This article is a campaign against what we have seen a couple of times: A small business is approached online by an overseas distributor. So happy to potentially start exporting, the small business signs up the distributor straight away! It is a very common mistake. My message is BE PICKY! Don’t be scared to be choosy even though you are a small business. You will actually been seen by overseas buyers as a very professional company, if you explain to potential distributors that you are evaluating several distributors in the market before making a decision. They will rather think that you know what you are doing. And it creates a very sane competitive tension in the market.
It may sound basic, but make sure you evaluate potential distributors thoroughly before signing them up. Sometimes small businesses get so excited to get contacted by a European distributor that they even forget to assess them before even starting to negotiate with them.
As a technology company, in advanced manufacturing for example, you first need to think how you would like your product to be sold.
The common point I see among my tech clients, is that they need a European distributor that is going to make the effort to demonstrate their product, set-up trials, collect feedback and push the sale.
What is also critical is that they share plenty of feedback from the field with you.
Another common trait from successful clients is that they continuously develop products based on their customer’s feedback and they use this feedback to prioritise projects, based on volume forecasts.
Your future distributors need to target first the clients that you are looking for. They should be aligned. Be very clear on which segment you have the most success with in your local market : should your distributor target a network of dealers or sell to large accounts?or to SMEs?
After that, you need to define what type of after sales support will they provide to you? Is it just a level one support or more? Which process will be established for this support?
The other important point is what marketing tools are they going to use to promote your products? Does it fit with your company’s marketing strategy or ideas? You need to ask them for their reach and the type of marketing campaign they undertake: do they attend fairs? Do they have an aggressive online presence? In which magazine do they advertise?
Another major item to evaluate, is the mark-up structure. How many layers of mark-up will there be: Wholesaler/Dealer/Consumer or Distributor Consumer? How much mark-up does each “layer” expect? Then where do you sit in comparison to your Recommended Retail Price (RRP).
If you are working with a large retailer/distributor ask them for their suppliers’ conditions and clarify if any financial contribution will be asked later down the track (end of year discount, contribution to a catalogue…). It is important to take this information into account in your pricing.
Another information, that you should be aware of, is the profile of the distributors’ sales representatives. What is their background? Are they technically educated or more marketing focused trained? Don’t hesitate to ask how they are paid: on sales? on margin? on profit?
A very crucial point as well is the volume of the product assortment of your distributor. You really need to choose between being one product among a limited number of other products or are you going to be in a massive catalogue. It comes down to choose the size of your distributor, is a small distributor good for you or rather a large national distributor? It’s critical to really choose this, because in terms of speed to market it is very different. You may need a quick entry into the market with a small distributor, if you need export sales rapidly
This is a long list of criteria for you to choose from, they will be applicable in a lot of cases. Evaluating your potential future distributors will increase your chances of success. The cost of engaging the wrong distributor is high for a small business. SMEs can’t afford to have no return. For us at Exportia choosing the most suitable distributor is also critical, because our clients need a return on investment from our services.
All the best for your selection of the best distributor for you, if you have any questions please contact me on the exportia website.