Understand the different roles these two entities play in a sustainable and active channel of partners.
If you're new to sales or channel management, the variety of terms may confuse you at first, so we've put together this quick "cheat sheet" to clarify the main differences between Distributors and Resellers, both instrumental for your Channel Strategy.
Let's start with Distributors:
Distributors are entities that sell B-to-B (Business-to-Business). Generally speaking, the distributor does not invoice the end client, instead, it offers products and services from selected vendors to a wide net of resellers.
From the many advantages of using a Distributor as part of your channel management strategy, we highlight the following:
The distributor is a channel and business accelerator, allowing vendors to reach more resellers faster, with less effort and resources.
Working through a distributor reduces financial risk since the vendor will invoice the distributor only, and it's the distributor who's responsible for invoicing the multiple resellers that are part of your channel network of partners. It's also up to the distributor (and not the vendor) to offer lines of credit to resellers or not.
Distributors also reduce administrative costs, as vendors don't need to worry about processing multiple orders for multiple resellers and instead can concentrate their efforts on working with only one entity - the distributor.
Last but not least, distributors can sometimes generate interesting "sales synergies", by cross-selling different solutions from different vendors, therefore generating an interesting cross-selling pipeline.
Resellers sell directly to end clients, so they work through a B-to-C business model (Business-to-Consumer). For clarity, resellers don't sell to other resellers.
Some of the benefits of working with resellers include:
The level of specialisation and technical expertise is normally higher in resellers than in distributors.
Resellers reach out directly to clients, which could speed up the sales life-cycle.
Resellers have valuable relationships, the know-how, and the background rapport to handle clients more easily and effectively. They are also more influential in decision-making, which can be crucial to close a business deal.
Finally, resellers can add their own managed services to increase the value of the product supplied by the vendor.
So in summary, distributors sell to a network of resellers and resellers sell directly to consumers.
Whether you use one or the other or decide to use both, will depend on your Channel strategy and the maturity of your products and channel network of partners.
For example, if you're new to a market, perhaps a distributor won't add much value initially, because you need references and get to the market fast, but as you sign resellers and those relationships start getting challenging to manage, it might be wise for you to recruit a distributor that can handle the administrative and financial side of things.
To help you draft a strong and solid Channel Strategy that generates good results, we've created this template that you can download for free below.
About the author
João Beato Esteves is the CEO of United Channels Consulting. He founded the company in 2017 after 20+ years of working in the IT and cybersecurity industries developing channels and leading sales teams for prominent companies such as Symantec and disruptive start-ups like Watchful Software.