26 October 2024
Understanding the term "DEALER" in marketing distribution
Dealer is another name for retailer or retail distributor but in some industries the term dealer has a more specific connotation.
In the distribution chain the dealer is the final step before a product is sold to the end-user.
The broadest possible definition of "dealer"
The dealer is the final link in the distribution chain where product meets end user and the sale is completed.
In the marketing distribution context, a "dealer" purchases goods from manufacturers or wholesalers and sells them to end consumers who might be individuals or a business.
Dealers play a crucial role in the distribution chain by exposing products to the market. They often provide additional services such as product demonstrations, after-sales support, and financing options, as well as promoting their products and services.
The difference between retailer, retail distributor, and dealer
While the terms retailer, retail distributor, and dealer are sometimes used loosely and interchangeably, most would agree with the following distinctions:
- Retailer: A retailer sells products directly to the end consumer. Retailers typically operate physical stores or online platforms where consumers can purchase goods. Examples include supermarkets, clothing stores, and e-commerce websites.
- Retail Distributor: Strictly speaking, a retail distributor acts as a middleman between manufacturers and retailers. They purchase products in bulk from manufacturers and distribute them to various retailers. Retail distributors handle logistics, warehousing, inventory management, and promotion to assist create pull through demand from their retailers. However, in Australia many people refer to retailers as "retail distributors."
- Dealer: A dealer can function as both a retailer and a distributor, depending on the context. Dealers often specialize in specific product categories and provide additional services such as installation, maintenance, and customer support. They may sell directly to consumers or to other businesses.
Industries where "dealer" has a more specific connotation
The term "dealer" carries more specific meanings in certain industries:
- Automotive Industry: In the automotive sector, a dealer is a business authorized by a car manufacturer to sell and service its vehicles. Car dealers often have showrooms, offer test drives, and provide financing options.
- Agricultural Equipment: Dealers in this industry sell machinery and equipment used in farming. They often provide maintenance services and spare parts to ensure the longevity and efficiency of the equipment. Typically they operate from premises in country towns, display product for sale both in yards, and showrooms, operate mixed businesses often acting as a dealer for a range of equipment from multiple manufacturers, have on site servicing, and sell farm consumables, tools and implements. However, in large regional centres you may find dealers who specialise in the sale of one manufacturer's product.
- Luxury Goods: Dealers in luxury goods, such as high-end watches, jewelry, and art, often have exclusive rights to sell certain brands or items. They provide personalized services and expertise to cater to affluent customers.
- Technology and Electronics: In this sector, dealers may specialize in selling and servicing specific brands or types of technology products, such as computers, smartphones, and home entertainment systems.
Multi-brand vs. single-brand dealers
Dealers can be categorized based on the number of brands (from different manufacturers) they represent:
- Multi-brand dealers: These dealers sell products from multiple brands. This approach allows them to offer a wide range of options to consumers, enabling them to compare different brands and choose the best fit for their needs. Multi-brand dealers are common in industries like electronics, where consumers benefit from having various brands available in one location.
- Single-brand dealers: These dealers focus on selling products from a single manufacturer under a single brand. This often allows them to provide in-depth knowledge and specialized services related to that brand. Single-brand dealers are typical in the automotive industry, where dealerships are often authorized to sell and service vehicles from one manufacturer. Usually the manufacturer sets stringent standards for the dealer to meet as part of their business arrangement (dealership agreement or contract). In Australia this can effectively mean they are operating as a franchise. If so, then franchise law applies and often the dealership agreement is set-up from the beginning as a franchise agreement, but not always.
Dealers as franchises in Australia
In Australia, many dealers operate under franchise agreements. A franchise is a business model where the franchisor grants the franchisee the right to use its brand, business model, and support systems in exchange for fees.
This is common in the automotive industry, where car manufacturers authorize dealers to sell and service their vehicles under specific terms and conditions. The franchise model ensures consistency in brand, service, and quality across different locations, benefiting both the brand and the consumers.
Car dealers often have independent operations typically the sale of used cars and offering servicing of vehicles that are not the manufacturer's brand and hence they may not be operating as a franchise. Solicitors sort these matters when the lines become blurred. Read more about franchising as a distribution strategy.
Selective distribution and specialized dealers
The term "dealer" is often associated with selective distribution, a strategy where manufacturers select a limited number of intermediaries to distribute their products. This approach is common in industries where specialized knowledge and services are crucial. For example:
- Electronics Dealers: These dealers specialize in selling and servicing electronic products, often representing multiple brands to provide a wide range of options to consumers.
- Car Dealers: Typically authorized by a single manufacturer, car dealers offer specialized services, including sales, maintenance, and financing, ensuring a high level of expertise and customer satisfaction.
Selective distribution helps maintain brand integrity and ensures that dealers can provide the necessary support and expertise for the products they sell.
In summary, while the term "dealer" broadly refers to an intermediary in the distribution chain, its specific role and responsibilities can vary significantly across different industries. Understanding these nuances helps in appreciating the vital role dealers play in connecting manufacturers with end consumers and other businesses. Additionally, the distinction between multi-brand and single-brand dealers, the franchise model in Australia, and the concept of selective distribution highlight the diverse ways dealers operate within the market.