Vendor: Definition, How It Works, Types, and Examples

What is a vendor?

A vendor is an individual or business that sells goods or services to other parties. Vendors appear at multiple points in the supply chain — from manufacturers and wholesalers to retailers and service providers — and are paid for the products or services they provide.

Key points:
* Vendors sell goods or services to businesses or consumers.
* They can operate at different stages of the supply chain.
* Vendors include manufacturers, wholesalers, retailers, and service providers.

How vendors work

Vendors acquire or produce goods or services, market them, and sell to customers using whatever channels suit their business (e.g., storefronts, online marketplaces, food trucks, B2B sales). The supply chain begins with raw materials and ends with final delivery to the consumer; vendors can occupy many roles along that chain.

Because each link in the supply chain adds cost, some businesses minimize links by buying directly from certain vendors or by serving multiple supply-chain roles themselves. Also note: most jurisdictions require vendors to hold appropriate licenses or permits.

Types of vendors

Broadly, vendors fit into four categories:

• Manufacturer — Converts raw materials into finished products and often sells to wholesalers or retailers.
• Wholesaler — Buys in bulk and resells to retailers (sometimes to end consumers as wholesaler-retailers).
• Retailer — Purchases products from other vendors and sells directly to consumers.
• Service provider — Offers services (e.g., catering, event planning, IT, maintenance) rather than physical products.

Business-to-business (B2B) vendors

B2B vendors sell parts, components, or services to other businesses that use them to produce end products or run operations. A small manufacturer, for example, might source components from multiple B2B vendors and then sell finished goods through retail channels, becoming a vendor themselves.

Vendor vs. supplier

The terms are often used interchangeably, but there’s a practical distinction:
* Supplier — Typically provides raw materials or inputs early in the supply chain.
* Vendor — Usually sells finished goods or services to businesses or consumers and may operate later in the chain.

A supplier can be a vendor if it also resells finished products; conversely, a vendor may source from suppliers.

Vendor reconciliation

Vendor reconciliation is the process of matching a company’s accounts payable and payment records against vendor invoices and bank statements. It verifies that amounts owed and paid are accurate, helps detect errors or fraud, and supports healthy vendor relationships.

Examples

• Event services: A company planning a large employee party might contract a venue owner, decorators, and caterers — each becomes a vendor when contracted to provide goods or services.
• Technology: Amazon acts as a vendor both as an online retailer and as a provider of cloud services (Amazon Web Services), offering hosting and infrastructure businesses often cannot afford to build themselves.
• Small-scale: A food truck that buys ingredients, prepares menu items, and sells them directly to customers is a vendor operating at the retail and service level.

Bottom line

Vendors are essential participants in commerce who sell goods or services across various stages of the supply chain. They range from one-person operations to multinational firms and can be more cost-effective than buying directly from upstream suppliers, depending on the business model and scale.