Vendor Explained 2025: Types, Examples, and Pricing Insights

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What Is a Vendor in 2024?

A vendor is an essential participant in the supply chain responsible for providing goods or services to businesses or consumers. Unlike manufacturers who produce items, vendors typically refer to those who sell or distribute these goods, although some vendors may also manufacture products themselves.

Key Insights

• A vendor broadly refers to anyone involved in the buying and selling of goods or services.
• Vendors source products or services and resell them to other businesses or end consumers.
• Major retailers like Target depend on multiple vendors, purchasing at wholesale rates and selling at retail prices.
• Manufacturers can act as vendors by supplying finished products to wholesalers or retailers.

How Do Vendors Operate?

Also known as suppliers, vendors acquire goods or services from various sources and sell them through channels that suit their business model. For example, a food truck vendor procures ingredients, prepares menu items, and then sells directly to customers in target locations.

Vendors and Large Retailers

Retail giants such as Walmart and Target maintain extensive vendor networks to source inventory at wholesale prices. Vendors supplying these stores usually operate on a larger scale to meet volume and contract requirements.

B2B Vendor Dynamics

Many vendors specialize in business-to-business sales, providing components or services that other businesses use to create final products. For instance, a company manufacturing widgets might rely on multiple vendors to supply various parts.

These manufacturers may also become vendors themselves by selling their finished products on online retail platforms.

Service Vendors

Vendors are not limited to physical goods; many provide essential services. For example, a company’s HR department organizing a holiday event may contract with vendors for venue rental, decorations, and catering services, each becoming a vendor upon agreement.

Important Note

Most states require vendors to obtain licenses before operating. If you plan to become a vendor or hire one, verify the licensing requirements with your local authorities.

Common Types of Vendors

Vendors typically fall into one or more of these four categories:

• Manufacturer: Converts raw materials into finished products sold to wholesalers or retailers.
• Retailer: Purchases goods from vendors and sells directly to consumers, e.g., Target.
• Wholesaler: Buys in bulk from manufacturers and sells to retailers or sometimes directly to consumers.
• Service Provider: Offers various services to businesses and individuals.

Vendors in the Supply Chain

Vendors are key players throughout the supply chain, which encompasses all activities and entities involved in producing and delivering a product or service. The supply chain begins with raw materials and ends with the final consumer purchase.

Businesses strive to streamline the supply chain to reduce costs, as each additional link typically adds to the final price. Utilizing vendors can bypass some links, offering cost advantages over traditional supply chain models.

Vendor vs. Supplier

While suppliers are typically the originators in the supply chain, producing or sourcing raw materials, vendors purchase from suppliers and resell to customers or other businesses.

Vendor Example in 2024

Amazon exemplifies a modern vendor by operating both as an online retailer and a service provider offering web hosting, cloud storage, and other business services, enabling smaller companies to access expensive infrastructure affordably.

Summary

Vendors are entities that procure goods or services and resell them to other businesses or consumers. They play a vital role across various industries by offering cost-effective alternatives to direct supplier purchases. Vendors range from small independent sellers to large-scale enterprises serving warehouse retailers.

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