Becoming a distributer....

**sillytrader** · 12-20-2006 08:34 AM

Hey guys,

I have found a product that I'd like to sell in North America. The company is overseas and doesn't have a presence here. I'd like to become their distributer/middleman. So when customers ask them for samples etc. they can at least deal with someone on the same continent.

I guess what I'm wondering is how would a setup like this typically work?
Would I buy inventory?
Would they ship product to me, then I sell it...sort of like consignment?

Thanks for any help.

**jg_macarthy** · 12-20-2006 09:40 AM

It all depends on what type of relationship they want. Call them.

**Sam Barona** · 12-20-2006 10:28 AM

If they are not currently in your market, their product is unique, and you have the resources to do it, then buy exclusivity for your region/country.

Generally speaking, to become an authorised distributor you need to commit to MOQs (minimum order quantities). If your company does not have a track record, then they might ask for personal guarantees, so, say you commit to a USD$500K yearly spend, but your business goes under, they will chase YOU up for the remainder.

Distribution is about buying in bulk and selling to trade buyers. Otherwise you are just a dealer/trade buyer.

Be mindfull when you do your financials that you take into account the fact that you will be paying upfront for stock that will be bought by trade buyers who normally want/get 30 days credit.

also, that the stock takes time to land, go through customs, etc, so that you are not selling stock that you cant deliver on time.

Its also true to say that you can expect smaller margins as a distributor than you would expect as a trader; but then your business model should be based around volume. Your forecasts, marketing plan, etc will ahve to reflect this.

Good luck

Sam

**sillytrader** · 12-20-2006 12:42 PM

Hey Sam

Thanks for the reply.

The product is not unique...the company with a presence itself in North America is. I'm not looking to import the flying car or anything that clever.

I am certainly not in the financial position to offer them much in guarantees.

What I was hoping to do was be their middleman in NA. If/when they have inquires from someone in NA I could be that guy.

I may be way off here and feel free to tell me if I am...

The company is small in size and currently ship to Europe and Asia. They'd like to start selling in NA...obviously...but have stated, distance, shipping costs for samples, language and the ability to meet face to face with a potential customer as barriers. They could send someone here from their plant to be that "presence"...they said they are not interested in that..again, small company.

So my hopes/idea/plan was to be the guy that had a some inventory on hand that could be their liaison for when they have interest from NA..as well as drum up additional business...ebay, set a website to sell the product and be a drop shipper for other websites. It could be a type of consignment arrangement where I would sent them their cut or we could set it up that the paypal account, etc could be in their name and they could pay me my cut...either way.

We would be starting out small to start to make sure both sides built that trust.

I thought of this as the only way I could move forward as I don't have the money to be the "typical" distributer/partner but wondered what others thought of the chances it would fly?

Thanks for your thoughts

Originally Posted by Sam Barona

If they are not currently in your market, their product is unique, and you have the resources to do it, then buy exclusivity for your region/country.

Generally speaking, to become an authorised distributor you need to commit to MOQs (minimum order quantities). If your company does not have a track record, then they might ask for personal guarantees, so, say you commit to a USD$500K yearly spend, but your business goes under, they will chase YOU up for the remainder.

Distribution is about buying in bulk and selling to trade buyers. Otherwise you are just a dealer/trade buyer.

Be mindfull when you do your financials that you take into account the fact that you will be paying upfront for stock that will be bought by trade buyers who normally want/get 30 days credit.

also, that the stock takes time to land, go through customs, etc, so that you are not selling stock that you cant deliver on time.

Its also true to say that you can expect smaller margins as a distributor than you would expect as a trader; but then your business model should be based around volume. Your forecasts, marketing plan, etc will ahve to reflect this.

Good luck

Sam

**Sam Barona** · 12-20-2006 03:24 PM

OK. Yes it can work, provided you place sufficient efforts into it.
Perhaps not as a distributor, but starting as an agent and developing from there.

There are always risks, of course of doing something like this without a contract, so, if you can, tie them to a contract that gives you a fair chance to make some money, rather than just develop a pipeline for them just to send someone in to cash in on it and cut you out.

If they are a small firm, they are likely to agree to this. You have to present a strong argument about how you are in a position to develop their US market effectively; they can supply you with relevant marketing/promotional/support materials that you can translate into English and a term for you to have exclusivity of your region, with a view of growing it to other states.

Since they are a small firm, you have a far better chance to secure a great deal for your self.

Good luck

Sam