From our book: “Successful exporting – negotiating the dangers of the deep”.
“DD” – Deep Diver – pressures you throughout the book with the most challenging in-depth questions.
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You may be naturally drawn to appointing distributors as your principal channels because they are arguably perceived on the surface to be the cheapest and easiest route to your uncharted territories. You consider recruiting a distributor on the basis of their known access to these markets, and the fact that they have an existing organisation with a solid reputation. You assume that they will undertake most of the required investment because you are offering them generous trading discounts.
A distributorship is basically another business like yours. They have similar core behaviours, expectations and challenges. Nevertheless, the distributor margin imposes an extra cost layer on your products or services. The reality is that distributors need to earn enough to cover their own commercial structure such as offices, sales teams, showroom, warehouse, online sales function etc. and they need to make a respectable profit.
However, there may be valuable major accounts in the territory that you would wish to target and which you may be prevented from accessing via your distributor because of the various layers of profit margin required by all parties.
Distributors will usually have a portfolio of other brands and products complementary to yours, which is why you may be considering appointing them in the first place. Naturally, your chosen distributor needs to be enthusiastic about your products and services and see where they fit in to their overall offering.
This brings up the inevitable dilemma of providing samples. Your distributors may well expect samples of your complete range on the basis of “no samples – no sales”. Even when they are prepared to pay for them, if your samples are limited, you will have to manage distributors’ expectations stringently from the outset.
Remember also that your distributors will own your customers. They will be taking the orders, buying the stock, servicing consumers, collecting payments and will be totally responsible for paying you. In the interests of a distributor’s self-preservation, your access to genuine real time market intelligence, product feedback and trends, knowledge of customers’ profiles, contact details and preferences, competitors and hidden opportunities may be denied to you or at best distorted through the poor visibility of cloudy, dark or swirling waters.
In some territories, distributors may not exist or will be limited. There may be very few prospects who could agree to be your distributors in underdeveloped countries, e.g. Africa, or where the cultural or political environment has not previously allowed the growth of private businesses, e.g. China or Russia, or where the population is too small, e.g. Iceland or Fiji.
In the final analysis, where your expectations of a distributor’s investment and involvement do not match theirs, they may feel marginalised and not fully honour what you understand has been agreed between you.
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