Distributor

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Russian: Дистрибьютор


“Distributor” (dealer, reseller, merchant, jobber, etc.) means any natural or legal person in the supply chain who, on his own behalf, furthers the availability of a product to the wholesalers, retailers, and B2B market consumers, or, in exclusive cases of B2C market or in the frame of the direct marketing arrangements (e-commerce included), to end consumers. More than one distributor may be involved in the supply chain. However, persons in the supply chain involved in activities such as storage and transport on behalf of the manufacturer, importer or distributor, are not distributors under this definition[1]. In common parlance, distributors are often thought of as having closer and more long-term relationships with the manufacturers (vendors) from which they buy than wholesalers. The following check-list [2] is intended to understand better the dissimilarities between agent and distributor.


Who am I, Distributor or Agent? - Check-List

Comparative Factors I am Supplyer’s Distributor if….. I am Principal’s Agent if…..
Risk
  • I buy products for my own risk and account.
  • What, me take a risk? No way!
Customers Belongingness
  • I sell products to my customers.
  • I sell products to Principal’s customers.
Compensation
  • My compensation is the difference between my buy price and my sell price.
  • My compensation is a flat commission.
Sales Amount Information
  • I don’t brag when I make lots of sales for the Supplier. Otherwise, the Supplier will start thinking: “Gee. If it’s so easy, maybe we should be there.”
  • When I make lots of sales for the Principal, I blow my own trumpet for a bonus or other incentive based compensation.
Pricing Policy
  • I set the price of the products to my customer.
  • My prices to the customer are none of Supplier’s business.
  • The Principal advises me what price to sell its products for.
  • The Principal and I consult closely about what price I should sell its products for.
Sales Policy
  • I set my own sales policies.
  • The Principal sets my sales policies.
Authority
  • I have authority to promote, market and sell Supplier’s products pretty much as I determine.
  • I promote, market and sell Principal’s products pretty much as the Principal determines. I must conform to Principal’s directions and only operate within my scope of authority.
Customer's Perception
  • The customer perceives me as the supplier.
  • The customer perceives the Principal as the supplier
Contacts wits Customers
  • I discourage the Supplier from contacting my customers. I try to keep the Supplier in the dark.
  • I have no problems if the Principal communicates directly with its customers provided the Principal doesn’t keep me in the dark.
Non-Payment
  • If heaven forbid, the customer doesn’t pay, it’s my problem.
  • If heaven forbid, the customer doesn’t pay, it’s Principal’s problem.
Ad and Promo Costs
  • I bear my own advertising and promotional costs out of my gross profits. If I’m lucky, and the Supplier is in a generous mood, the Supplier may contribute to a trade show booth or some other cooperative promotional campaign, on an equal basis with its other distributors.
  • The Principal covers my advertising and promotional costs.
Ad and Promo Costs
  • I have my own warehouse. The goods are mine! I bought them.
  • I may have a small warehouse. But I don’t own the goods. I hold the goods for the Principal, who pays the storage and insurance fees. The warehouse is for buffer stock only. the Principal usually ships direct to its customers.

References

  1. Definitions of the Terms Manufacturer, Authorised Representative, Distributor and Importer. - Final Document of Global Harmonization Task Force, March 26, 2009 - http://www.ghtf.org/documents/sg1/sg1final_n055.pdf - accessed 05/10/2012
  2. Auerbach, R. Am I an agent or a distributor? - www.marketnewzealand.com/auerbach -accessed 01/27/2007
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