When you open a retail space or online store, there are several options for where to source your product. Choosing a supplier is a decision that will be influenced by your personal and business values. You may want to choose a local supplier or prioritise product quality; prices may be your number one consideration, or perhaps lead times will affect your decision.
All these factors can contribute to your decision of which specific suppliers you want to engage. There are also different types of suppliers to consider, and here, we discuss the difference between buying wholesale or direct from the manufacturer.
What Is the Difference between Wholesalers and Manufacturers?
What is manufacturing? Make UK describes manufacturing as “a series of processes that deliver a whole solution to their customer”. Manufacturers make goods from the raw materials and will have many suppliers themselves. Different manufacturers specialise in different products and industries, and some only make custom products to order. As opposed to buying raw materials, wholesalers tend to buy finished products to sell on to customers; whether that be gardening supplies, tools or DIY materials, there are wholesalers across most industries.
Both manufacturers and wholesalers provide finished goods, selling to retailers for you to then sell on to consumers. The main difference between these companies is that manufacturers produce the items as well as sell them, whereas wholesalers are just part of the sales process. Wholesalers are ultimately customers of many manufacturers.
Both wholesalers and manufacturers sell directly to other businesses (B2B), and most are distributors to online stores as well as bricks and mortar retail spaces.
Benefits of Buying Directly from a Manufacturer
Buying from reputable manufacturers can guarantee good quality, as the quality check is a part of their process. If you have issues with any products, you can contact the manufacturer directly rather than via a third party.
Using a manufacturer as your supplier can reduce the size of your supply chain, and a lean supply chain is generally considered the most effective. Cutting out the middleman can streamline your process.
Manufacturers can sometimes provide smaller quantities, as opposed to wholesalers that will dictate a minimum order quantity. It’s worth bearing in mind that smaller quantities don’t necessarily mean a better price. Even as a manufacturer, the price per unit will be based on the quantities bought, so you may not get as good a deal if you purchase low numbers.
Disadvantages of Using a Manufacturing Company
Many retailers assume that direct buying will be the cheapest option. In reality, when you buy direct from a manufacturer, you often end up spending more. Manufacturers are not in the business of sales; their core business model is production. This means they often have higher profit margins because that is the end of the line for their products; there’s no ongoing profit from their goods.
Manufacturers are often specialists and so can’t provide the variety you need from a supplier. A factory may only supply one product, so to you would need to buy from many manufacturers to build a range of products in your retail business. While buying direct may seem like it reduces your supply chain, you will actually end up sourcing multiple finished products via multiple manufacturers, making your supply chain much more complex. The more companies you source products from, the more admin is associated. This costs you valuable time and money that can be better used elsewhere in the business.
While there are lots of successful manufacturers, their priority will always be in producing goods. The business model is not necessarily an optimal sales service.
Advantages of Using Wholesalers
Wholesale businesses can offer a much wider selection for retailers versus manufacturers. The wholesale industry is a huge space, and wholesalers have access to any number of products on the market. As buyers, you can enquire about the potential of stocking something you don’t currently see on their website, which they may be open to.
Using a wholesaler as your supplier also enables you to have one account, or possibly two to three if you have a very varied product offering. Having a small number or just one distributor helps streamline your processes, cutting down on admin. It allows you to have just one point of contact versus several independent manufacturers.
Because of the nature of wholesale, wholesalers can price their products and services much more competitively than other suppliers. Buying huge volumes of products enables wholesale businesses to sell products very reasonably, enabling retailers to offer more affordable products to consumers.
As opposed to the aim of manufacturers being primarily to produce goods, a wholesaler’s intent is to provide pre-made goods. As a sales environment, you can rely on experienced wholesalers being familiar with a sales funnel and the day-to-day challenges of a retail space. As buyers, there are probably few things you could tell a wholesaler they haven’t heard before! If ever you’re unsure about entering into a new business relationship, make sure to do your research. You can request information from wholesalers about contract terms, reviews and even how they differ from competitors.
You may use a combination of wholesalers and buying directly from manufacturers to stock your retail store. Ultimately, your customer will appreciate both the variety and value you can offer by using wholesalers to source your products.
To find out more about how Chartrent can fulfil your wholesale needs, contact our friendly team today. Call 01603 426167 or email sales@chartrent.co.uk for more information.