A distributor is an independently owned business that is primarily involved in wholesaling and takes title to the goods that it is distributing. A distributor is a middleman who handles consumer or business goods that may be manufactured or not manufactured (such as agricultural products), imported or exported, and then sold. The figure illustrates the distributor’s relationship to the seller and buyer.
Distributors typically purchase goods on their own account and resell them at a higher price, accepting the risks and the rights that come with ownership of the goods.
A distributor:
- Is independently owned.
- Takes title to the goods it is distributing (ownership passes from the seller to the buyer upon purchase)
- Is often classified by product line (such as medical, hardware, or electronics products)
In the import/export business, there are two main types of distributors:
Full-service distributors:
A full-service distributor provides the following services to its customers and suppliers:
o Buying: The distributor acts as a purchasing intermediary for its customers.
o Creating assortments: The distributor purchases goods from a variety of suppliers and maintains an inventory that meets the needs of its customers.
o Breaking bulk: The distributor purchases in copious quantities and resells to its customers in smaller bulk quantities.
o Selling: The distributor provides a sales force to its suppliers.
o Transporting: The distributor arranges for delivery of goods to its customers.
Drop-shipping distributors or Merchant-export distributors:
A drop shipper or merchant-export distributor is a distributor who sells merchandise for delivery directly from the supplier to the customer and does not physically handle the product. The distributor does take title to the goods before delivery to its customer, however, as well as the risk.
When you are operating as a full-service distributor, you have a greater level of control. On the downside, you have a greater level of risk and need for working capital because of the significant additional expenses.
