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What is a Vendor?

Last updated 03/15/2024 by

Camilla Smoot

Edited by

Fact checked by

Summary:
Vendors are any individual or company that sells goods or services to another individual, business, or government. Vendors are crucial to a business’s supply chain and overall success. Maintenance providers, retailers, and small business owners are all examples of vendors.
An important part of running a business is vendors. But vendors are not something many people think, or even know, about. Small businesses and large corporations alike rely heavily on vendors to ensure that their products are delivered on time and of good quality.
Since vendors are crucial to nearly every business and customer, we’ll explore the ins and outs of vendors in this article.

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What is a vendor?

A vendor refers to a person or company that sells goods or services directly to another person or company. Vendors are not always manufacturers and might not create the goods they sell. In some cases, vendors resell goods they purchased from another vendor at a price mark up.
The word “vendor” is a fairly broad term that encompasses consultants, contractors, suppliers, contract employees, and more. Businesses work with many different types of vendors to supply their customers with the necessary products.

Why are vendors important?

Vendors are essential to a business’s supply chain, including everything from producing to distributing goods or services. Without vendors, consumers would have a very difficult time accessing goods and services, and businesses would have a hard time providing necessary products to their customers.

How vendors work

You can think of this process as an economic production chain, where raw materials pass on from a supplier to a manufacturer. The manufacturer then provides the goods to a retailer or vendor. Though the pattern may change for some businesses, the following is a basic rundown of how buying from a vendor generally goes:
  1. The buyer makes purchase orders.
  2. The vendor delivers the goods or services to the buyer.
  3. Buyer receives an invoice from the vendor.
  4. Buyer pays the invoice to the vendor.
  5. Goods or services are sold by the buyer to other businesses or to the end-user.
For example, let’s say Company T manufactures furniture. Store L is a furniture store and fills out a purchase order to buy 20 chairs from Company T. Company T fulfills the order and delivers the chairs to Store L. Store L receives an invoice from Company T and pays them. Store L then sells the chairs to end-users at a slightly marked-up price.
If you have trouble paying for vendor invoices, your company may get the necessary help from a small business loan. Before agreeing to the terms, compare between lenders to ensure you’re getting the best deal for your business.

SuperMoney may receive compensation from some or all of the companies featured, and the order of results are influenced by advertising bids, with exception for mortgage and home lending related products. Learn more

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Types of vendors

Vendors could sell directly to the consumer, other businesses, or the government. Here’s a rundown of three different types of vendors and what they’re called:

Business-to-business

Business-to-business (also referred to as B2B) is a vendor who sells to other vendors. These transactions often involve products, where one company purchases goods or raw materials to be used in their own product.
However, some service providers exclusively market to other companies, such as industrial cleaning or property management. This would be an example of a B2B service provider.
Example:
Company X manufactures microchips, and Company Y manufactures computers. Since they do not produce microchips at their business, Company Y buys microchips from Company X. Because they are both vendors, this is a business to business transaction.

Business-to-consumer

A business-to-consumer (B2C) transaction occurs when the vendor sells directly to the consumer. This can include everything from a street vendor to a retail store. Since these vendors sell directly to the consumer, this transaction is known as an end-user service or product.
For instance, Store Z sells office supplies. Kristin goes into Store Z and purchases some pens. Because Kristin bought the pens for herself and will not sell them, she is an end-user, making this a business-to-consumer transaction.

Pro Tip

Online consultation businesses are a billion-dollar, business-to-consumer industry. If you’re interested in starting your own consulting business or wondering if it’s a good fit for you, check out SuperMoney’s four tips for starting an online consulting business.

Business-to-government

Business-to-government (B2G) is a vendor that sells to the government. The government relies on private sector vendors to provide them with necessary goods, such as weapons or defensive material, or services, including government consultation.
Let’s say the army purchases military aircrafts from Company B. Because Company B is a business and the army is with the government, this is a business-to-government transaction.

Examples of vendors

Here are some more specific examples of vendors that fall under the B2B, B2C, or B2G categories.
  • Independent vendor. Independent vendors sell goods or services directly to individual consumers. An example of this could be a massage therapist or various small businesses. Independent vendors are business-to-consumer vendors.
  • Manufacturer. Manufacturers create and develop goods from raw materials before selling them. This could be a company that fully creates car batteries or computers and sells them to other businesses. Manufacturers fall under the business-to-business category.
  • Maintenance and service provider. Companies that provide maintenance and services as a business are another form of vendor. A service or maintenance provider could do landscaping, cleaning, transportation, and more. These are considered business-to-consumer vendors.
  • Retailer. Retailers are individual companies that sell directly to consumers. Retailers often purchase goods from a wholesaler or manufacturers and mark up the price for the consumer. Because they sell to end-users, retailers are business-to-consumer vendors.
  • Wholesaler. Wholesalers are an example of business-to-business vendors. Wholesalers sell goods to other businesses, usually in large quantities for a less expensive price. Those businesses then sell those goods to consumers at a higher price.
Because the government can act as both a consumer and a business, many of the vendors discussed above could also be business-to-government vendors.

FAQs

What is the job of a vendor?

Vendors sell goods or services to stores, individual consumers, or businesses. Vendors are essential to the production, supply chain, and distribution of products.

Is a vendor the same as a supplier?

Vendors can be suppliers, but not all suppliers are vendors. Typically, suppliers sell raw materials to manufacturers, but it depends on the business and what they sell.

What’s the difference between a vender and a vendor?

Both vender and vendor have the same meaning, but “vendor” is considered the proper form of spelling.

Is a vendor an employee?

No, vendors are not employees. That being said, contract employees can be considered vendors, and contract employees can be very similar to employees. However, a contractor is not technically an employee.

Key Takeaways

  • A vendor is a business or individual who sells goods or services to another business or individual.
  • Vendors are crucial to the supply chain, distribution, and overall success of a business.
  • The three different types of vendors include business-to-business, business-to-consumer, and business-to-government.
  • Retailers, wholesalers, and service providers are examples of vendors.

Vendors in capital goods

Many vendors, such as Lockheed Martin and General Electric, are in the capital goods field. Many capital goods businesses are very large and have been around for a long time. To learn more about this field, check out SuperMoney’s article on jobs in capital goods and companies in the capital goods field

SuperMoney may receive compensation from some or all of the companies featured, and the order of results are influenced by advertising bids, with exception for mortgage and home lending related products. Learn more

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Camilla Smoot

Camilla has a background in journalism and business communications. She specializes in writing complex information in understandable ways. She has written on a variety of topics including money, science, personal finance, politics, and more. Her work has been published in the HuffPost, KSL.com, Deseret News, and more.

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