Dealer Vs. Distributor: Understanding Your Vendors

To remain viable, a practice must remain profitable. Developing a strategic procurement strategy is the first step in gaining the ability to control supply costs and thereby improve profits. To develop a strategy that aligns with your practice’s goals, a practitioner should understand how their suppliers operate and how the industry works as a whole. Supplier selection is a critical part of the procurement lifecycle. By understanding the differences between vendors, and the pros and cons of each, you can ensure to make the right decision for your business. Strategically deciding on the types of vendors you choose to buy from and establish long-term relationships with is an important part of ensuring you meet your objectives. To assist you in figuring out what kind of vendors are right for you, this article will focus on the key differences between dealers, distributors, and wholesale distributors and how those differences may impact your business. Let’s kick things off by taking a look at distributors.

What Is a Distributor?

Just as their name implies, distributors act as intermediaries, managing the distribution process for manufacturing companies. The distributor is typically delegated a specific geographical area by the manufacturer to sell certain product lines directly to dealers, who then resell the products to customers.As dental offices require a very wide range of often very user-specific products, ordering all supplies from a single manufacturer is simply not viable. Manufacturers prefer to sell in large quantities, while individual dental practices face space limitations and prefer not to tie up too much cash in unneeded supplies.By stocking tens of thousands of SKUs from a range of manufacturers, distributors step in as a middle man, allowing you to amalgamate your orders and order smaller quantities more frequently.Working as authorized representatives of the manufacturer, distributors will bring additional value to customers by:

• Maintaining a strong relationship with the manufacturer
• Providing after-sale services such as technical support to resellers
• Communicating any special needs, requests, or concerns on your behalf and helping to facilitate resolutions if any issues arise.
• Offering logistics, storage, and shipping support to both the manufacturer and the customer.
• Offering customers further services such as equipment installation, service, and repairs. For example, a dental practice may purchase x-ray equipment from a dental equipment distributor and then sign a service contract for them to maintain and service that equipment.

What is a Dealer?

A dealer acts as a middleman between the distributor and the final consumer, making their profit by adding a margin onto the price they pay the distributor. Again, they are authorized sellers for a given area, often referred to as being “official” or “certified” dealers. However, there may be other dealers in the same geographical area, so competition can be high, which often results in customer service and availability of products being a distinguishing factor and competitive advantage.Dealers also often sell a wide range of products and likely offer goods from competing brands.

Dealer Vs. Distributor: Key Differences

Both dealers and distributors play middlemen in the distribution process between manufacturers and end users. They also both are authorized to use the manufacturer's trademarks and logos, as long as they aren’t represented as their own.Although the words “dealer” and “distributor” are often used interchangeably, they are, in fact, not synonymous. There are significant differences between the two, besides the fact that dealers deal with the final consumer and distributors have direct contact with manufacturers.Below we clarify for you exactly what those differences are.

Function

A distributor purchases products directly from a manufacturing company and then distributes the product to dealers.Dealers purchase products from distributors and then resells the product to the end consumer, in this case, dental practices and DSOs.

Connection

Distributors are the middle man between manufacturers and dealers. Dealers link the consumer to distributors.

Type of Products

Dealers sell a particular category of products, whereas distributors sell a variety of products.

Level of Competition

Distributors deal with a moderate level of competition while dealers exist in a high to extremely high competitive environment.

Selling Area

Distributors are responsible for distributing to a large geographical territory. Dealers sell to a smaller, more local area with more nearby competition.

Incentives

To help motivate sales, manufacturers will often provide incentives such as special discounts to distributors. Distributors will also offer incentives to dealers, such as subsidized advertising.

Inventory

Distributors stock non-competing products from one or more manufacturers. Dealers hold a large array of competitive product lines, often from a few different distributors.

Volumes

Distributors purchase items in large quantities from manufacturers, whereas dealers can purchase smaller bulk quantities or even single units from a distributor.

What About Wholesalers?

A wholesaler buys goods in very large quantities from manufacturers and resells them to customers in smaller quantities but at wholesale price. Wholesalers typically sell to a limited area and do not have contracts with manufacturers. They also typically don’t get involved in or offer promotions or incentives.Wholesalers may buy and sell all types of products and attract customers by leveraging high-volume purchase orders to improve their purchasing price and passing at least a portion of their savings onto customers.

Which Type of Vendor Should You Choose?

Choosing a vendor isn’t always black and white.Of course, everyone wants to save a dollar, and price should always be a main consideration when deciding on where and what you buy. But there are other areas that may introduce risk and impact your business, such as:

• Leadtime
• Product Listing
• Availability of stock
• Quality & Compliance
• Customer service
• Sales support
• Reputation
• Financial standing

Almost all dental distributors hire sales representatives to oversee accounts and are compensated according to their sales numbers. Some go the traditional route of physically visiting offices to facilitate orders and offer sales support. However, other distributors prefer to utilize remote sales reps who rely on phone calls to drum up sales and get orders placed.As different practitioners want different things, both service models play an important role in supporting the dental industry. Because a field representative is constrained by geography and the time it takes to visit offices, they simply cannot serve as many practices as a phone rep. There are both cost and service implications to this for a practice to consider.In the end, you may choose to buy a certain segment of your supplies with a distributor whose “value-added” services you truly value and consider critical to your practice. For instance, a local rep may help you out of a bind by delivering some rush stock or offering samples of products you feel may bring a benefit to your practice.Other low-cost supplies that are regularly available through a long list of suppliers you may decide to purchase based on price alone, selecting the supplier at the time of order.Also, if you’re flush with cash and willing to order and store larger quantities, you could work directly with a wholesaler, for instance, and leverage your volumes for deeper discounts.Just remember, the pricing you see online may not be the best price you can get. Manufacturers, dealers, and distributors could be willing to cut you a deal based on your purchasing volumes. So go ahead, and make the ask. As the saying goes: you can’t get what you don’t ask for.

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