Your 6-Step Guide To Becoming a Distributor
Updated March 10, 2023
Distributors play a key role in the movement of products from manufacturers to retail consumers—they often handle the sale and transportation of goods to merchants. With this, joining the distribution field can be a highly fulfilling and lucrative career path, especially for those involved in specialized product markets. If you're considering becoming a distributor or starting your own enterprise, there are a few essential steps you can take to start your journey. In this article, we outline what a distributor is, how you can become one, what skills you should develop and the average salary and job outlook for distributors.
What is a distributor?
Distributors are typically independent business owners who transport products from manufacturers to market environments. They are an important part of the chain of supply and demand. Distributors often buy products, store them and sell them through different processes, depending on their specific purpose. They may serve as retail distributors who sell such products to consumers directly, or as wholesale distributors who purchase goods from manufacturers and sell the products to other organizations, like retailers, merchants, contractors and institutions, for resale or use.
Similar to retail sales, the primary goal behind distribution is to buy goods and sell them at a profit. Comparatively, though, most distribution is exclusively handled in the business-to-business sector, rather than business-to-consumer. Most essentially, distributors serve as the linking force between the manufacturers of a product and the end consumers. This can be a highly lucrative undertaking, especially in niche markets where distributors may grant exclusive rights to distributors to sell certain products in particular regions.
Related: How To Start a Distribution Business
What does a distributor do?
Distributors usually purchase products from manufacturers and sell them to buyers like retailers for commercial resale or use. They can choose to sell any product—from food items to automobiles, distributors may choose the industry in which they operate. From here, distributors form business agreements with manufacturers that dictate the terms of their relationship. Manufacturers may specify contract pricing for bulk sale item purchases made by distributors. In most cases, though, distributors take primary responsibility for the operations necessary to sell products, while manufacturers focus solely on the creation of said products.
Distributors typically form business partnerships with a network of retail outlets or buyers that they can sell products to. These buyers purchase products from distributors, often at wholesale pricing levels, and resell them to end consumers. Many distributors handle the transportation logistics, like shipping, behind these sales, which is a significant benefit for manufacturers and retailers alike. Distributors may ship products domestically or internationally, depending on their specific industry.
In addition, customer service is a large part of the distribution business—as sales professionals, distributors must build the infrastructure to provide customer support to retailers through their organization. While many conceptualize customer service as the responsibility of manufacturers who build products, that's not typically the case. Distributors may take care of accounting issues, shipping errors, product shortages, defects and other customer-related concerns. It is often the distributor's responsibility to replace products with active warranties or those damaged in shipping processes.
How to become a distributor
Becoming a distributor can be a highly rewarding venture full of profitable opportunities. The exact path you should take to become a distributor will depend on what industry you're interested in, where you live and how much funding you have to invest in starting a business. With this, though, there are few essential steps you can follow to establish the basis for your distribution career. Here are six steps you can take toward becoming a distributor:
1. Identify your industry
The first step to becoming a distributor is identifying the industry you'd like to serve. Prior to establishing your business, you'll need to decide what you'll sell and who your customers will be, as distributors typically specialize in a particular industry or sell products to specific consumer bases.
You should try to decide what product market you're interested in—you can choose any industry, from technological products to restaurant wholesale. In order to make your decision easier, research different industries and the products sold within them. This research can help you find information about openings for distributors, potential profit margins and projected industry growth. Such information can be vital in making an informed decision and building a business prepared for growth.
2. Register your business legally
To operate as a distributor, you will need to register your business legally. You may need to acquire licensing or other registration depending on the state your business is located in. In order to ensure you're in compliance with local business regulations, contact your local government center for business licensing and ask for information about the procedures for registering as a new distribution business. They will provide you with all the necessary applications and components for registering your company legally.
This is an important step as maintaining legal compliance with local regulations can help you avoid discrepancies in the future. In addition, some of the manufacturers and buyers you'll interact with as a distributor will require you to provide documentation of your business license, resale tax certificate or other federal identification items prior to working with you.
3. Seek suppliers and manufacturers
Once you've established your distribution business as a legal entity, you should begin researching potential suppliers and manufacturers that handle the products you're interested in distributing. You can often find information about becoming a product distributor on a manufacturer's website or by contacting them directly. Some manufacturers prefer to sell their products through exclusive distribution agreements, while others work with independent distributors that sell products from various manufacturers.
Since there's a large array of manufacturers out there to choose from and various types of distribution agreements, it's a good idea to gather as much information as possible prior to committing to working with suppliers and manufacturers. You'll want to focus your energy on courting suppliers and manufacturers who can offer you a mutually beneficial partnership. Detailed information can help you make decisions about these relationships.
4. Plan your logistics
An important part of starting a business operation is planning logistics accordingly. You should start with identifying your budgetary capacities through financial calculations. This will help you get a better idea about how much money you can invest in hiring other employees and buying products. From here, try locating a warehouse to store the products you're looking to distribute and draft a plan for how your business will function.
In the draft of your business plan, you should include basic information about transportation, shipping, customer support infrastructure and accounting matters. This plan will be incredibly helpful in getting your distribution business started. You can build more complexity and strategy into these processes as you develop your business around the type of manufacturers and suppliers you create partnerships with.
5. Apply as a distributor
Once you identify potential manufacturers and suppliers, you should apply to be a distributor with them. Each company will have its unique application processes, but nearly all suppliers will ask you to go through an application process to see if you'll be a good fit for them as a distributor of their products. These processes may require in-person meetings, tours of facilities, analysis of financial statements, providing proof of letters of credit from your financial institution and other steps.
If you're accepted as a distributor, you can start the tangible work of moving products from suppliers to buyers. It's important to note, though, that some suppliers, especially larger ones, may first enroll you in their robust distributor training programs. They design these programs to help distributors develop the knowledge necessary to sell their products effectively.
6. Build relationships
As you design your business' operations around the partnerships you've created with suppliers and buyers, you should work purposefully to build trustful working relationships with them. These relationships are a key part of maintaining a healthy distribution business, as manufacturers ensure a steady supply of product while buyers ensure a steady flow of sales. These entities will help you develop a profitable business model and grow as a company.
Therefore, you should identify a point of contact at all of the companies you interact with—these individuals can help you efficiently navigate manufacturing and buying processes. They'll be familiar with the culture of their workplace, and this can be incredibly useful while managing a distribution business. In addition, they can keep you informed about product details so that you may provide effective customer support.
Salary and job outlook
Distribution is a promising and stable career field that is expected to grow as the markets for e-commerce and deliverable consumer products expand. According to the U.S. Bureau of Labor Statistics (BLS), the field of transportation, storage and distribution is projected to grow 4% in employment over the next 10 years from 2019 to 2029. Further, while the exact salaries of distributors varies depending on the size of their business and the type of industry they serve, the average national salary of distributors is $13.53 per hour with the potential for an average commission of $17,500 per year based on the success of sales operations.
Related: Guide To Distribution Channels
Skills for a distributor
There are a variety of skills that can be useful when working as a distributor. Depending on your specific industry and the size of your business, the exact skills you'll need to succeed as a distributor will vary. Despite this, there are a few fundamental skills you should focus on developing as you start your new career that may help you enter the field of distribution more easily. These skills include:
Sales skills: Since distributors primarily handle the sale of goods and products to buyers like retailers, merchants and other businesses, they should possess excellent sales skills. These sales create the profit behind distribution businesses. Therefore, it's important for distributors to develop skills that can help them understand their buyers' needs, the type of products they're selling and how they can effectively engage their buyers.
Interpersonal skills: Distributors should develop the strong interpersonal skills that typically accompany the sales skills mentioned above. From cold calling buyers to establishing relationships with manufacturers, distributors must use their interpersonal skills to create trustful business partnerships. These skills are particularly important as secure partnerships are vital component in building a successful distribution business.
Negotiation skills: Many successful distributors are able to strike lucrative deals with manufacturers and buyers alike. In order to turn a profit, you'll want to be able to negotiate purchasing and sales agreements that benefit your bottom line. Therefore, developing a strong base of negotiation skills can help you in the long term as a distributor.
Operational skills: Most distributors will need the operational skills necessary for running a business. These operational skills can help distributors manage employees, logistics, budgetary matters, customer service and other key components of maintaining a company. When companies grow, employees may undertake these responsibilities, but in the beginning, a distributor will be responsible for these duties.
Research skills: Distributors must stay up to date on the trends of their particular industries. Therefore, it's important for distributors to hone their research skills so that they can predict what products market trends will favor. Developing a keen sense for making these predictions can help distributors find relevant, salable products and stay on top of their industries.
Communication skills: Since distributors interface with manufacturers and buyers on a regular basis, developing the skills to communicate effectively can be helpful. These vital skills will come into play in nearly all aspects of managing a distribution business, including sales, negotiation and operations. Therefore, distributors can benefit greatly from establishing a sturdy base of communication skills.
Jobs similar to a distributor
If you're thinking of becoming a distributor, there are various related careers you can consider in your job search. Here's a list of 10 jobs similar to a distributor:
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