Learn what a merchant is, the varying types of merchants, and their role in direct-to-consumer (DTC) companies.
A merchant is a person or a company that sells goods or services. The merchant will sell products for a profit and facilitate the customer's buying journey. They can be an online retailer or a wholesaler and sell to any source, as long as they are selling for profit.
When shopping online, you often have a range of products available to you. Whether it's a large website, an online boutique shop, or a one-person online business, the person or business you purchase your items from is a merchant.
A merchant is anyone who sells goods or services for a profit. You are a merchant if you facilitate the customer journey by selling something and receiving funds in return.
A merchant is a seller in a sales transaction. The merchant has goods or services to sell and offers them to customers for a price. While a merchant will make purchase—for example, paying for production by a manufacturer—the person or entity is not considered the merchant during that transaction.
A merchant can either sell products and services to another business or directly to a customer. The type of merchant is defined by the buyer and the platform used to facilitate the transaction.
Retailers and wholesalers are two of the most common merchant types. In this digital age, new types of merchants have also emerged, such as ecommerce merchants and affiliate merchants.
Wholesale merchant
Typically, wholesalers or wholesale merchants buy goods in bulk and resell them to retailers in smaller quantities. Because wholesalers buy goods from manufacturers and resell them to retailers, they are both resellers and merchants—serving as a link between the producer and retailer.
Most wholesalers ship from large storage facilities, such as warehouses. Nowadays, wholesalers are also commonly used as brokers even though they do not actually handle the stock—a process known as dropshipping. They are considered an essential part of any market. In a business-to-business (B2B) model, wholesalers sell to suppliers. In a business-to-consumer (B2C) market, they serve as an intermediary in the customer journey.
Retail merchant
A retail merchant is commonly recognized as the person or business that a customer buys the product or good from in a transaction. The retail merchant acts as the intermediary between the manufacturer or wholesaler and the customer. Retail merchants do not create or manufacture any products. They are responsible for the sales process and reaching customers.
After receiving the product from a wholesale merchant, retailers will sell it again for a profit. These prices must be at a specific margin rate to ensure profitability. Wholesale prices are always lower than retail, but these products are often only available to consumers through retail channels.
Ecommerce merchant
An ecommerce merchant is strictly involved in the sales of goods online. They use online marketplace platforms like Amazon, eBay, Etsy, or their own websites to sell the goods.
The concept of an ecommerce merchant is relatively new in the sales space. It has gained popularity in the digital age, as it's often cheaper to run an ecommerce business than to have a physical storefront.
Affiliate merchant
An affiliate merchant uses a network of affiliates to help facilitate sales. They are usually not a part of the primary sales process and are hired by manufacturers or wholesalers to leverage their network and sell products to the retailers that will then sell to the end user. Affiliate merchants create profits by charging each account a membership fee and collecting commissions from successful sales.
A merchant sells goods directly to consumers through various distribution channels to earn a profit. Retailers are just one type of merchant in the sales world. They are the consumer-facing part of the supply chain and what most people recognize as the place from which they buy goods.
Large retailers can purchase goods in huge volumes from manufacturers or wholesalers—often at a considerable discount—giving them the ability to charge lower prices. Small, family-operated stores can buy from the same outlets or smaller vendors but may charge higher prices. Either way, retailers then sell those goods to the end customer at a markup price—the difference between the purchase price and resale price.
Many companies now assume the role of both retailers and manufacturers. For example, Apple is both a manufacturer and a retailer because it builds and sells its products through company-owned storefronts and online portals. A company like Best Buy is considered a retailer, as it sells a variety of products from different manufacturers but does not have any of its own products. Companies that manufacture goods eventually sold in stores first sell their products to wholesalers, who then distribute them to retailers like Best Buy.
Each type of merchant has its own strengths and place in the economy. The channel you choose to sell through and which part of the sales process you want to target will determine which type of merchant you will be.
Once you choose which type of merchant to be, getting your goods to the next channel is most important. Outsourcing logistics to a third-party logistics (3PL) provider will help you save time, lower operating costs, and ensure your customers are receiving their goods as expected. With the help of an order fulfillment provider like Airhouse, you can streamline fulfillment logistics, giving you more time to grow your business.
