B2B product · B2B sales

What to consider before selling to distributors?

James Pagni Owner at CeramicSmokeware.com

January 26th, 2017

In two weeks I am going to a trade show (my 4th show selling my niche product). I have never worked with distributors but I believe that if I really want to push my product to a larger audience then selling to a distributor will be the way to go. I have sold to one distributor but it was for their shops to see how my product sells (should I call these shops to see how they sold and then call the distributor to schedule a meet up at the show? Assuming that they sold). So what advice do you have when considering selling to distributors? What am I in for? Should I start with one or try my options? Anything will help, Thanks james

Mark Todd Global Sales,Distribution and Luxury Brand Management at MPower, Prarie Boys,Selfie Tan, AIr Motion and TOO

Last updated on January 26th, 2017

Hi James,

Distribution can really accelerate your business.

Key points first:

1. Vet potential distributors through other contacts and always have them complete a distributor profile form which includes commercial data, turnover, brand history, current brands sold, possible competitor conflict, client data and churn rate, payment history and credit profile.

Seek references if possible.

2. Don't agree exclusive rights in the first instance and never give away a major market as sole representative in the initial stages. If the distributor performance indicates significant growth and long term opportunities arise through a clear strategic path and approach by them territorial rights can be extended or granted.

3. Ensure a price harmonised sales model for all markets including any permitted discounts, promotions, and recommended retail price.

This helps protect against any illicit sales or cross border diversion.

4. Set clear parameters for any marketing, advertising , web or social network representation.. You need to create an asset library with guidelines of use and rights of use.

5. Agree a contract based on a probationary period to test the market followed by a term agreement against an assigned target for year 1-3 normally.

6. Never agree to credit terms for the first 3 months until the probationary period has lapsed and you see progress.

100% payment on order.

After 3 months 50% on order followed by 30-60 days for balance.

Never release stock on a new order until any balance is settled.

7. Agree shipping terms, method and conditions.

E.g Ex Works

8. Make sure your products are market and country compliant for export. Once at the port of destination many distributors manage any additional requirements needed.

9. Make sure you can fulfill any orders and quotas, always keep reserve inventory and be aware of the timeline for replenishment.

Hope this helps, these are just a few key points to note.

Remember that distribution is all about partnership so communication is critical, form a solid relationship and grow together. Keep in constant contact and request frequent updates.

Remember that's it's your football and you kick it where you like.

ps: not a big fan of discount.

Offer a retro based on target or over achievement of plan tends to be a good incentive and offer the retro in product not cash.

You could offer a small discount for on time or early payment.

Good luck.

Alan Sack Founding member of SACK IP Law p.c., Intellectual Property Law and related Matters.

Last updated on January 27th, 2017

James you received great advice from Todd. I look at selling to distributors from the eyes of an IP attorney. You should make sure you consider and nail down the following:

1. Clear your brand and logo before marketing and distribution are started. Remember, trademark rights are national and sometimes international in scope. So just because you may have cleared your company name for state registration, doesn't mean that you have the rights to market under your brand. I typically recommend that a full trademark search is ordered from a reputable vendor, and that you have an experienced Trademark Attorney then clear your brand for marketing and for federal Trademark Registration in advance of any sales or marketing.

2. Once your brand has been cleared, have trademark applications filed for registration of the brand and your logo in the US Patent and Trademark Office.

3. Make sure that your product is clear for sales and/or importation. That may involve a patent search and potentially analysis of applicable copyrights.

4. If your product or artwork is unique and proprietary, have patent, design patent and/or copyright applications filed, before you start marketing and sales activities.

5. Make sure you enter into a written agreement with the distributors making it clear that the Trademark and other IP rights belong to your company, and establishing guidelines on how your brand may or may not be used by the distributor(s)

I hope this information is helpful in launching your business.

James Pagni Owner at CeramicSmokeware.com

January 26th, 2017

Note I am capable of producing 500 pieces in a month but I can only discount 20% when selling bulk orders. What should I think about when doing distributor pricing as well?