How to work with a distributor to build your brand in a new market.
When you and your company decide to “go global” and venture into new markets, you’re faced with many questions. Where do we begin? What markets need our products? How do we market to people in that market? Many companies work with the U.S. Commercial Service, a division of the U.S. Department of Commerce, to answer these questions and start working with local contacts who can help, like distributors.
How a distributor works
Distributors are trusted partners that sell your product or service locally in the market. While they are not employees of your company, they should uphold your company’s reputation and brand and help grow your sales. A distributor could be a company in your industry that represents multiple brands or products and has their own service department, or they may be a salesperson who’s been in the industry for years but wants a new opportunity. Their experience, network and connections can be very valuable to helping your company succeed in a new market, and it’s important to leverage their knowledge as well as support them.
Local experience and knowledge
A distributor acts as your eyes and ears in the market, and you benefit from listening and learning from them. They can help you anticipate required steps for doing business, like certifications, as well as better understand the area’s nuances. Their knowledge will be useful for designing labels, dealing with customs, planning logistics, identifying potential customers and more.
A distributor knows the local culture, and they are a powerful resource for marketing within it. Once they understand your products, how they work and who would want them, they can give you advice on who to market to and how. Work with your distributor to make sure they have the information they need to promote your products.
Sales and financing terms
As your distributor works to sell your product, it helps if the financing terms match local selling practices. This makes them better able to attract customers. Let’s look at a fictional example: ABC Manufacturing, a U.S. company, agrees to DEF Sales & Service representing them in the European market.
The DEF team explains to ABC Manufacturing that in Europe most sales incorporate 60-day credit terms as a minimum standard. In this situation, DEF needs ABC to give them terms of at least 90 days in order to deliver product and give customers 60 days to pay, which are standard terms in Europe. This comes from a long history of trade credit insurance availability in Europe, dating back to the 1600s. ABC has never used credit insurance before but is curious to learn more.
ABC Manufacturing has learned a valuable sales lesson. In order to grow in the market, and to support their distributor, they need to extend credit. As ABC expands and finds other distributors in other markets, they now have the new sales tool of secured credit terms in their toolbox – giving them the flexibility to better support their distributors and grow sales. While this is new to ABC, they obtain a trade credit insurance policy that covers their sales to DEF. By listening to their distributor, they can embrace what is typical in the local market and grow their international sales significantly as a result.
Like any great relationship, the one with your distributor is about collaboration, communication and trust. They should share your goal of expanding your business’ reach through sales. When you give them the information they need, support them and listen to their advice, a distributor can be a great ally for you and your company in a foreign country. Just be sure to ask your legal counsel to craft a well-documented distributor agreement before you get started.
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