15 May 2025

The terms distributor and wholesaler are often used interchangeably, but they refer to different roles in the supply chain. Here's a clear breakdown of the differences between the two:

Although there is considerable blurring between the definitions the essential difference is this:

Distributors tend to deal with a much smaller range of brands and usually have exclusive rights to market and sell those brands into their territories. Distributors develop market demand and set-up distribution.

Create consumer demand + Set-up and support the distribution network

Wholesalers usually do not have exclusivity and sell a wide range of brands. They service retailers and "get products on the shelves" by promoting their extensive range of products to retailers.

Get the product on the shelves + Replenish retailers' stock

Thus, the distributor works closely with producers and manufacturers and find wholesalers, whereas wholesalers work closely with large end users and retailers. The following diagram illustrates the classic distribution model...

The intent of the whole scheme is to achieve wide distribution of products into diverse geographies as efficiently as possible. However, more than just a logistics scheme, each party undertakes steps to increase volumes through this chain by promoting the products stocked in the supply chain.

In terms of marketing theory, this distribution scenario is termed "indirect distribution" as the manufacturer isn't selling direct to their end-user markets (the customers supplied by the retailers) but relies on intermediaries (distributor --> wholesalers --> retailers --> end-users) to do this for them.

Example of a distributor

Welding Industries of Australia (WIA) is an import distributor specializing in welding equipment and products. WIA represents four brands WIA (a house brand), Miller, Hobart, and Bernard.

WIA is wholly owned by ITW (Illinois Tool Works) a Fortune 200 US company that also owns Miller, Hobart, and Bernard. Thus ITW is an example of a manufacturer-wholly-owned import distributor set-up in Australia to develop and service the market.

WIA has set-up a distribution network of over 50 retail distributors and service centres around Australia who on-sell Miller, Hobart, and Bernard products to end user markets. End-users are typically manufacturers, welding contractors, mining oil and gas companies, metal fabricators, and construction companies.

Because welding equipment is a high-value low-volume product, WIA do not sell via wholesalers, but sell direct to their retailers (what they call "Retail Distributors"). WIA retailers are typically specialist B2B companies with a focus on welding technologies and tooling.

WIA is an example of a typical distributor that represents a narrow range of brands in a specialized product category working closely with their manufacturers to set-up distribution and promoting the products to create brand awareness and demand.

https://welding.com.au/

Example of a wholesaler

They provide wholesale distribution for 27 different brands including well known names like WD-40, Tectalloy, INOX, Wynns, Chemtech, Solvol, Septone, Toyo and others, and cover numerous product categories including fillers, paints, construction adhesive, sealants, adhesives, expanding foam, glues and epoxies, gaskets, galvanizing paints, high temperature paints, tyre repair, marking pens, lubricants coolants, painting and decorating tools and consumables, and many others.

CW Brands supplies a large number of retailers across Australia that sell to the end-user markets listed above but also provide a direct to customer online shop. Thus for manufacturers and import distributors they provide two-paths to market; an online shop (e-Commerce) as well as traditional retail distribution through hundreds of stores across Australia.

As a method to reach both large and small end-user customers (from large companies who order products by the pallet or carton) down to single product sales) CW brands provides an efficient path to market.

CW brands illustrates a typical wholesaler that provides manufacturers and import distributors wide geographic reach, getting products on shelves, re-stocking retailers, reaching large customers, and representing a multitude of brands in similar categories.

https://www.cwbrands.com.au/

Distributors versus Wholesalers: confusion in terminology

Problem is, it's all called "distribution" so sometimes you find a variety of terminologies like "wholesale distributor" and "retail distributor" and sometimes "stockist" and even "agent" when really they aren't agents as usually defined. And sometimes retailers will call themselves "wholesalers" to project a cheaper image ("Bunnings Warehouse" for example).

It's not so much what they are called that's important, it is the role they play in the distribution process.

Distributor and wholesaler: Roles in the supply chain

Distributor: Acts as an intermediary between a manufacturer and various resellers or retailers. Distributors often have exclusive rights to sell the manufacturer’s products in a certain territory or market segment.

Wholesaler: Buys a wide variety of goods in large quantities from manufacturers or distributors and sells them in smaller quantities to retailers, resellers, or other businesses. Wholesalers typically do not have exclusive rights.

Relationship with the Manufacturer:

Distributor: Typically has a closer, contractual relationship with the manufacturer. They may also provide marketing, after-sales support, and training.

Wholesaler: Usually has a more transactional relationship—they buy and sell for profit but don’t usually offer added services or take on marketing responsibilities.

The difference between services provided by distributors and wholesalers:

Distributor:

• Product promotion and marketing (brand building and creating demand)
• Setting-up distribution
• Technical support
• Customer service and training
• Inventory management

Wholesaler:

• Promoting product range to retailers (getting the product stocked on retailers' shelves)
• Bulk breaking (selling in smaller quantities)
• Storage and transportation
• Order fulfillment

Distributor and wholesaler: variation in inventory and risk

Distributor: May take ownership of inventory and bear higher risk, especially when offering technical or warranty support.

Wholesaler: Also takes ownership, but their risk is limited to buying and reselling—no obligation for after-sales support.

Distributor and wholesaler: Pricing and Margins

Distributor: Often operates on higher margins than wholesalers to fund marketing and providing services.

The distributor essentially behalves similarly to the manufacturers they represent. They have obligations to develop the brand and market demand as well as stocking and distributing products to to keep their supply channels stocked. Further, like the manufacturer, they also have obligations to provide services as well as the products themselves. This includes such services as: processing warranty claims, and after sales service. As part of their market development process, they typically provide training and technical support.

Wholesaler: Works on higher-volume, lower-cost models, with less emphasis on value-added services.

The wholesaler operates on a lower cost base through not providing any services, they simply stock the product closer to the end user market thus facilitating easier access (stock replenishment), arranges packing and transport of the product to the buyer (usually a retailer, but sometimes large customers deal direct with wholesalers). The existence of wholesalers reduces the need for retailers and large end-users to hold larger inventories because they know they can obtain new supplies from the local wholesaler on a timely basis.

However, wholesalers quite often operate a sales force to promote their products to their retailers and large end-users.

Disintermediation

The main premise of this article (so far) is that distributors (or manufacturers) achieve "distribution" via the services of wholesalers who then on-sell to retailers. This implies a three or two step path from product source to the end user. Each step (or "intermediary" or "middle-man") in the chain adds a margin thus increasing the price to the end user.

You don't need to be Einstein to realize cutting out the middleman will dramatically lower the price of a product. And in practice that's exactly what happens...

• Procurement specialists: Large companies with buying clout (tend to place orders of high value) will often seek out the product source (manufacturer or import distributor) and attempt to buy direct thus cutting out the intermediaries further down the supply chain.
• Large retail chains: Similarly, large retailers in Australia (Coles, Woolworths, Bunnings, Officeworks, Reece Plumbing, Harvey Norman etc.) are almost never supplied by wholesalers and insist on buying direct.

This means that overtime the more efficient distribution models (such as retailer owned and operated Distribution Centers and 3PLs) are often used and the Distributor to Wholesaler to Retailer model is less often the norm.

This is called "disintermediation".