MGH Distributors
The business model of wholesale distributors

The Business Model of Wholesale Distributors ​


The world has developed widely with so many professions and services that are available to individuals. One such profession is the distribution of goods and services in bulk quantities. It is known as wholesale distribution. If you are looking for a career in this field or are interested in knowing about wholesale distribution, this is the right article for you. 

In this article, we will be explaining the various types of people involved in this process and the model that is adopted by people. So, dive into the articles and get all the important details that are required.

Who is a wholesale distributor?

The individual who conducts the process of wholesale distribution is known as the wholesale distributor. They are companies that distribute products from manufacturers to retailers or customers. A wholesale dealer is a middleman who is in charge of delivering massive wholesale shipments directly to retailers or consumers. They do not engage in the small day-to-day individual transactions that a retail store would. The wholesalers rather focus on distributing products in large quantities in bulk shipments. They are typically the only businesses that engage in direct transactions with manufacturers. They also purchase products at their wholesale price directly from the manufacturers themselves. 

Various wholesale distributors 

Moving on to the next topic, we have the various types of wholesale distributors. So they are broken up into three distinct categories which consist of- 

Merchant wholesalers 

The most common type of wholesalers consists of merchant wholesalers. They are wholesalers who buy directly from the manufacturer. Then, move the product to one of their warehouses and then sell it to retailers or directly to customers. The wholesale operation comes with its own risk. Such as the wholesaler may not be able to unload the product in its entirety or at a price high enough to merit its acquisition in the first place. The wholesaler bears all the losses that may occur in this situation. 

Agents, brokers, and commission merchants 

The next category consists of agents, brokers, and commission merchants that serve manufacturers and producers who do not have in-house sales teams by locating retailers and other customers to buy their commodities. These kinds of wholesalers charge a commission on purchases paid to them by the supplier, typically as a percentage of the total sale. Unlike merchant wholesalers, agents, brokers, and commission merchants are not responsible for the losses incurred during the process of selling products at a high enough margin. The manufacturer of the commodity that is contracting with the merchant is responsible for all losses.

Manufacturers and producers

The last category consists of manufacturers and producers that are involved in the wholesale process. They are large enough to be able to afford and operate an in-house sales team. That is often selling their products to retailers and other customers themselves. Some of them also have e-commerce platforms. This allows them to cut out the middleman. Hence, enabling them to achieve higher margins on their products and make money in the long-run. 

The business model of wholesale distributors

What is a business model?

A business model  is an organized guide or template that includes the plans your business hopes to achieve as well as how you plan to achieve them. It includes the following- 

Summary and overview of the company 

It is the basic overview of the business idea or business you are operating. 

Products or services details 

Here you will dive into a little depth about the products or services you are offering. 

Target market 

This is where you will discuss what your target customer base is and find the ideal customers or retailers. 

Goals and plan of how to achieve them 

Here, you will outline a basic plan of action for achieving specific goals for your company. In addition, discuss the strategy for how you plan to market your products, get to scale your business and get your products to the customers. 

Company’s financial plan 

In this section, you will break down your financial projections, cash flows, financing plans, and response plans for either positive or negative forecast miscalculations. This step is of utmost importance. When you are applying for financing, whether it is for a loan or pitching your business to potential investors, your company’s financial plan and standing are always going to be the center of attention. 

Management information 

The last one is management information and should include a short bio and contact information of the management. 

Tips for wholesale distribution business model:-

Decide what kind of wholesaler you want to be.

As discussed above, there are various wholesalers involved. So choose the right one. 

Be clear and use measurable goals 

While writing the goals and objectives of your company, imagine where you want to see your company in 10 years. Once you have it figured out then accordingly write them down. 

Establish who you plan to sell your products

Find the right customers for your commodities by doing thorough research on the same. 

Decide how you plan to sell your products 

Decide on how you want to promote and sell your products. If you are planning to sell on an e-commerce website, look for the various dos and don’ts. 

Build out a clear supply chain 

The supply chain that consists of manufacturers, distributors, and retailers should be built properly for effective sales. 

Outline all of your expenses 

Consider all the expenses that have happened and highlight the ones that were unnecessary. Hence,  you can avoid them next time. It will help you save a lot of money that you can put to good use. 

The bottom line 

In conclusion, wholesale distribution seems like a tedious process and it may be tough, but definitely not impossible. With the right resources and plan you can easily build your own distribution company. A popular example of the same is MGH which is a global distribution company with over 1800 employees and distributing in 18 countries. The company ensures that the products are of the best quality and distributed to the customers in the most ethical manner. It is situated in Myanmar and has been working to provide various goods and services to all the individuals around the world. 

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