Steps to Finding the Right Distributor
Successful exporters understand the value and importance of engaging in extensive and methodical due diligence before appointing a new distributor. Following a prescribed distributor search and selection methodology can reduce the risk of false starts and wasting resources on distributor terminations down the road.
In the Caribbean this is even more relevant due to the existence of close-knit business communities, a small distributor pool and the interconnectedness between many distributors and trade partners. For example; Massy Distribution and Massy Stores in Trinidad and Barbados, Grace Kennedy and HiLo in Jamaica, or CFL and Super J in St Lucia. Badly-executed distributor selection, management and termination with any one of the above distributors could lead to an FMCG exporter’s brand being locked out of powerful national supermarket chains.
Distributors have also become very meticulous in their search for new brands and supplier partnerships and are looking for companies and brands that apply stringent and proven methodologies to their distributor search, selection and management efforts as they see this as being essential for the long term success of the partnership. Below is my recommended approach for finding and selecting the best distribution partner in your target export market.
- Cast a wide net.
At the start establish a wide pool of potential distributors using as many information sources as possible. Some suggested sources are: Chamber of Commerce in the target export market; High Commissions and Embassies in your home market;
websites of local companies that export to your target market; local bankers with a branch network in your target export market; and existing distributors in the target export market
- Develop an “ideal distributor” profile.
The second step is to narrow down the pool by developing a checklist of criteria representative of an ideal distributor profile for your product. For example, if your product requires cold storage facilities and trucks this would be a key criteria to narrow down your pool or if your export objective is to sell to the traditional trade (mom and pop shops), it would help to narrow down your list to distributors with a large van sales infrastructure and national reach. Developing and applying this checklist approach results in a shorter and more targeted list of leads that meet your ideal distributor profile.
- Pre-qualify and prioritize.
Sending an email introducing the company, product and upcoming plans to travel to the market gives the lead advance notice and sets the context for you to follow up with a pre-qualification call where you can determine their level of interest and identify any conflicts of interest. For example, ask if the distributor already has a competing brand in their portfolio and if they do, ask them how do they see your brand fitting in. Sometimes a distributor may decline interest right off the bat and may even recommend another distributor not on your list.
Read More: Importing or Exporting? Read This.
- Prepare for the interview.
The next step is to prepare a complete list of questions for the meetings with the distributors that passed the screening and pre-qualification process. Some of the key areas to focus on are:
- Number of years in business
- Sales and distribution structure (sales and merchandising force, distribution fleet, warehouse space)
- Brands in their portfolio
- Advertising and promotional activities
- Channels serviced and number of customers serviced by channel
- Annual sales turnover in dollars or number of containers imported
Always set up the first meeting at the distributor’s office where you can get important clues and early answers to questions on your list. For example, most best-in-class FMCG distributors tend to display awards that they have won in their waiting area or will have small product displays of their most coveted brands there. You can also get a sense of the corporate culture based on how you are greeted at reception, who attends and participates at the meeting and if you are invited to tour the warehouse and offices after the meeting.
Read more: International Sales Agreements: 5 Things to Know
- Evaluate the trade.
Always visit the trade independently and prior to meeting with a potential distributor to better understand the structure of your product category in different distribution channels. For example, competing brands, SKU’s available, category shelf space, prices, packaging trends and promotional and advertising material. This also provides an opportunity to simultaneously evaluate how well the distributor’s brand portfolio is distributed and merchandised.
- Check references.
At the end of the process you should have a list of two or three qualified distributors. At this point it is advisable to request a list of supplier references in order to conduct background checks and to understand overall performance and payment history before making a final selection.
