What Are the Ups and Downs of Being a Distributor
Entrepreneurs research businesses before making the commitment to start a company or purchase a franchise. Becoming a wholesale distributor puts a business owner in the middle of the retail market between the manufacturers and end users. It can be an exciting business, as there are plenty of ups and downs to being a distributor.
A distributor is in constant touch with manufacturers and retail outlets. This allows the distributor to be privy to new technology trends and to also hear how consumer buying trends are changing a market. A distributor can become an invaluable business partner to manufacturers that want to know what consumers are thinking, and to retailers that want to have inside information on new product releases. This can give a distributor an inside track to helping manufacturers release popular new products. It can also help the distributor to recommend product upgrades that benefit its retail outlets.
When manufacturers establish relationships with larger retail outlets, the manufacturers will often bring in a distributor as the one that will act as the product go-between. In some cases, the manufacturer will receive large quantity requests from retail chain stores, and pass those requests on to a distributor. A good working relationship with a manufacturer can lead to lucrative deals that require very little sales work on the part of the distributor.
When a retail customer wants to complain about a product or return a product she does not like to a retail store, that retailer is going to go back to the distributor he bought the product from and not directly to the manufacturer. Products that are beyond the return date, or where the retailer has no invoice to prove that the product was purchased from that retail outlet can become customer service nightmares and potential areas of lost revenue. An efficient customer service department with strict policies on what a distributor can and cannot do will protect the distributor from significant losses. It will get the retail outlets to consider their potential loss in a customer service issue and force retailers to develop effective customer service habits as well.
Distributors that ship large quantities of expensive products to a variety of retail outlets are exposed to the possibility of theft. The manufacturer's exposure to theft is low because it is only shipping to a handful of distributor locations. The distributor is shipping to hundreds, possibly thousands, of retail locations and the possibility of theft or loss of product is much higher. The distributor company can protect itself by developing policies that prevent product from being shipped to dubious locations, such residential homes or hotels. The distributor should work with reputable carriers that are aware of the challenges in delivering product to some areas, and have developed methods to reduce loss.
A distributing company's strength is based on its ability to deliver products to a vast retail network. This requires the coordination of receiving and shipping products to and from several warehouse locations. The distributor needs to develop efficient shipping and handling policies that will give manufacturers confidence that their products will safely reach that large network of retail products. The distributor maintains logistics by hiring experienced warehouse coordination staff and by keeping a close watch on all warehouse activity.