New market access - why playing safe doesn't pay off in a long term for the business
Searching for distributors is the most common approach that I come to witness on the most constant basis, whenever the companies look into selling abroad or exporting their products. I do understand that it does seem to be less risky for a company in comparison to building its own sales infrustructure in the target market, however below are few good reasons of why this apprach is not working in a long term. Let's try to look into pros and cons of moving into your target market directly or through a local distributor.
Before we start discussing the advantages and disadvatnages of working with the local distributor, It is important that you conduct a thorough market due diligence to identify strong prospects among which you pick the one who deserves to distribute your product. Lets elaborate on few points that will be important in making decision as which way to move.
- Do I trust 100% to what I hear from a distributor about my target market?
How can you trust someone you just met? We all know that building a relationship takes time and it can eventually go either a good way or a bad way. You are lucky in case your distributor turns out to be a decent orgnization with strong credibility but what if it is not the case? It takes a lot of patience and knowledge of your target market but most of all it might take a lot more time which is one of our most important assets. Trust will be always be one of the key concerns as slong as you deal with and entirely rely on a third party organization to promote your product.
- Am I really in control of whats happening in the market in terms of business development of my product?
You have to keep in mind that you are dealing with an indepedent commercial entity, which means they are your business partner, they either can or may report to you their business activites that directly relate to your specific product however remember that they absolutely do not have or obliged to do so unless you have discussed these points and those terms are in the contract.
Most distributors will only represent your products in their market under exclusive terms which is normally valid at least for 12 months. When the sales are down, and in case you either do not support or believe the distributor's arguments and reasons behind this, remember that you have signed an exlusive contract. This situation puts you in an awkward position and you can not do anything except finding a possible way out of the situation which hopefully worksout to your advantage.
- Is their company mission and vision in alignment with our's?
In case you want to create a strong positive impression in customer's minds towards your product you need to make sure your distributor share the same mission and vision which is rather a difficult thing to achieve. Remember that if the distributors were to adopt mission and vision of each and every organization whose products they sell, it would have created a mess within their organizations and it just doesn't make sense at all. It is simply hard to make a third party company adopt your culture and if you want to do so you need to take them over or simply establish yourself in the very same market
Now of course some distributors play an essential in role in helping certain companies to penetrate their markets and I am sure there are plenty of stories behind this claim however, you need understand the market and make your own assessment whether you want to move in directly or through a distributor.
Move in directly
You are in control of the whole process from the beginning to the end. Decisions are made and executed at a much higher pace and most importantly you pick and choose the talent who would lead your orgnization and make changes whenever you feel it is important to make changes.
Intelligence in business is everything, nowadays organizations work with large amount of data that they have build over the years and the accuracy of that data is essential to make the right strategic decisions.
Being directly present in the market creates an edge against your competition especially when you think of the local knowledge and data that you possess because of your direct presence in the market unlike your competitors.
It is highly likely that noone will ever know your product better than you would, relying on a third party organization to share your story with your customers is not entirely wise thing to do, customers want to hear the story from the first source who have developed the product from the very scratch and introduced it to the world.
Why share your profits when you can have them stay within your organization? Most companies do not have control over the end-user prices that distributors sell their products for. In some markets that difference between the distributors purchasing price and selling price is significant and consecutively the profits are high. This is another reason why selling directly through you local office is a good idea.
Whatever your decision is you need to have strong arguments ahead of making decision as which way is the best way to move ahead. Do not rush, take your time to make a thorough evalutation, do your homework, do plenty of research because at the end it does payoff.