Approaching Distributors versus Retailers in Global Market?
The various aspects the correct strategy at a specific point of time
Direct to retail chains OR importers/distributors?
Pricing:
Understanding the wanted/needed Suggested Retail Price (SRP) and knowing the cost of the product usually can tell if there is space for a distributor or not in the value chain. If the whole value chain cannot earn its regular margins, it will not work for long.
Brand strategy:
If you want to sell once a year at peak time, maybe as a promotion, you might select “direct to retail”. But if you need to create brand awareness or build demand, you might want to grow in small steps and distributors will usually invest in marketing (in different ways depending on the local culture and what works best in their market).
Product innovation:
The more innovative the product is, the more investment you need from the distributor, as usually they would invest in communication, local fairs…
Financial ability and Insurance:
Most major retail chains in major markets require a quite tough contract to be signed. You need to be able to stand behind those requirements.
When is it best to approach Distributors versus Retailers Distributors:
- A partner for a long term strategy: step-by-step, build slowly but surely…
- More brand builder (marketing investment, local fairs, print and online advertising, PR…)
- Wider presence: your products will be placed at more point of sales in the country
- Possibility to start with independent stores PRIOR to chains and create the demand from the market
- Easier to reach (CEO of importers do not change as often as buyers at major retail chains!)
- Easier to work legally
Retail chains:
- Higher margin for the brand/manufacturer and higher margin for the retail chain
- Quicker entrance to market once decision taken
- Appropriate for promotional items/peak timing/big
- Potential for bigger volume quicker
As a quick summary, study your product line + pricing + your category/market/competition and from there, the strategy whether to approach importers or retail chains will be much easier to see & act accordingly.
Karen Klein