with selling the commodities, a distributor is legally bound to offer a number of services like repair and replacements, technical support and after-sales services.

Depending on the power of the distributor, and the brand involved, a distributor may be entitled to sell only one brand of a product in an exclusive territory, or may have many brands to sell in larger areas.

Another type of distributor is the contract distributor who buys products from a manufacturer, combines them with other products, thus increasing the total value and then resells them. Therefore a contract distributor is different from wholesale distributors in the sense that, wholesale distributors only purchase products, while contract distributors combine them with other products from different producers.


Who is a Dealer?

A dealer is an individual who actively purchases goods from manufacturers and then sells them off as part of their account or stock. To put it simply, a dealer is someone who deals with the trade of a particular item or commodity. He or she indulges in commercial trading for themselves, as a part of their business. 

For example, when you go to the nearest electronics shop to check out the latest smartwatches, you’ll know you are talking to a dealer.

Another definition of a dealer is the middleman between the consumer and the distributor is the dealer. They too, like distributors, are authorised to sell these commodities in their particular area.

What makes a dealer different from other middlemen is that a dealer can always attract customers loyal to other dealers or from a different area. For example, if you decide to visit the pizza chain outlet five blocks away, instead of the one in your neighbourhood, you know the dealer has successfully attracted you.

A dealer can sell products and items of the rival, competing brands, out of which some will have more customers, and some, a weaker customer base. He or she makes a profit out of selling these at a higher price than what he purchased for.


Dealer vs Distributor

While both a dealer and a distributor forms an essential part of the supply chain, there are several significant differences between the two, that can be summed up in the following points.

  • A dealer pacts with specific types of products while a distributor is an individual who supplies certain types of products to the market.

  • A dealer connects distributors with potential customers while a distributor creates the link between the dealer and the manufacturer.

  • A dealer buys goods to sell them off as part of their regular business, from his or her own stock. Contrary to this, a distributor simply purchases products from the manufacturers and sells them to dealers or retailers.

  • A dealer can sell off a variety of products as part of their commerce, while distributors usually strictly deal with a single category of products.

  • Dealers are faced with stiff competition. This is hardly the case for distributors.

While the above points clearly explain the underlying differences between dealers and distributors, the following table can help you to further understand them.

Premise

Distributor

Dealer

Definition

An individual or business enterprise supplying goods to dealers and other retailers

A person or business enterprise buying and selling goods to customers

What is their function?

A distributor buys products directly from the manufacturer.

A dealer purchases products and sells them off as part of their own business.

Role

Agent/Middleman

Principal 

Connects

Dealers and manufacturers

Consumers and distributors

Deals with

Diverse products

Products of a specific type or category

Competition

Moderate competition

Stiff competition

Functional Area

Large

Limited/Restricted


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FAQ (Frequently Asked Questions)

1. What is Dealership?

A local business that sells products at the retail level, based on a legal dealership contract with the manufacturer or producer, is known as a Dealership.

2. What is the Difference Between Franchising and Dealership?

Franchising involves selling products that are made in franchise outlets. A franchise owner has to buy a fixed number of products from the franchiser or main company.

A dealership involves selling already manufactured, packaged goods, as part of regular business. A dealer sets his or her own goals and is not contractually bound to buy a fixed number of goods every day.