Channel Partners: Wholesalers, Distributors and Retailers & their Functions in Distribution Channel

01/09/2020 0 By indiafreenotes

A channel partner is a person or organization that provides services or sells products on behalf of a software, hardware, networking or cloud services vendor. Channel partners include value-added resellers (VARs), systems integrators, consultants, managed service providers (MSPs), original equipment manufacturers, distributors and independent software vendors. Many technology providers, including Amazon Web Services (AWS), Cisco, Dell EMC, IBM and Microsoft, have formed partnership programs to engage closely with channel partners.

Two well-known channel partner programs are:

  • Managed Services Channel Program (MSCP): Defines best practices for channel partner market or industry services. Best practice compliance validates channel partners and services.
  • Outsourcing Channel Program: Designed for channel partners handling asset management for a specified period. Includes combined manufacturer, service provider or data center technologies.

A referral partner is a sales representative, consultant or customer that enhances marketing and boosts sales by directly referring customers to manufacturers via multiple channels.

Channel and referral partners are often compensated with gratis discounts, training, technical support or lead generation tools.


The wholesaler can be understood as an intermediary entity that buys goods in large quantities and resells them to the retailer, with the sole aim of earning profit. He/She acts as a middle-person between a manufacturer and retailer. Due to direct buying from the manufacturer or producer of goods, wholesaler obtains products at low prices and sells them to the retailer at higher prices. Thus the remaining amount is the source of revenue.

Whole-selling entities play a crucial role in the supply chain process, as it buys the goods from different manufacturers in bulk, break bulk into smaller units, hold inventories in warehouses, provides quicker delivery to buyers, reduces risk by taking the title of goods, and so on. As these entities mostly deal with business customers, i.e. re-sellers they do not pay much attention to the location, atmosphere and promotion.

Wholesaler – Business to Business sales and Business to customer sale

  • Wholesalers have huge quantity of the same product (Imagine a marble shop which is a wholesaler and has huge quantity of different marble floorings and tiles).
  • If you want to buy from a wholesaler, you have to visit his place. (He does not distribute the items)
  • In large companies, wholesalers may buy from distributors. Wholesalers are lower then distributors in channel sales. There might be multiple wholesalers in the same city.
  • Wholesalers mostly sell directly to other businesses (like retailers) but they are likely to sell to customers who need in bulk as well (example a cement wholesaler selling small amount of cement locally just to meet demand)
  • Are very important in the perishable goods market (fish, vegetables etc).
  • Major work is of warehousing
  • Margins are lesser but the volumes are huge.

The best example of wholesalers is the local cement guy or the local vegetable market. Although a normal vegetable retailer might roam the market with his van or might visit place to place, a wholesaler sits in his own place and does business.

You might noticed from time to time various Cloth wholesale markets where a huge business is done from a small shop. The wholesalers generally operate from a small shop but they will have a huge warehouse nearby from where they supply the material.

Because wholesalers sell material in huge bulk or the material which they sell is in demand, these wholesalers do not move from shop (this is generally the norm) and they sell most of their products from their own shop. Imagine the vegetable wholesaler who might sell tons of vegetables from his shop when retailers visit him.

A wholesaler may buy direct from the company or he might buy from another distributor. If you look at the ice cream market, there is a C&F (wholesaler of ice cream) involved who stocks the ice cream in bulk and other ice cream vendors may buy from him or the distributor arranges transportation from the wholesaler to the retailer. This bulk stocking wholesaler is needed in every city within a few milers because otherwise the ice cream will melt. As a result, wholesalers have a huge role to play in perishable good items.

Finally, distributors are not allowed to sell to end customers are all whereas a wholesaler might do that. For example – a cement wholesaler generally sells in bulk to the local developers who are erecting buildings. However, he may sell small items through a shop to local labourers, plumbers who need small work to be done with cement (home jobs). A distributor cannot do that because he is obstructing the sale of the retailer to whom the distributor is selling.


As the name suggests, the distributor is an agent who distributes products and services to various parties in the supply chain network. It is impossible for the manufacturer to reach customers directly for selling products and services, and for this purpose, they have to rely on middle agents or distributors, who exclusively store and sell the company’s products, in different locations.

The distributor is also known as channel partner who deals with the manufacturers to promote and sell their products and services to various customers, such as retailers or final consumers. To do so, the distributor enters into an agreement with the producer and purchase the right to sell the producer’s product. However, he cannot use the producer’s trade name.

Distributors purchase non-competing goods or product lines from different manufacturers, hold stock in warehouses, transport it to various locations and resell it to various parties.

Distributors – Strictly business to business sales

  • Distributors are the ones whose job is to increase the visibility and sales of the product, for which they might visit shop to shop and pick orders.
  • An excellent example of distributors are the ones selling Samsung Smart phones who visit all the shops within a region to ensure that the material is on display by the retailers. You will not find a wholesaler of Samsung but you will find retailers and distributors.
  • Distributors sell to both – Wholesalers and retailers.
  • Transportation is a huge cost for distributors as delivery from warehouse to end retail outlet is the work of the distributor.
  • Distributors are never allowed to sell to end customers because the distributors have a lower price of the product and this move will cut off the sale of the retailers.
  • The turnover done by the retailers is the target of the distributor. A distributor is more concerned with secondary sale (sales from retailer to customer) because if secondary sales don’t happen, then primary sale from happen (sale from distributor to retailer).
  • Major job is visibility, distribution to many outlets and sales.

Consumer durable, electronics, hardware or other equipments, medicines are perfect examples of sectors which use distributors and not wholesalers. A medicine retailer may have more then 1000 different type of medicines. He cannot afford to visit wholesalers who are stocking all these machines.

So the companies appoint a distributor who can distribute the various medicines to the retailer who in turn sells it to customers. Similarly, there are various distributors for washing machines, televisions and other white and brown goods who distribute products to retailers – small retailers or modern retailers.

There might be vegetable and perishable goods disributors as well. These distributors might visit from town to town and deposit a bulk of the material with the local wholesaler who will later sell it forward to other retailers. In this case too, the cost of distribution from distributor to wholesaler has to be bourne by the distributor.

Transportation is a major cost for any distributor and hence, the distributor considers the cost of transportation in his profitability analysis. Alternatively, a distributor might try to club together various deliveries to the same place so that the cost is lesser for deliveries and transportation.

The main work of the distributor is to push retailers in converting more sale. Imagine the competition between Samsung and Micromax or Oppo or Vivo. There is a distributor for each of these companies and all distributors will try to push their own products in the market. They can do this by launching various trade promotions or pushing the retailer in picking more material so that the sale is maximum for their brand.

So if a retailer picks more Micromax unit from the Micromax distributor, he is likely to sell the Micromax brand more then Samsung to the end customer. For this to happen, the distributor has to give promotional support to the retailer or push for more sales so that ultimately the retailer sells more unit to the end customer.

If the secondary sale is happening (sale from retailer to customer), the primary sale (sale from distributor to retailer) will happen automatically. A good distributor concentrates on secondary sale and not primary sale.

A distributor is also supposed to stock products in bulk but he can anytime order smaller quantities from the company from time to time to distribute forward. Generally distributors are not expected to have as big warehouses as wholesalers because it is the work of the distributor to distribute and not to warehouse. Distributors use the storing capacity of retailers below them or wholesalers below them to stock the material.

Key Differences between Wholesaler and Distributor

The difference between wholesaler and distributor can be drawn clearly on the following grounds:

  1. The term wholesaler is defined as a person or entity, who purchase goods in bulk and sell them in relatively smaller units. On the other hand, the distributor is one of the major links that supplies goods and services to the entire market.
  2. In general, distributors enter into the contract with the manufacturer to trade in non-competing goods or product lines. Conversely, a wholesaler do not enter into the contract with the manufacturer, i.e. he has the liberty to offer products of competing for nature to the retailer, provided by various manufacturers.
  3. There are four types of distribution levels, in which wholesaler is present in two level and three level channel. Unlike, the distributor is present only in the three-level channel of distribution.
  4. As a distributor acts as a middleman to supply specific goods in the market, his area of operation is larger than the wholesaler, who serves a limited area.
  5. Retailers are the only customers of a wholesaler. On the contrary, a distributor provides goods to many parties in the supply chain, like wholesalers, retailers and even direct consumers.
  6. Wholesalers do not involve in marketing, pitching, selling products to the prospective buyers or retailers, i.e. product of an individual manufacturer waits for the retailer’s interest and order placement. In contrast, the distributor sets deal with the producer and engage in promotional activities, to increase sales. Hence, they act as a sales representative to the producer.


When buyers buy a product and sell it to the final customers for their consumption, and not to any supplier or wholesaler, this is known as Retail. The retailers are the mediator between wholesaler and customers. They purchase goods from the wholesaler and sell them to the ultimate customers in small quantity. Retailers offer a vast variety of goods and are in direct communication with a large chain of suppliers, giving them an opportunity to manufacture and develop more sustainable goods.

A retailer does not manufacture any product they sell, but they are the final link in the distribution chain and the one who connects and delivers the goods and services directly to the customers.

Importance of Retailer

  1. Provide Assortments

Supermarkets or small Kirana shops sell different product items manufactured by different companies. These places enable and give choices to customers to pick from a vast assortment of goods, sizes, brands, and prices at one location.

  1. Breaking Bulk Orders

Manufactures and wholesalers sell the products in bulk to the retailers. The retailers then sell it to the customers in smaller and more useful quantities. This activity of breaking bulk order into tiny amount according to customer’s requirement is known as breaking bulk.

  1. Holding Inventory

The significant action accomplished by the retailer is maintaining an inventory, so the items are available whenever the customers want. This action allows the customer to buy products in a small quantity as required.

  1. Providing Services

Retailers implement services that make customers shopping journey favourable. Example, retailers showcase all the products so that the customers can see and buy them. Retail store’s employee salesperson to assist the customers.

Key Points of Retailer

  • It creates a high annual sale and has a huge impact on the economy.
  • Creates employment and offers extensive varieties of career opportunity.
  • Offers widespread categories of products and services.
  • A retail service can improve a product’s image.
  • Spread information to customers through display, signs, and sales personnel.