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Several terms in the world of economics in the field of trade such as distributor, reseller, agent or supplier sometimes confuse us. As a lay person, the meaning of these various terms is sometimes misunderstood or misunderstood.
One of the most common questions is What is a Distributor? So, in this article we provide an understanding of the terms above as knowledge.
If in the future you are interested in entering the business world and are attached to these jobs, you already understand it. Basically, distributors function as a connecting force between the producer of a product and the final consumer.
This method can be a very profitable venture, especially in niche markets where distributors can give exclusive rights to distributors to sell certain products in certain regions. If you want to know what is meant by distributor, you can read the following explanation.
What is meant by distributor?
Then, what is meant by distributor, huh? In general, distributors are parties who buy products in large quantities from manufacturers and distribute them, either directly to consumers or to retailers who then sell them to consumers.
Reporting from Finance Strategies, the distributor's business model is to buy products from manufacturers at low prices and sell them to retailers or end users at higher prices.
To maximize profits, distributors should enter into supply agreements that offer low purchase prices for high markups while focusing on operational efficiency to keep product sales costs low.
Usually, distributors will collaborate with one or more companies at once to market, transport and sell goods in various ways.
Distributors can increase a company's market and expose it to a larger consumer base, and sometimes offer service, technical support, or warranties on behalf of the goods or company.
Simply, Distributors are parties who carry out activities to deliver goods and services belonging to producers, until they reach the hands of consumers, who can be individuals or companies or business entities. The distribution process is quite long because sometimes goods distributors do not actually send goods and services directly to consumers.
Distributor's Important Points Are..
Distributors will tend to work in wholesale representation and will purchase products in very large quantities. So there are many distributors who will work directly with retailers such as stalls and other shops.
Distributors will also get special prices from various manufacturers so they can make a profit. The distributor's function is to act as a liaison between producers and consumers and see the distributor's function below.
- For producers, distributors will function to assist the process of distributing the goods and services that will be produced. So producers will focus on monitoring the continuity of production and quality of goods to customers, both retailers and consumers.
- For producers, distributors have the function of getting buyers or customers in their area. It can also function to serve customers or consumers better by being located close to distributors and consumers or customers.
- For producers, distributors also have the function of monitoring price stability, because if an item is piled up it can reduce the price. Meanwhile, for goods that have been stacked and there are difficult areas, the price tends to be increased.
- For customers, distributors have the function of making it easier for consumers to obtain the goods or services they need. One of them is building distribution centers that are spread across every city or province.
The following are the functions of distributors for producers and customers which you can pay close attention to. Even though there are similarities in selling products, there are differences between distributors, suppliers, agents and resellers. Check out the differences below.
- Suppliers are parties who will sell goods sustainably in production activities. In general, suppliers sell raw goods.
- Distributors are the first chain after producers who usually sell finished goods from producers. Although there are also those who sell raw goods from various existing suppliers.
- Agents are good intermediaries between distributors and retailers. So profits are obtained from sales commissions or the difference between the price purchased from the distributor and the price set by the retailer.
- Resellers are parties who usually sell goods directly to existing consumers. This reseller also takes relatively fewer products because they will run their business online.
Distributor Function for Business
After understanding what is meant by distributor, you also need to know the function or role of distributors in business. The following is the explanation, quoted from the IREAP page.
For producers, distributors play a role in helping distribute goods and services produced by producers to customers, both retailers and consumers. So, producers can focus more on monitoring the continuity of production and quality of goods.
For producers, distributors also play a role in getting customers in their area. Distributors can also serve customers or consumers better, because of the close location between distributors and consumers or customers.
This can be done by carrying out promotions that are appropriate to the regional conditions of each distributor. The presence of distributors can also maintain price stability, because goods piling up in one place can reduce prices. Meanwhile, in areas where there is a shortage of stock, the price of goods tends to rise.
Meanwhile, for customers, the role of distributors can make it easier for consumers to obtain or purchase the goods or services they need.
The reason is, distributors can help producers in classifying/sorting products according to type, size and quantity. Distributors can provide estimates of the price and availability of the product before it reaches consumers.
Distributors can also help customers by building distribution centers spread across every province.
In this way, producers located in just one region can distribute their goods throughout Indonesia with the help of distributors who have a network of warehouses throughout the region.
Types of Distributors in Business
Not only do you know what is meant by a distributor, there are other types of distributors in business, including:
a. Goods Distributor
As the name suggests, a goods distributor is a type of distributor that distributes products in the form of goods. In the distribution process, goods distributors will distribute products to retailers who are then distributed to consumers.
However, there are also distributors who directly distribute their goods to final consumers. There are many examples of distributors of goods, such as grocery store sellers or vegetable traders at the market.
b. Service Distributor
The products distributed by this type of distributor are not goods, but services or certain services. In contrast to the goods distribution process, service distributors can distribute their services directly to consumers.
An example of the service distributor process can be seen from the distribution of financial services from multi-finance companies to their customers.
c. Individual Distributor
Finally, there is the type of individual distributor. It is called that because distributors can distribute products from producers to individual or private distributors, then distribute them to final consumers.
An example of an individual distributor is the MLM business model.
Tips for Becoming a Successful Distributor
After knowing what is meant by a distributor, its role and types, you may be interested in entering the business world as a distributor.
Are there any tips for success in becoming a distributor? Of course there is, here are the tips!
1. Know the Target Market
Before becoming a distributor, you must first know who the target market is for the product/service being offered. This is because distributors usually specialize in a particular industry or sell products to a particular consumer base.
There are various distributor industries that you can choose from. Starting from technology products to food. To make it easier, you can try researching different industries and the products sold within them.
This way, you can find information about vacancies for distributors, potential profit margins, and industry growth projections.
2. Register a Business
So, if you have decided what type of distributor to choose, it's time for you to register your business legally in the eyes of the law. This method is done to avoid unwanted things in the future.
By registering your business, customers can also judge that your shop is trustworthy. So, they will no longer hesitate when buying the products/services you offer.
3. Look for a Manufacturer
Before actually becoming a distributor of goods/services, you have to find a manufacturer who is the supplier. You should start researching potential suppliers and manufacturers who handle the products you are interested in distributing.
For example, by looking for information about becoming a product distributor on the manufacturer's website or by contacting them directly.
Some manufacturers prefer to sell their products through exclusive distribution agreements, while others work with independent distributors who sell products from multiple manufacturers.
Quoting Indeed, it's a good idea to gather as much information as possible before you decide to commit to working with suppliers and manufacturers. This is because there are so many manufacturers out there to choose from and different types of distribution agreements.
4. Make a Business Plan
In becoming a distributor, you also need to make a mature business plan. You need to identify budget capacity through financial calculations.
So, you can estimate how many employees need to be hired, the number of goods to be sold, and determine the location to place stock.
Apart from that, you need to choose the appropriate type of logistics. That way, you will be more focused in running a distributor business.
Closing
For those of you who want to become a reliable distributor, first build a network with producers and consumers so that the products you distribute can sell quickly.
Also use digital platforms such as websites and social media so that producers and potential consumers can more easily reach you.
That is the understanding of what is meant by a distributor, roles, types, along with tips for becoming a successful distributor. Hopefully this information about what is meant by a distributor can be useful for those of you who want to do business!