For many businesses, particularly manufacturers and producers, success overseas depends on finding and building strong partnerships with distributors. Here are our top tips, to help you do it right:
1) Take the initiative
Yes, it’s true that sometimes a distributor will make the first approach. They may be responding to your website (“We’re looking for distributors”), or have seen an ad you placed through some 3rd party service. They may even walk right up to your stand at a trade fair, and proposition you. However, in waiting for a response to your static presence you’re giving up control of the process and schedule. Such an approach might appear simple and cost-effective, but it rarely yields good results, and is often inefficient in the long-term. Instead, decide what you need and then go for it.
2) Be involved in research
Selecting the right distributor(s) for a market is a crucial strategic task. As an example, in the case of one UK business I’ve assisted, one country (China) accounts for more of their sales revenues than any other. So even though they sought specialist help with the process, they never disengaged from the process – and rightly so! A good researcher should work with senior management, allowing them to tune the criteria, identify interesting leads, and avoid blind alleys. That’s why we always take this collaborative approach to distributor searches.
3) Set smart criteria
Gut feel is useful (“do I like this person? Can we work with them?”), but it’s never enough to make a good choice. I like to create a spreadsheet with the new candidate distributors in rows, and at least 10 criteria in columns, so that I can score them as we go along. If a meeting or with the distributor is involved then “Gut feel” will be included as one of the criteria. The criteria are given weightings too, so that more important ones have a greater impact on the result. Keep your criteria “smart” as well - adjust them as you go along, add new ones as you get new ideas, play with the weightings, and so on.
4) Get ruthless
You may start with a long list of “potentials”, but that will often need to be whittled down to 4 or 5 strong candidates before you can start to engage with them properly. That’s because it’s hard to keep more than 5 in mind at one time. If, after face-to-face meetings and visits to their sites, you feel the shortlist is wrong, drop some candidates from it before replacing them with others.
5) Think 360°
You’re looking for a partner who will sell for you, and as such you may need to pitch your product to them, but don’t forget that they are also selling themselves to you – in other words, you are hearing a sales pitch also. So, don’t just consider what a candidate distributor say about themselves – what others say about them is probably far more important. Look for customer reviews, talk with their other suppliers, check their formal accreditations, and – if possible – ask your end-customers about them too.
6) Make your “due diligence” holistic
Think of the “due diligence” process as an all-round assessment process. By gathering and cross checking information about the candidate distributor from a number of sources, you will end up with a picture that has integrity, and that makes sense within their market context. Some information will be volunteered, but other parts gleaned from related businesses, retrieved by detailed document review (e.g. audited accounts, registration certificates), unearthed from court records, the media, country/industry reports, and so on. Obviously, not all of these require the distributor’s cooperation (or knowledge, even), though a few of them do. A good, holistic due diligence strategy will approach the distributor’s operations from many angles, gathering early that information that is public, and waiting until appropriate points in the relationship before requesting those that are confidential or commercially sensitive.[1]
7) Be practical about language
Though British SMEs have more linguistic resources at their disposal than ever before, not least among their own employees, the language of most supplier-distributor relationships is still English, and a high standard of spoken/written English will feature on their list of selection criteria. A relationship which relies on the language skills of just one team member (whether yours or your distributors) is at serious risk. But even if their English level is high, communication with you may still be a challenge for them. So, remembering that your aim in this relationship is a win-win, try to make communication as easy as possible, at the same time as you are trying to assess their capability to work with you in English. Do this by, for instance, sending questions, documents and presentations in advance, to allow time for preparation before meetings.
8) Window or wall?
If you want a distributor who will keep you at a distance from the market and end-customers, a “wall” to protect, then seek out one that is used to such an arrangement. But you if you want a new window into a market, direct end-customer engagement and a more transparent, participative distributor arrangement, look for clear evidence of that instead. Once again, don’t just take their word for it – look for hard evidence. Do they share customer names with you? Take other suppliers to meetings and trade shows? Are they open about end-pricing? Organisational culture is hard to change, and if the two of you are not a good match in this respect, best keep looking!
[1] For an excellent example of a holistic approach to international/cross-cultural due diligence, try Jeremy Gordon’s Risky Business in China – A Guide to Due Diligence (2014) Palgrave Macmillan, Basingstoke.
[Article originally written for, and published online in February 2018 by Chamber International]