A retail distributor serves as a go-between for customers and manufacturers. The majority of the time, when a manufacturer creates a product, it does not sell it directly to the end user. Instead, large quantities of the product are sold to a retail distributor, who then sells the products through a retail store.
Individuals or corporations who put together or produce a product are referred to as manufacturers. Many manufacturing jobs are outsourced to countries with lower labor costs, such as China or the Philippines. These items are then sold in other countries after being exported.
The manufacturers of the items, whether they are located offshore or in the country where the product will be sold, create a network of retail distributors who handle the product’s sale to the consumer. The manufacturer may have an exclusive distribution agreement, under which only one company is allowed to sell its products. Most manufacturers, on the other hand, will have distribution agreements with a variety of retailer distributors.
A retail distributor pays a wholesale price when purchasing a product. Because of the volume in which it purchases the product, this is a lower cost. In general, the bigger the distributor, the better the volume discount on a given product. Smaller retail distributors may find it more difficult to compete as a result of this phenomenon, as they end up paying more for their inventories.
The items are received the retail distributor, who then prices them. The distributor may sell the product at a suggested price set the manufacturer. Distributors, on the other hand, may set their own prices for a given item. Retail distributors always set prices for goods that are higher than what they paid for them. The distributor earns money in this way. To control the distribution and brand reputation of a given product, some manufacturers will set a price limit that manufacturers cannot exceed or fall below.
The consumer then purchases the item at the higher markup from the retail distributor. A consumer who does not want to pay the premium for using a middleman can buy items directly from the manufacturer or through direct sales. However, this is not possible with all consumer goods.
Retailers may have an agreement with manufacturers that allows them to return unsold items in certain circumstances. This is common in the bookstore industry, for example, where unsold copies of books can be returned. In some cases, once a distributor has purchased an item, it is his responsibility to sell it. If the product does not sell at the marked price, the retailer will be forced to liquidate the item at a lower price in order to recoup some or all of the product’s purchase price.