Looking for a distributor? An insider's top tips on what they are looking for.
You want a distributor that matches your business ethics and have relationships with your desired retailers, however they need to make a profit and will expect you to be prepared to scale up and enter a contractual arrangement with them.
Before making contact, be prepared to answer these questions:
What are your product margins? More specifically, what is the wholesale price, the distributor price and your recommended retail price (RPP) & is GST included/to be added. Can you demonstrate a profit for everyone involved? If not, get in touch for assistance to develop your pricing strategy
What are your Trading Terms? Include minimum order quantity, payment terms and returns/credit policies for retailers. Also include details of returns policies for customers that you will support. Decide in advance if you have any flexibility on price/quantity/type of retailer etc.
What is the shelf life of your product? Does it need to be stored / transported in a particular way and, if so, how will you support that?
A distributor will also want to understand how well you are already established / positioned in the market:
Who currently sells the product(s)? They may want details of retailers, other distributors locally and interstate; and the quantity you are producing/delivering to gauge your capacity
What will be your ongoing sale arrangements direct to customers? None / online / at markets / bulk personal orders etc. Will you be selling at a different price point through any of these outlets? Overall the distributor may expect you to balance existing sales with future retail sales so that you are not in competition with your own product
Remember that distributors often want exclusivity and will ask for it! Know your financial bottom line and non negotiable items in advance before starting to negotiate a contract
A distributor will also expect you to provide marketing support still. Be prepared to discuss:
How you will support the products when in new retail outlets / any links to your direct sales
Any promotions/discounts that you can offer
Your social media / web presence and the messages you deliver through your brand will show your level of support for retailers (or competition with them)
Freight arrangements. Will your stock be held by you or the distributor / is freight included within the distributor price point or added on top for the retailer to pay / match back to the shelf life and storage requirements of your product.
And…. don’t forget the legalese. We strongly recommend you seek independent legal advice before signing any documents in relation to your business, from a commercial premises lease to a distribution contract. As our lawyer says: “if you don’t dictate terms, be prepared to abide by others’”.
After working through this checklist, tidy all your information into a pitch - a high level presentation that you talk to when meeting with potential distributors. If the initial meeting goes well, then you can follow up with your product details and trading term information.
It’s a lot to prepare - if you need assistance answering these questions, preparing your pitch or finding distributors that match your product, get in touch for a strategic coaching session.
*Thanks to 3 Hungry Monkeys for sharing these tips