How to compete with your product in the global economy? How can you manage product distribution from a few thousand miles away? How does one keep up with the competition?
International distribution strategy
There are three ways to set-up global distribution of your products:
- International departments. Setting up international departments means that your brand will directly enter another country’s market. This gives you complete control on distribution, but elements like personnel, training, compensation and cultural background should be considered.
- Working with distributors. Export management companies and export consultants can arrange your product distribution in foreign areas. Distributors with experience in shipping and importing have the fastest and easiest procedures when it comes to selling in the foreign markets. These companies help in establishing your company overseas by exclusively handling the distribution of your products.
- Online. Export has entered the internet and is now utilising online tools to send out products into the world. This has threatened certain foreign distributors, in fear of their services becoming obsolete within the global market. Although internet may take over the sales function, promotion and shipping continue to stay offline to a large extent. Local distribution partners may play a role in this.
International departments: setting up your own sales force
This often is the most expensive way of market entry, and may not be viable for companies who only expect to sell limited volumes in the target country. It gives the most control on operations, but you need to make sure that at least your sales staff is local, otherwise you may face cultural differences.
There is always a lead time, mostly of about a year before your international department starts generating revenue. First you should incorporate the company, hire an office, hire staff, and only after their training you can start with the first sales cycles.
International distribution channels: how to find and manage them?
Finding a good foreign distributor takes time and funds, but an efficient foreign distributor could bring in revenue in a fast and steady manner.
To get your desired distributor or retail distribution chain, you will need a clear product offering and convincing arguments why a distributor would benefit from promoting it. How will your product range bring him more profit than what he already has on the shelves? On the other hand, you will have to check whether the distributor has enough reach and a good reputation.
Here are some more items for your evaluation checklist to identify the right distributor:
- You must first look into the company’s reputation – both its recent and long-running issues must be carefully scrutinised.
- The company’s competitive profiles would come next. How they stand against other foreign competitors and local favorites will provide you with an insight to their performance.
- You must weigh the expectations of the company on your distribution support. Avoid picking foreign distributors whose demands outweighs their services.
- Discussion of requirements for minimum inventory is also considered as an evaluator. Foreign distributors will display their best performance, and it’s up to you to make them prove their capacity. Choose a distributor that could work around the limitations of your inventory.
When evaluating the candidates for your distribution, keep in mind how well they realise your goals for sales revenue for their country. Perhaps you should not promise exclusivity and work with multiple distributors.
Online sales: often the cheapest way to test the market
Making use of local online platforms can be a good way to make your market entry. This way with limited investments you can try out the market.
Step 1: use a drop shipping approach
Make sure that your product is available on the right local platforms and in the right language. As soon as you get an order, you can ship the product directly to the end-customer. The right service provider can do this for you, and also respond in the local language on any enquiries, requests or claims.
Step 2: add local shipping
If volumes increase and become more predictable, you can make your product more attractive by sending stock to to the country, so that you can offer shorter delivery times. Local fulfilment parties can import your goods, keep your stock, and package and ship your products on demand. This way you will save on shipping costs, and increase your margins, at least if you have the volumes to overcome the monthly costs for storage and financing of your local stock.
Step 3: add offline
For a number of products it is useful to have offline sales outlets as well, if only for your customers to touch, feel and try out your products. If the online sales of your product becomes substantial, it will also become less risky for retailers to start distributing. Alliance experts knows the market, can easily select the right retail chains and approach the most relevant distributors. Read more about our matchmaking services.
Export distribution strategy
Distributors are like employees and customers in one. They represent your company and sell your items like an employee while having extremely demanding requirements of a customer. Some international distributors focus more on the business with regard to sales rather than technical service.
Difficult technical problems are usually handled by suppliers while trivial technical issues and support are covered by the distributor. Ideally, there should be a good rapport between the distributor and the supplier to optimize distributor performance.
An important factor in the relationship is the distributor margin. You will have to see what a reasonable retail price is, and which part of the margin between the retail price and your cost price you should give away to the distributor (and possibly retailer). Balancing these margins will also help balancing the relationship.
Always be aware on which way the dependency works: is the distributor dependent on you or are you dependent on the distributor. Especially where it comes to large scale retail chains and supermarkets you may have to pay first to get your product on the shelves: listing fees or slotting fees.
Channel conflicts and management
If you use your own sales force, distributors and online sales in combination, then you may get channel conflicts. Your distributor may feel uncomfortable if sales is moving to online, especially if he has put in a lot of effort to open the market. This requires good financial agreements but also a good relationship with your distributor.
Here are a few steps in ensuring a smooth supplier and distributor bond:
- By sharing your vision, practices, and resources with your distributors, you can create a link of trust that could harmonize mutual benefits. This could also keep your distributors interested in the kinds of service you will offer to them.
- You should be willing to help your distributor’s business succeed in their endeavors. To achieve this, you should know your distributor’s company like the back of your hand to create an impact on your trade relationship. In this way, you’ve also garnered their respect for your company and their sincere assistance to help you reach your ultimate goals.
- Feedback from end customers is essential in creating a harmonious relationship between you and your distributors. Feedback can call out service or item incidence regarding your items. As a supplier, this feedback could improve your service and items, which in turn, increase the sales and positive image of your distributors.
- For your international distributors, it is necessary to learn about the culture and traditions of your distributor to avoid being intrusive or seem dictatorial to them.
Distributors are partners. As a manufacturer, you should learn to treat them with respect the way you would treat your own employees. Distribution, especially international, is a specialized function that requires great expertise.