Now is the time to re-evaluate your global footprint and look to new countries for your international expansion. Look to where trade agreements are in place and economies are booming for the opportunities.
Often the easiest way to enter a market appears to be through a local distributor This is a low-risk strategy on the face of it, certainly from a fixed cost perspective.
A Distributor is a local company that will buy your product, market and sell it themselves. You rely on them to generate the leads and secure new business. They are your customer in the target market. In fact, if you enter into an exclusive agreement, they will be your only customer! You invoice them, they invoice the end user and take the corresponding credit risk.
A distributor may well have a strong name in the market, which will quickly help you to gain market awareness and confidence in your product/service. Market entry can be quicker and penetration deeper due to the distributors’ connections.
On the other hand, your identity and brand can become lost, with the distributor the stronger presence. The customer is used to dealing with them, you may not have a direct relationship at all. What happens if you decide to change distributor, or they opt to drop your product? You could be back virtually to square one.
A distributor may also overcome the currency issue too, as you can sell to them in your home currency, and they can sell to the customer in the local currency. On the other hand, you have all your credit eggs in one basket with a distributor and may well have a greater overall exposure.
If you decide to use a distributor, it is critical to make the right choice. Get this wrong and it can severely disrupt your progress in the market.
Do not rush in, take your time to assess potential candidates, talk to more than one. Visit them, get a feel for the company, who their customers are. Do they really specialise in your market sector?
Here are some top tips to finding the right distributor:
- Research into the market to see if any names keep coming up. Is there a stand-out candidate company you would really like to get on board?
- Ask around. Let the market know you are looking and ask for recommendations.
- Check with potential customers if they would recommend anyone.
- Look at the exhibitors or delegates at recent or future conferences.
- Check the advertisers in relevant magazines or journals.
- Look at the members of any relevant trade association.
- Do a web search.
- Ask for support from the Commercial section of your embassy in the country.
- Check who your competitors use. Could they be tempted away?
In short, look at all possible avenues to create a target list of names to contact and explore. Approach them with details of your product or service. Evaluate them to shorten the list to those who show the most interest, combined with the required market presence and potential.
It is very important to choose carefully. This distributor will be the face of your company in the market. You may well be judged by who you are associated with. Make sure they have a good solid reputation and a long-standing interest in your market.
Also, look at their existing portfolio of products or services. Who do they already represent? Are they complementary or competing? Are they operating in the right market sector? Do they appear to have a lot of products already for the resources at their disposal? Is this a concern?
A well-connected representative can be worth their weight in gold in helping you make entry into the market. With the right connections they can fastrack you in front of the right customers, but beware those who promise amazing things when in reality they are either already fully committed, not in the right market space or have conflicts of interest.
It is not unheard of for a supplier to be tied up for years with a distributor who either cannot, or deliberately does not, market it aggressively. Be wary of those who profess to be well connected or related to the Prince or Government Minister.
Once you have narrowed it down to one or two potential companies, suggest a loose working relationship to start with until you are both sure you are a good fit. See if they produce the goods, open the right doors and hopefully secure some orders before rushing into an exclusive or long-term contract. Remember making the right choice is critical to the success of your market entry strategy. It can be a complicated and time-consuming process. For this reason, we developed our PartnerTrack service to lead the search and help select the right partners for their business.