Distributors buy products from manufacturers and sell them to retailers. The only difference is that your prices are lower for the distributor because they have to resell them to retailers.
In addition to pricing, you must also communicate to the distributor your marketing strategy, which may include sales contests and promotions, so that your sellers can share your product with retailers, you need an exit strategy for each product that you sell to the distributor. Just like retailers, the distributor does not want to be caught with overstock. The key is to remember that merchants rate your product according to different criteria than your potential customers. It does not matter if the product is exciting or innovative, if your business is hard to manage and, more importantly, if the distributor can’t make a profit, they will not buy from you. If you manage your inventory with a distributor and use marketing and sales tactics to drive revenue, you will open up your product to new retail opportunities in the long run.
Identify your target market
Determine how quickly you can produce your product and target your market to see if you can tailor the product to trending needs. Depending on your finances and inventory, you may not want or be able to market your product nationally.
Contact the sales companies that are active in your market
- Identify companies that distribute products in your industry, as these distributors should have relationships with the type of retailers who might be interested in storing your product. Avoid distributors who have close relationships with your competitors as these companies run the risk of jeopardizing existing distribution agreements by promoting your product in front of your competitor’s products.
Prepare a report in which you project product sales.
- You may need to hire a research firm to gather data to prove that consumers and businesses are hungry for your product. You also need to provide your financial information to prove that you have enough money and resources to produce the product on an ongoing basis.
Agree on a price.
- You need to evaluate your product to cover manufacturing costs and generate enough profit to grow your business and buy new inventory. Consider the average selling price of similar products and set the price of your product so that the retailer can make a healthy profit from the sale.
Discuss the conclusion of an exclusivity agreement with the distributor.
- The distributor may agree to pay a higher price for your products if you obtain the exclusive rights to sell your product. However, if you intend to expand your business, you should not sign an exclusive contract with a company that does not have the infrastructure to market your product in a large geographic area.
Sign a distribution contract.
- Ask a lawyer to make the final agreement. The distributor and you must insert clauses that allow both parties to terminate the agreement under certain circumstances. Consider imposing penalties so that each party receives compensation if the other party waives the contract.