What to Look for When Choosing a Distributor

When First Entering Markets

There are a number of steps companies can take when first entering markets to ensure that an adequate distributor is found as to avoid intermediary problems. The first step, of course, is to do the homework—i.e., research local distributors. A company should be sure to research the local market thoroughly before selecting a distributor. This process includes understanding the legal and regulatory environment, as well as the local culture and business practices. The company should then consider using a local partner, as working with a local partner can provide invaluable insights into the market and help the company navigate any potential challenges. Potential partners should be thoroughly vetted by conducting due diligence on their financials, business practices, and reputation; and terms and conditions should be clearly negotiated and set out with reference made to

specifying roles and responsibilities, pricing, and delivery schedules. Communication channels also need to be established to facilitate regular check-ins and updates. The company should also have a contingency plan in place, which is good risk management and would ensure that the company has access to other distributors as well for sourcing inventory should the need arise (Green & Kegan, 2020). Following these guidelines, a company can avoid distribution problems.

When selecting a local distributor, one of the most important steps is the evaluation/research phase of choosing a distributor (Arnold, 2000). The company should be very selective—and should be able to examine all distributor options to see which one will be best for the business. This step involves evaluating the distributor’s financial stability, which can be done by reviewing the firm’s balance sheet and annual report. But another way this can be done is by examining the company’s customer service record. This information can be obtained by talking to other businesses that have used the distributor’s services. It is also important to assess the company’s geographic reach. This will ensure that the distributor is able to provide coverage in the areas that are most important to one’s business. By considering these factors, one can be sure to that the most important first steps to select a local distributor that will best meet the needs of your business are taken (Green & Keegan, 2020).

Another recommendation Arnold (2000) makes that should figure into any guidelines on this matter is to “look for distributors capable of developing markets, rather than those with a few obvious customer contacts.” It is not necessarily always the best choice to go for a “market fit” distributor because such distributors may merely represent the status quo. Rather, a company should look at the distributor’s culture, values, and risk/reward scenarios. The goal is to find a distributor that will work well with the company and who can generate good sales. Local distributors are typically more invested in the success of the product than even the company might be, because it is the distributor’s reputation on the line. As such, they are often more willing to go the extra mile to ensure that the product is successful. In contrast, a large corporation that goes it alone may be more likely to cut corners in order to save costs. In effect, partnering with a local distributor is often the best way for a company to launch a new product in a new market because the distributor will have a good and meaningful ground game—and if it does not have a good and meaningful ground game, the company should steer clear of it and find a distributor that is willing to invest itself.

At the same time, the company should keep in mind that the local distributor is really like a marriage partner: this is going to be a long-term partnership, hopefully, and not just a market-entry opportunity. The long-term partnerships are the ones that often give the best success. That is why it is so important to be discerning up front: the company should make sure that the distributors share market and financial performance data (Arnold, 2000). And for the partnership to work, the company needs to retain control over marketing decisions. Just like in a marriage, the partners play certain roles, the distributor should be following the directives of the company when it comes to advertising and marketing choices. The marketing strategy is part of the company’s approach—the distributor is really there to get the product to the right places. Distributors may have great ideas when it comes to selling—but a company should not leave it entirely in the distributor’s hands (Arnold, 2000).