Know-How Exchange : Strategy

Distributors always want exclusives-- and without investment or performance goals. You as a manufacturer cannot continue to accept that. There are some hard business decisions that must be made.

Add your distributor. If you are important to the first distributor, they will balk, but they will continue with you. Explain it as I have, its a business decision. You appreciate your association with them, and want it to continue. You are being open and honest. They may not like your decision, but they will appreciate your position.

Are there items you can private label for one or the other so they have the feeling of proprietary without giving it? Are there performance goals you can set that might give them an edge on pricing?

Ilan,
In the distribution world yours is a fairly common delima.

Before you appoint another distributor there are questions you need to ask yourself:
1) Are my distributors responsible for creating demand or for simply satisfying the logistics of handing customer orders?
2) What have I done to communicate my need for growth to my distributor? Goals, Targets, etc.
3) What tools have I provided to my distributors to help them build the sales of my products?
4) What market segment or geography does my distributor cover? Does the new distributor cover some other segment or geography?

I can point to instances where exclusive distribution works much more effectively than normal distribution plans and visa versa.

Do you know where your distributor is selling the product? Do you know where the potential order from the second distributor came from and why they all of a sudden are looking to you as an additional supplier?

If you would like to discuss this off line, we have assisted many organizations in optimizing their distribution channel. And, I would be happy to chat with you.

A saying over my desk is "leap into the abyss, you may find you land on a feather bed". You have two choices, leap, or accept what is. Again if you are important to the first distributor, they will bark but not cancel. If you aren't important-- then you should deal with that sooner rather than later. Its a common dilemma, and you are heading toward "analysis paralysis". I have dealt with this countless times. I've never been thrown out. Not to say, "It'll never happen". Your distributor has been thru this before, you aren't the first. He understands tough economic times. He knows his sales are stagnant. I just read an article that 50% of those in the marine business are unemployed. I did a biz plan recently for a boat broker-- and while things have been tough in this industry past couple years-- they haven't been a disaster. So no growth is hard to justify. Another point -- and this was something Frank sent me offline-- Does your distributor offer you exclusivity?

Ilan,

I would talk to the prospective distributor and find out what he thinks he can accomplish based on what he knows about your current distributor. Likely he sees an untapped market. Carve that market out from your current distributor and explain to him why.

He then has the option to work like crazy to grow the remaining markets or complain and go elsewhere.

Your prospective distributor might need to disclose some plans that you must agree not to share.

Michael

Before leaping, ask for concrete business plans showing their investment, ideas, and referrals from previous companies they have worked with. You don't want to switch distributors only to find that the new ones don't have the resources to make it a success and can't go back to your previous distributor either.

You may not lose those "sure" sales worst case-- if the 2nd distributor knows the market, he knows where those clients are.

Another option is to work with the first distributor, giving him a chance to provide a plan to increase sales and match the investment.

And follow Jay's advice, make sure they are everything they say they are.