Do you want the bad news or the good news first? It’s never been harder to find the right distribution partner in international markets, but it’s never been easier to find out background info on potential partners.
Finding the perfect partner for your distribution is effectively “distributor dating” as you need to invest time to get to know one another before committing to a relationship.
Whilst business travel is starting to strongly rebound, flights are expensive and delays are even more likely than pre-pandemic so making your distribution partner search a hybrid process is more important than ever.
At a push you can make the entire process virtual, however having at least one visit to the market in question will help you to better understand that market as well as to judge whether you really have found the best partner to represent your brand.
So let’s go through the steps to finding that perfect match…
Table of Contents
Are You a Good Fit For Each Other (at least on Paper)? Do you have an ideal distributor profile?
Do your desk research up front! Far too many companies appoint the first distributor who sends them an enquiry. This is an approach that can block your sales growth over many years to come (especially if you give them any kind of exclusivity).
Make sure that you take the time to do as much research as possible up front in order to reduce the chances of any nasty surprises later.
Check out their:
- Technical expertise
- Bandwidth and Focus
- Alignment of values and working style
- Ability and willingness to invest
If you are a small start up, you probably won’t be happy in the long term (even if you get as far as signing a contract) with a company who normally distributes P&G or Kraft Mondelez – you probably need a distribution partner closer to your own size, but still powerful enough to make an impact on the market.
Be proactive about seeking suitable candidates for your brand distribution. Use your ideal distributor profile to identify those companies who seem to be the best fit for you and approach them accordingly.
My recommendation would be that you search for at least 3 companies who would be interested to represent your products. It’s important at this stage that you also clearly communicate to them that you are discussing with other candidates – you don’t want anyone to be offended.
In order to reach that list of 3 short list candidates though, you may need to have “first coffee dates” with more companies.
What Do Distributors Want to Know?
Create a one page, fact-based company profile focused on “what distributors want to know” about your company and brand.
Export managers often send a whole host of info to potential distributors regarding the benefits of their products without actually addressing the questions which distributors are interested in having answered.
- What is your pricing strategy relative to competition?
- How much will you invest in promotion and media?
- What is a reasonable margin that you leave for the distributor?
- What kind of track record do you have of working with your distributors?
- What kind of terms do you usually expect to work with?
- Do you take a longer term approach to your distribution partnerships?
- How easy are your products to launch?
- what are the real USPs of your products? (Just saying “we have the best quality” won’t cut it.)
In the end, a potential partner wants to know how much he can earn with your products, how easy are you to work with and do you fit to his working style.
Whether your initial meeting will be online or in person, your website is the first place a potential new distributor will check.
When was your site last updated? Does it need to be refreshed to reflect the new post-Covid reality? If you have a page called “news”, make sure that this is updated regularly even if not so much has been going on during the pandemic period. Perhaps you’ve had new product launches or initiatives to be a more sustainable workplace? Be creative (I don’t mean lie!) but think about how you can showcase your company culture.
What about your company catalogue and standard presentation? It’s really easy to overlook the fact that photos or relevant statistics may be several years old. If you don’t refresh the look of such materials, they rapidly become stale, both visually and also in the way that your sales managers present them to potential new partners.
Focus on relevant commercial facts such as your market share in the home market and the region you are opening up (if that is relevant), social media campaigns, and your business launch model. Stay away from vague unsubstantiated claims about being “superior” or “the best” as these strike a jarring chord in many countries as they are often forbidden in advertising.
Show cultural empathy
If you are using international campaign examples, make sure that you show cultural sensitivity in the examples you have chosen. Talking about Kosovo when pitching to a distributor for China or India is unlikely to demonstrate your competence but would be a great example to use if talking with Montenegro or Albania. Likewise talking about successful marketing campaigns in Israel to a potential partner in Iran isn’t going to get you any plus points.
That first meeting is like a casual coffee date
These days your first meeting with any potential new partner is likely to be in the form of a video meeting. Think of it like a first date for coffee.
Don’t overwhelm the distributor with facts and PowerPoints – death by Powerpoint is never pretty and this initial “date” is just to test the temperature of the water and see if you’re a potentially good match.
Send presentations, samples, and your profile in advance. Remember that a presentation for reading can contain a lot more information on the slides than one designed to be presented in person. Adapt your materials accordingly so that your potential new partner has information to refer to and you don’t need to read through all the facts and figures. You don’t want to be “that bore” who always just reads their slides…
Devote the “first date” to telling your “brand story” in a relatable way. Explain to the distributor why you believe that his company fits well to your expansion plans in the market concerned. What is it about his profile that attracted you to him?
After this set of initial meetings you should whittle down your list to a short list of around 3 candidates who you feel that you could work with.
Samples are Essential if you’re going to be Finding the Right Distributor
No distributor will buy your product without tasting it or feeling the quality so send samples in advance of a second meeting.
Inform the potential distribution partners that you’d like to receive as much specific feedback as possible from them during the second meeting.
This could include:
- The range of SKUs available (how many would be suitable for the market in question)
- The flavours available – do they fit with local taste? Perceptions of salty, sweet or spicy can vary hugely from one market to another so all feedback is valuable
- Does the packaging meet local requirements in terms of physical protection (how do the competition package this kind of product), design aesthetics and size.
I remember once presenting a range of children’s skin care in various markets: the feedback from Israel was that the unit size was far too small, whilst Vietnam complained that the bottles were too large to launch…
You could think about including a small gift with the sample package if you know you are not going to be visiting for some time in person.
What Do You Know About the Category from Online Research?
You don’t need me to tell you how much information is available online these days. If you’re thinking of entering into new markets then you need to do as much desk research on your category as possible. Most top supermarket chains have their own web shops and there are also large online players in many markets, especially in Asia.
That makes it simple to conduct basic overseas category reviews from the comfort of your home office. You can identify local category dynamics in advance of your call as well as validating distributor performance at leading retailers.
Which categories are saturated? How are promotions structured? Who are the main competitors?
How are your potential distributors represented with their other brands? What is the depth of their product listings in the online stores?
The more information you can gather on the market up front, the better you are placed to ask the right questions about the category in your meeting. It’s one thing to establish that consumers seem to prefer strawberry to banana, but you need the local insights from a partner to explain WHY.
The 2nd Meeting – more of a working lunch
How will the relationship look if you decide to work with the distributor? Now is the time to explain in more detail.
At this stage you are still talking with 3 candidates who could potentially be your new distributor in the target market.
Not everyone agrees with this approach, and you must use your judgement as to how much pre-work you are going to expect from a potential partner before he gets a positive decision from you about being the new distributor. However, if you are even thinking of offering exclusivity then it’s reasonable to expect a certain amount of conceptual work from a partner.
The export manager can share their objectives (what are their expectations in terms of turnover and market share), pricing, business development model, and marketing strategy.
You can request the potential distributor candidates to prepare a business plan (if you often enter into new markets, it may be worth you preparing a template of what you want to see included here in such a concept) and their open questions. These items should be shared in advance of the meeting.
The second date should be devoted to talking about the proposed plan and gaining alignment around key issues. You need to gain as much understanding as possible about how the market in question functions and how the shortlisted partners would plan to launch your products.
You need to discuss more of the “nitty gritty” to get a proper feel for whether each company would be a good fit for you and whether they are prepared to work according to your principles.
Leverage the Power of Video to Make You Stand Out
Does your company even have a YouTube channel? If yes, does it purely include a stuffy corporate video (you know the kind with dramatic music and text designed to instantly cure insomnia…)?
Think about creating something more relaxed and fun to show potential distribution partners what you are about. You can make those videos private if you don’t want the whole world to have access – that way they can only be viewed with the link.
Topics could include:
- A guided tour of your factory – especially Chinese partners love to see this kind of film, and right now when travel is both expensive and complicated it may be the best option for many other countries too.
- Short product trainings/overviews
- An introduction of your export team
The aim here is go above and beyond the expectations of the potential distributors. You want to make them excited about the idea of working with you and your dynamic team. Consequently a creative approach would be more important than having a 100% scripted professional production here – it’s more to give an impression of what you are about in the day to day cooperation.
Of course, you need to consider whether any information (eg aspects of your production facility) is confidential, but with careful camera shots you can certainly create the impression of a personal visit.
Do the Background Checks
Who has never googled their upcoming date?
Whether you are “distributor dating” your potential partners purely online or also able to visit then background reference checks are essential.
Firstly, invest in a Dun and Bradstreet financial check. Inform the potential partners that this is your standard practice and ask them to cooperate if they are contacted by a local representative. (If the local regulations don’t require them to publish financial records then there may be no information available without this step). This kind of due diligence is a small price to pay for the peace of mind of knowing that you’re not talking to companies who are insolvent or involved in fraud cases.
Be aware though that in some markets the info might be extremely “thin”. Also, it may take some explaining for the distribution companies to understand why this is so important for you.
Contact a couple of their existing suppliers and ask for a reference. This is a little like asking for employee references when recruiting so you need to accept the limitations of this tool. For example, if you ask a Japanese company about their partner in Hong Kong or Thailand, you’re unlikely to really find out very much at all. On the other hand, I once contacted a company only to be told they’d had discussions but never worked with a certain distributor… so that one fell off the short list for dishonesty right away!
Good old Google
Search Google Earth for their company address. Does the company exist there? Is this an office building or a residential facility? Of course, not everyone is trying to scam you in some way, but there are cases where companies don’t legally exist but try to act as if they were established.
Is the company present on LinkedIn? How many employees have a profile on LinkedIn? You need to be careful when drawing conclusions from this approach as LinkedIn is not as ubiquitous in many markets as it is in the US or UK. For example, in Austria or Germany, many people use Xing (= a local language platform) or view LinkedIn purely as a kind of CV depository. In China, LinkedIn is only accessible via a VPN so not finding a company there doesn’t indicate anything suspicious.
Nothing beats IRL (In Real Life) for Finding the Perfect Partner (or as close as possible)
Before making any final decisions about which distribution partner you should entrust your brand to, it is always best to visit the market in person if possible.
You can do a large amount of up-front screening via online meetings, however nothing beats a personal visit. That way you can get a feel for the market dynamics (for sure you will better understand why certain things don’t work or why others are necessary) as well as sitting down to discuss and have a meal with potential partners.
At the end of the day you do business with people so if you discover that you just can’t get on with your potential partner then this doesn’t augur well for your future success. For me personally the absolute minimum is that in addition to the measurable KPIs that I need a partner to fulfil I can also happily spend lunch or dinner with that team.
Give the relationship time to mature – Distributor Dating isn’t a fast game
At the start of any new international expansion project everyone on the team is full of enthusiasm and expects to progress within weeks. Sometimes though it can take months until you really find the right partner. You can’t force these things – it’s better to wait until you have the right partner than to begin with one who will destroy any future chance on the market.
Changing a distribution partner (at least in consumer goods) usually costs you effectively between 6 and 12 months sales so it’s better to wait and be certain rather than rushing into a partnership without a strong foundation.
After a visit to the market and meeting with your short list of 3 potential partners you should be in a position to make a decision about which one to go with. To make that an objective decision it’s worth choosing a method such as a balanced scorecard in order to judge each partner against the same criteria. Whilst there’s often pressure to make a fast gut decision, it’s really worth investing the time, resources and money to thoroughly investigate your options up front. These costs are considerably lower than if you go with the wrong partner and have to salvage your brand sales and reputation later.
To stick with our dating analogy, you wouldn’t marry after just a coffee date would you? So keep the same principles in mind with your distributor dating.
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