Agents Or Distributors, Which Is Best For You?
Which is the best for you, agents or distributors? In this article, we weigh up the advantages and drawbacks of distributors and compare the group to agents. Previously, we brought you the things to know about agents, now we focus on the second part of this series by focusing on distributors. Read on to discover our analysis on the two options and to determine which is the best option for your company.
Distributors
The relationship with a distributor is slightly more hard-edged than with an agent. Essentially you sell the product to the distributor at a given price, often ‘ex works’, so they often collect at your factory gates. The distributors sell and market the product to their existing customers as they see fit.
As the distributor is taking title to the goods, there are no import taxes or tariffs for you to directly pay, although will have been taken into account by the distributor. So you indirectly pay either in the percentage or fixed retainer that you agree, or in reduced sales as distributors mark up the price of the product to cover any taxes. Cultural fit between a brand and distributor is important. A poor fit may well mean you have a partner focused on making a quick buck and a brand interested in the long term, or vice versa. Below, we breakdown some pros and five cons of distributors.
Advantages Of Distributors
- As you’re very often paid on delivery (and in advance of the eventual product sales) there’s a definite cash flow benefit.
- The onus is on the distributor to find the customers.
- You’ll not incur any premises costs for warehousing, logistics or a sales team.
- From a risk perspective, the distributor retains the financial risk of the stock.
- Expertise in the right FMCG product categories are a given, with distributors enjoying top-notch commercial connections. The result? It’s far easier to secure appointments and make the sales.
Disadvantages Of Distributors
- With the adage that you ‘can’t sell what you don’t own’ being true, brands need commercial partners who are enthusiastic about their products. If your commercial partners aren’t genuinely passionate about your products, rather than just people going through the motions, your brand will suffer
- Trust needs to exist between the parties and ways of working need to evolve so that decisions can be made quickly.
- Some distributors will try and push financial risk back to you by insisting on a ‘sale or return’ basis.
- If communication isn’t great with your distributor or they don’t have the same commitment as you, you may miss out on a promotion or listing slot.
Picking The Right Partner
There are so many variables that we find it’s rarely the case that there’s a ‘one size fits all’ solution to the agent versus distributor question. Pick the right partner and there will be many years of mutually profitable growth ahead. Pick the wrong partner and frustration, dashed hopes, lost sales and excruciating financial pain lies on your path.
Suffering From The Agent Versus Distributor Dilemma?
In 2015 alone we helped over 20 international companies successfully unlock sales in European markets, so it’s safe to say that we know our stuff. To successfully protect and grow your brand in export markets it’s vital you have access to expert advice.
As a reader of this blog you automatically qualify for a free 30-minute consultation with our FMCG consultants. To arrange this, call 01803 203387 or email hamish@hra-global.com
