Choosing an effective distributor for an export market is one of the most important decisions you will make. A poor choice can lock a business or product out of a market permanently.
The decision to appoint a distributor in a chosen market should always be made strategically, having considered all aspects of the opportunity. An exporting company may habitually work through distributors in other markets, but that doesn’t mean it’s necessarily the right choice in a new market.
The uppermost consideration for the exporter should always be the end user. We need to understand the nature of the market, how it operates and crucially, who our target customers are and how they behave. We live in a fast-changing world, and ways in which we buy and sell things are changing fast, as we can see from the decline of traditional retail outlets on the high street, for example.
A distributor can of course be invaluable in reaching target customers and securing sales, but there is also a very significant cost involved, as distributors will seek to achieve a suitable margin on the business they secure, which typically will be in the region of 40-50%. There are workable solutions in many cases.
When we are sure that a distributor is the most effective way to reach the end users, we need to consider the essential qualities that the distributor should have. This is also a consideration that should be made with the specifics of the market in mind, we shouldn’t just use the criteria we’ve used before. Typically, an effective distributor will be someone with a track record in our target market, with ongoing business relations with target end users, for example because they are supplying them with other products. From the distributor’s point of view, our products should be a natural extension to their range, and not conflict with competitive products.
If we have contact with end users, it can be useful to involve them in our choice. Asking contacts we already have to recommend a potential distributor can be a useful start. We can also find possible distributors from trade directories, trade show literature and other people’s websites. Not least, we should of course consider potential distributors who approach us. If nothing else, they are showing enthusiasm and a proactive approach, which are useful characteristics.
Just as we’d do when recruiting an employee, we should carefully consider what the ideal qualities of a distributor will be. Decide whether these are essential or just good to have, and write a distributor profile.
I would never appoint a distributor with firstly visiting the market, doing some independent research and meeting candidates in person.
I would never be afraid to approach potential distributors directly, and find that the best means of initial contact is still the telephone. Take time for candidates that you approach to consider your proposal, and provide them with the information they reasonably require, not least product samples if that’s feasible. Encourage him to discuss them with key customers, you will at least be getting some useful customer feedback if nothing else!
Having ‘warmed’ some candidates from a distance, prepare to visit the market. I would consider sending each candidate a short questionnaire about themselves for you to consider ahead of your meeting. This would cover crucial aspects of their business such as:
- Nature of the business
- Number of years in business
- Key products
- Target market
- Turnover history
- Number of employees
- Number of employees in sales roles
- Technical knowledge
- Ability to provide after sales service
- Company goals
Why they think they would be a successful distributor for my product(s)
Keep it short and simple. Not too many exporters seem to do this, but I think it’s a very reasonable request. One of the biggest challenges in working with distributors is getting them to respond to requests for information, even giving regular reports, so if a distributor is reluctant to provide you with some basic information at the start, I might take it as a sign that they probably won’t be the ideal candidate to work with.
Research the market as much as you can before you leave. Find out about the market size, number of potential customers, key competitors and any regulatory or cultural aspects that might affect the acceptability of the product or how it is sold. The idea is not to know more than our potential distributors, if we could do that, we probably wouldn’t need them! We need just enough knowledge to be able to judge if the candidate really knows their stuff.
Allow plenty of time for the visit. There is always pressure on export sales personnel to be productive, and the time spent seeking out a distributor is not likely to deliver any immediate results in terms of sales, but it’s important not to rush it. Travel independently and arrange your own hotels, but do take into account recommendations that your targets might be able to make. If possible, allow yourself at least two working days to explore the market before your first meeting. Use the time to check out competitors and their products.
Spread visits out as much as is feasible, I would recommend no more than two visits a day at this stage. It’s ideal to carry out the meeting at the candidate’s premises. Plan to arrive a little earlier than agreed. A little time in the waiting room or reception can help enormously to develop an impression of the business.
Always be prepared to answer a lot of questions about your business and products. It’s a good sign if the distributor has a lot to ask, it means they have thought very seriously about the opportunity. Be as open with them as you have asked them to be. A good relationship with a distributor is based on trust. There may be sensitive information you cannot or don’t want to divulge. If that’s the case then say so politely and explain why. Ensure that you are competent to demonstrate your products and answer technical questions etc. Remember the distributor is assessing you as well and wants to be confident that his potential supplier can provide the help he will need. If you don’t know the answer to a question, be honest and say so, but offer to follow up and do so as quickly as possible after the meeting.
Reserve judgement until you have met all potential candidates. Just as when recruiting an employee, the decision process is likely to be a mixture or objective and subjective observations. We need to be sure that we can develop a good working relationship with our chosen candidate, so impressions about the manner and attitude of a candidate can be just as important as hard facts.
It’s a good idea to discuss the final choice with colleagues, and perhaps with any existing contacts you have in the market, perhaps even with competitors if you have a trusting relationship with them. Seek to make a decision in a reasonable time, but if you are not sure, don’t hesitate to go back to the appropriate candidates with more questions.
Reaching a decision is of course just the start. Next, we will have to negotiate the terms of our agreement, prices, terms of business etc.
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