Manufacturers, Distributors, and Middlemen. Oh My!

What is the difference between a manufacturer and a distributor?

This issue can be a little confusing as companies can be one or the other, or both.

In general, a manufacturer is a company that designs and makes a product. Sometimes the actual making of the product is done in-house, sometimes it is outsourced. The underlying point is that they most likely own the patent/trademark for the item and move the product from an idea, to a live item. These companies spend a great deal of money on research and development, quality control, and improving the manufacturing process.

A distributor, by contrast, is a company that focuses on selling and delivering the product. They are experts on sales, marketing, inventory management, and public relations. Typically, a distributor will carry lines from many different manufacturers and use their relationships with retailers to get the products out into the marketplace.

So What is a Middleman?

For our purposes, a middleman is a company that tries to use their advertising and marketing knowledge to wedge themselves between you and the authorized distributor. These are the guys that come up when you do a web search for "drop shipping". Typically they add an extra layer of cost for you while giving little benefit in return.

By contrast, an authorized distributor or manufacturer that offers drop shipping will very rarely advertise this. Their primary business is in the bulk wholesale market. Drop shipping is a secondary service offering for them.

Why doesn’t the manufacturer just do it all?

Both sides of the business take money and expertise to be successful. In general, a manufacturer will prefer to spend their time and resources on developing new products. If a manufacturer does choose to distribute as well, it is typically in bulk formats. I would say that it’s pretty rare for a true manufacturer to offer drop shipping as selling one item at a time is really far out of their realm of abilities.

Who cares? Why is this important information for A Drop Ship Retailer?

In the drop ship world, there is lots of talk about find “real wholesalers”. My point in telling you this is that both manufacturers and authorized distributors can be real wholesalers. They simply play different roles in the chain. What you have to be careful of are the middlemen. I know it’s confusing because the middlemen are very good and positioning themselves as experts and "perfect solutions" to drop shipping.

Conslusion

The lesson to learn here is to ask lots of questions to be sure you understand who you are working with. Do you best not to confuse a distributor with a middleman, and visa versa.

Tags: drop shipping, wholesale, distributor

Leave a Reply