Distributor: Overview, definition and example
What is a distributor?
A distributor is a business or individual that buys products from a manufacturer or supplier and then resells them to retailers, other businesses, or customers. Distributors act as middlemen, helping manufacturers get their products to the market efficiently by handling logistics, warehousing, and sales.
For example, a beverage company might sell its drinks to a distributor, who then supplies them to grocery stores and restaurants.
Why is a distributor important?
Distributors are important because they help manufacturers expand their reach without having to sell directly to every retailer or customer. They provide expertise in local markets, streamline supply chains, and often offer services like inventory management and customer support. For retailers, working with a distributor simplifies purchasing by consolidating orders from multiple manufacturers into a single source.
In business contracts, clearly defining the role and responsibilities of a distributor ensures both parties understand their obligations and avoids disputes over pricing, territory, or exclusivity.
Understanding distributors through an example
Imagine a tech manufacturer that produces computer accessories like keyboards and mice. Instead of selling directly to individual stores, the company partners with a distributor. The distributor buys the products in bulk, stores them in their warehouses, and sells them to electronics retailers across the region. This allows the manufacturer to focus on production while the distributor handles sales and distribution.
In another example, a skincare brand uses a distributor to launch its products in international markets. The distributor manages local regulations, marketing, and retail partnerships, helping the brand establish a presence without directly setting up operations overseas.
An example of a distributor clause
Here’s how a distributor clause might look in a contract:
“The Distributor is authorized to purchase Products from the Manufacturer for resale within the Territory outlined in Schedule A. The Distributor shall be responsible for all marketing, sales, and distribution activities within the Territory and shall not sell Products outside the agreed Territory without prior written consent.”
Conclusion
A distributor acts as the link between manufacturers and the market, ensuring that products reach retailers and customers efficiently. They play a critical role in supply chains by handling logistics, sales, and local market expertise.
By understanding the role of distributors and clearly defining terms in agreements, businesses can build effective partnerships that maximize market reach while minimizing operational burdens. It’s a key relationship in scaling and growing a business.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.