Wholesale Distributors For Software, Hardware & SaaS
Wholesale distributors (or just Distributors) are used primarily when you have physical inventory and refers to companies that warehouse inventory for sale only to resellers (some are Hybrid Distributors and sell to resellers and to end-uses (they should be treated as a reseller in those cases). There is also a new type of distributor for SaaS applications.
Most SaaS products, unless they have a physical component (Point of purchase SaaS products that also use cash registers, etc.), don’t have a need for the typical wholesale, brick and mortar distributor. However, they may want to consider a SaaS distributor (such as SaaSMAX). Their value-ad is not fulfillment, inventory storage, financing or logistics, but help with building out your reseller network and selling more product. See the section, “How to Recruit Resellers” to learn more about SaaS and other distributor types.
Advantages to Vendors
Vendors use distributors to warehouse and balance inventory between resellers (i.e. BestBuy returns inventory after taking down endcaps and it gets sent to Fry’s, etc.). Vendors also don’t have to extend credit to as many resellers if they use distribution; they send inventory to the distributor and bill just a few disties instead of hundreds of resellers (who often require credit terms).
Disadvantage to Vendors
The disadvantage for vendors is that wholesale distributors increase costs 3-10 points (not the same as margin, but similar) and vendors do not always know which resellers are purchasing their product (the national resellers will tell them, but they don’t know about all the independents and regional resellers). As a result, they must rely on the distributor to help them promote to part of their existing reseller base. Wholesale distribution also requests co-op and MDF funds so they can participate in promoting your product, and they sometimes set up terms that are not always advantages to the vendor.
Advantages to Resellers
Resellers like wholesale distributors since they have fewer places to order products. Plus, they can contact 2-3 distributors to get a product, instead of hundreds of vendors. In addition, it is easier to link their accounting and inventory systems into a few wholesale distributors, versus all of their vendor’s disparate systems (critical for retail that can carry thousands of products from hundreds of vendors). Distributors also help finance inventory. Resellers can often buy on credit (accounts payable terms)–hoping to sell the inventory and collect from the end-user before it is due. Some distributors also provide value-added services to resellers with marketing, training, additional financing, promotions, inventory balancing, alliances, etc.
Popular High-Tech Wholesale Distributors
Following are several of the major North American high-tech wholesale distribution:
- Ingram Micro. 800-456-8000. They are the world’s largest wholesale high-tech distributor.
- Tech Data. 727-539-7429. Used to concentrate on VARs. Now universal.
- Douglas Stewart. Distributor for schools.
- Infogrames. Games distributor. Now Atari.
- D&H Distributors. Handle PC, education, Home Entertainment, Security and Government products.
- Activision Value. Games distributor.
- SaaSMax. A special distributor (app store) for SaaS Applications. A single stop for deal registration, one reseller contract, track, pay and collect commissions. Very unique model.
Additional Resources on Sales & Wholesale Distribution (Check out “Managing Channels of Distribution”)