Distribution Industry Vocabulary – The Various Terms Associated with the Distribution Industry
The distribution industry which caters to the needs of convenience stores and grocery stores consists of a wide network of small and large operators who work throughout the year to ensure that required products reach customers when they need them. A vast majority of manufactures depend on distributors and dealers to get their products into c-stores on time instead of selling it directly to stores themselves as it would involve added hassle of storing and distribution. From the time a product passes through doors of manufacturers’ factory till the time it reaches the customers’ hand it passes through several channels of distribution from wholesalers to warehouse distributors and then convenience stores.
Distribution channels not only facilitate flow of goods from manufactures to retailers but also take the responsibility of goods that are handed to them and ensure that they reach consumers in the same condition as was given to them by manufactures. The first step in distribution network involves breaking up of large shipment of products from manufacturers into small pallets and storing them into smaller assortments to be distributed across the network. Sometimes large convenience store chains like Walmart and Target and also warehouse clubs have their own distribution networks to get rid of middlemen. The manufacturers directly bring their goods to the warehouses of these stores which are then distributed to stores across the nation.
Here are a few terms which are generally used by distribution channel networks
Manufacturing sales agents – These are independent contractors who promote a company’s products but cannot make commitments on behalf of the company they represent. They work on commissions and carry products where the market is too small for the manufacturer to have a full time sales representative.
Large private label – Companies which are brand leaders in their category like toys, stationary items etc., sometimes buy finished products from small manufacturers and sell them under their own brand name. The rights to manufacture these particular products are given to these contract manufacturers as they can maintain the tight quality controls and they own no rights over the product they manufacture. This saves the contract manufacturer the trouble of worrying about sales or advertisement for their products as they are paid for their manufacturing activity and are also given raw materials for the same.
Specialty retail distributors – These distributors serve in small markets and adopt the title of product that they promote. They raise their markup value by 40 – 50 percent before selling their products to companies. They are able to carry products from several manufacturers as they are all similar products and can be sold under the same brand.
Industrial distributors – They sell several products to different companies from the same industry. These deal with a wide range of products and also provide technical support to the companies they sell their products.
Trade distributors – These distributors deal with tradesmen like plumbing distributors and auto parts distributors who are connected to a particular industry due to the special services that they provide to them. These distributors work as middlemen between manufacturers and tradesmen and do not deal with consumers or stores directly.
Wholesaler distributors – They have existed since the time convenience stores have expanded their business to include a wide variety of products ranging from food products to convenience goods and are unable to maintain distribution chain directly with manufacturers. Wholesaler distributors work as a vital part of distribution channels and do everything to keep the network working with distribution of a wide range of products to convenience stores, grocery stores and dealers. Wholesale convenience store distributors work with large format convenience store chains and they generally distribute the products to all their branches in a particular geographical area. These c – store distributors tend to specialize in special items which are required in large quantities by stores like tobacco products, dairy products etc., and have a long term relationship with their retailers.
Rack jobbers – These people are specialists and work in similar vein as specialty distributors thought their work responsibility in the distribution channel is quite different. They generally work as distributors for small manufactures who do not have the expertise to promote and display products in convenience stores or grocery stores. These c-store distributors rent out specific portions of a store which can be rack section or shelves in a strategic corner and place the products they represent in that area. They assume title of the products they sell and are paid by c-store only on actual quantity of goods sold. Both store owners and rack jobbers add their percentage to the products when they are placed on the rack for sale.
Distribution resellers – When manufacturers are unable to sell their products into specific locations though they have clients and are not keen on taking on responsibility of sales they sell it to resellers who assume title of these products. They work as resellers and take on the responsibility of purchasing and owning and also selling this merchandise as they cannot be returned back to the distributor or manufacturer.
Transporters – These men are the lifeblood of a distribution network and help transport goods across states and cities. They collect products from manufacturers and give them to wholesalers or stockists who then distribute it to other networks to reach their end destination which is convenience stores and grocery stores.
Merchant wholesalers – These are independent merchants who have a list of distributors to sell their products. They sometimes make large purchases on behalf of retailers in an area and may sell it to them on credit. They assume risk of the purchases like resellers and suffer loss if products remain unsold.
The distribution industry works like a well-oiled wheel to distribute necessary goods across the nation and earn profits for manufacturers, distributors and also convenience stores which sell store them for sale to customers. With internet reach small and large manufacturers can now directly interact directly with convenience stores and grocery store to sell their products. With time a few intermediaries in the distribution channel which do not add any value to distribution cycle are likely to be eliminated as companies look to improve efficiency.