How to evaluate the performance of an overseas distributor?

How to evaluate the performance of an overseas distributor?
  • Post last modified:August 30, 2020
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You are exporting more than one hundred countries, have great food products, and are working with prestigious customers, overseas distributors. Something doesn’t feel right though.

The business growth is slow, you are having payment problems, it is painful to get information and reports from customers, thus is difficult to evaluate the performance of your import distributors.

Does it sound familiar? Does it upset you? You are not alone.

You wonder:

“Is it priced too high? Are the distributors letting us down? What are we doing wrong?”

No, you are not mistaken. Simply, this is the nature of working with overseas distributors.

On the other hand, everyone on the internet is talking about ecommerce, telling stories about selling their products everywhere in the world easily, doing great on amazon, even talking about selling to China quickly, sharing listings, or posting snapshots on LinkedIn, doesn’t mean that they export over £1M per year.

Don’t believe everything you read on the internet.

Finding customers in export markets, landing your products on shelves somewhere in the world, shipping hundreds of containers every month is not as easy as they mention on social media.

Either way, whatever works. Whatever helps you to get the job done. You can sell overseas online, you can sell to distributors, even you can directly work with the biggest retailers, or you can do all of them together. All is related to your budget, your limits, and the target.

However, if your target is selling at least £1M every month in overseas, please think about how many pallets or how many containers do you need to succeed it?

Everything is purely related to supply chain and international logistics. That’s why, distributors are still existing and the choice of the biggest FMCG producers.

On the hand, doing business with overseas distributors are great deal of pain. They don’t understand your targets, they tend to hide the customer and market data, they are always out of stock and never pay on time, unorganized, dodgy kind of people. How many times do you have to ask them to share at least quarterly forecasts? We’ve all been there.

Before finding a distributor, exporting to a new market, visit the country to gain better insight.

Visit shops, retailers, restaurants, talk to your actual consumers, and keep yourself updated about trends and threats in your export regions. Visit warehouses, check best before date of your products.

  • Listen shop owners about the problems, check shelf prices in order to calculate landing costs, mark-ups, margins.
  • Pay attention to the potential distributors’ sales team, check the warehouse if needed, promise to support them with marketing materials, check their marketing activities, online presence, and commercial managing – promotion capabilities.
  • Understand their relationship with the biggest retailers, which will be your next target next year.   
  • Look for what the competitors are doing in the export market, analyse the demands and evaluate with your sales volume.

Seriously, why should you use import distributors?

The distributors are independent firms, usually consisting of only a handful of sales and support people.

Companies that want to rely heavily on export to distributors must first understand:

  • Route to market
  • Unique Selling point
  • The demand
  • Buyers’ Journey
  • Easiness of doing business in the market, and access barriers.

They should then look for the best distributor candidates. In some regions and countries, it still is hard to collect data and information needed. Find out what distributors your competitors are benefiting. The best valid advice is asking your peers and friends. Before pandemic tradeshows and exhibitions were one the best effective ways to seek out wholesalers. You can also check out our export market research article.

A good distributor network is often the key to market leadership and overall export success. Because it takes many years of continuous attention to develop and maintain, a sound producer-distributor organization is often a high barrier to competitors. Without a solid network, even a manufacturer with a superior product can fail in the marketplace. A producer that recognizes the importance of distributors has a major competitive advantage that can reap attractive profits for itself and its distributors.

1. A large potential customer base. The broader the customer base with standard requirements, the greater the need for a distributor network. This means, if you look to sell traditional channel like, ethnic markets, small shops or horeca channel, restaurants, café, and pubs, etc, distributors are key to the market.

2. FMCG and Small-quantity sales. If a customer orders frequently with small quantities and is concerned about the availability and stock level, more likely it will be sold through a distributor.

3. Rapid delivery and service. Minutes can be a matter of life and death when a hospital operating room needs a small piece of surgical tubing or parts for a life-support machine. In all these situations, the longer the downtime, the more costly the situation and the greater the need for prompt delivery and possibly for technical service by a local distributor.

How to evaluate – analyse – understand your distributor’s performance?

Most of a distributor’s capital is committed to the producer’s inventories. The producer’s pricing practices can enhance, protect, or penalize the market value and profit margins on the inventories. Seven out of ten import distributors tend to promote your products solely with price promotions, majority of import distributors don’t have key marketing tools to enhance sales or creating demand. So, make sure, your distributor has online presence, has working ecommerce pipeline, has full-time marketeers who will increase the brand awareness in the export market.

FMCG distributors are usually courted by numerous producers and, as a consequence, are probably carrying as many product lines as they can effectively handle. Therefore, consider potential interest you would get. Once you ship first three orders, you ought to ask sales reports, stock reports, point of sales – POS records in order to evaluate the interest you generated in your new export development.

Speaking of truth, as an experienced exporter, you would have seen this scenario so many times. After couple of containers and dozens of mailings, there comes the silence. The distributor does not reply your calls, emails and you are not able to travel that country easily in the meantime. You lost all the time and the interest and need to restart again with different partners.

“Beware of those who run slim and don’t have adequate financial means to carry our inventory or do business with us.” This creates a bias toward the more mature and better-financed distributor, which may not be the aggressive and specialized distributor the product requires.

A single distributor in an export market can rarely give a producer the market penetration and sales volume needed. Thus, you must analyse the market structure and the demand and asses the forecast the potential in each market segment.

The unique blend would be one ecommerce & amazon wholesaler, a distributor, and a countrywide retailer, for a successful food and drink producer export development. Each partner should avoid saturate each other’s margin and the profit potentially must remain attractive for everyone. So, the export salespeople and/or consultant partner must be involved heavily to manage the business to the right direction.

Often the import distributor’s sales representatives are undertrained and under supported—as some would say, “Ship the order and forget them.” Effectively training distributors’ salespeople to sell a product takes many hours. The producer must demonstrate the product features and benefits for many different situations or applications. The more technical the product, the more time necessary for sales training. Sometimes the producer must train both the distributor and the initial customers.

Evaluation of sales and growth data can quickly identify the best distributors and mark doubtful ones for further evaluation. Exporters should periodically review their distributors’ performances.

Here is a checklist to evaluate the performance of the import distributor, questions you need to raise at the management meeting:

  1. Adequacy of business experience, as reflected in quality of customer service.
  2. Business growth rate, and ability to seek more sales.
  3. Competence in managing the business (sales management, financial control, the payment collection, etc).
  4. Their market share in the market.
  5. Demonstrated willingness to carry the business.
  6. Knowledge of the local market – ability to accurately forecast future sales and identify changes in customer needs and expectations.
  7. Efficiency and condition of warehouse facilities and equipment, Stock management, inventory control, warehousing, order fulfilment rate.
  8. Financial position (accounts receivable, cash position, outstanding obligations, inventories, fixed assets, and payment record).
  9. Online marketing, PR, social presence, events, and more.

Overall fit, how well your goals, operating philosophies and business practices mesh the import distributor.

An agile producer periodically performs the task of getting more effort out of certain distributors or of replacing those who consistently perform inadequately.

Complete and periodic distribution evaluations require considerable time and diplomacy. But continual upgrading and strengthening of a distribution network are necessary to manage a distribution channel effectively.

The unique blend would be one ecommerce & amazon wholesaler, a distributor, and a countrywide retailer, for a successful food and drink producer export development. Each partner should avoid saturate each other’s margin and the profit potentially must remain attractive for everyone. So, the export salespeople and/or consultant partner must be involved heavily to manage the business to the right direction.

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