What are the differences between distributors and dealers?

The more obvious differences between distributors and dealers arises out of their separate and distinct positions within the typical supply chain, where distributors are closer in relationship to manufacturers while dealers are closer in relationship to the consumer. There are other, notable, differences in the two roles as well, including:

• Distributor agreements typically involve exclusivity, non-compete clauses, minimum sales requirements, royalty provisions (based on sales), and after-sale responsibilities, while dealer agreements discuss product quantities, warranties, price, and dates of delivery.

• Distributors generally require a greater investment associated with the purchase of products in bulk and any after-sale responsibilities, but also provide a greater potential for lucrative financial results.

• Dealers may provide competing products for sale in the same location, while distributors typically are bound to one brand and cannot offer or distribute competing brands.

• Distributors generally have exclusive rights to a large metropolitan or even multi-state territory for their sales, and thus travel more often, while dealers typically have only a local presence.

• Manufacturer control over distributors may involve financial incentives, sales strategy, advertising, promotion and sometimes training, while dealers are responsible for their own advertising, strategies and training.

• Distributors typically have more product on hand than dealers, who purchase from distributors in smaller quantities.

Read about the differences between dealers and distributors from position within the supply chain and responsibilities related to sales.