Manufacturer's representatives and distributors are similar in several ways: Both sell goods made by manufacturers, and neither is directly employed by those manufacturers. Instead, they operate independently. The key difference is that distributors actually buy and sell goods, while "reps" act only as sales agents for the manufacturer.
How Distributors Work
The typical distributor buys goods from the manufacturer at wholesale prices and then resells those goods to consumers or to retail outlets. Distributors actually take ownership of the products they sell, and they maintain an inventory. Distributors are responsible for getting products into stores, and when stores need more product, they order it from the distributor, rather than the manufacturer. The distributor makes its profit from markup -- the difference between what it pays the manufacturer for goods and what it charges its own customers.
How Reps Work
A manufacturer's representative is a salesperson and marketing agent. The rep contacts potential buyers, promotes the manufacturer's products and arranges sales. Reps do not take ownership of the products they sell, and they do not keep an inventory, beyond perhaps some samples. Their job is to line up customers for the manufacturer's products. They typically are independent contractors rather than employees of the manufacturer, and they usually are paid on commission, earning a percentage of all sales they make.
How Manufacturers Benefit
Production, sales and distribution require different kinds of expertise. It's often more efficient for a manufacturer to turn those functions over to independent distributors and reps than to try to build -- and maintain -- their own expensive marketing channels. That allows the manufacturer to concentrate on what it does best -- making things.
- Kaufmann Foundation for Entrepreneurship: Understanding Legal and Structural Issues in Issues in Establishing Sales and Distribution Channels
- Entrepreneur: Manufacturer's Representative
- A Framework for Marketing Management, Fifth Edition; Philip Kotler and Kevin Lane Keller
Cam Merritt is a writer and editor specializing in business, personal finance and home design. He has contributed to USA Today, The Des Moines Register and Better Homes and Gardens"publications. Merritt has a journalism degree from Drake University and is pursuing an MBA from the University of Iowa.