If you are a small one-item vendor, selling to retailers may be a very difficult task. Most retailers do not want to buy from a small vendor unless there will be a return on their investment. If your product assortment is small, it may be more efficient of your time and resources to sell to a distributor.
A distributor is a company that buys goods from manufacturers and sells them to retailers. Selling to distributors is the same like selling to retailers. The only difference is that your pricing will be lower to the distributors as they need to add their profit and resell to a retailer.
For small manufacturers, the benefits of partnering with distributors:
- Sell products into hundreds or thousands of individual retailers
- Act as an extension of a manufacturer’s marketing strategy
- Take on financial/credit risks and accounts receivable of retail customers
- Lower sales costs, including by servicing accounts too small for direct selling
- Manage EDI and reporting requirements for retailers
- Handle small-order shipments and drop-ship requirements
- Handle logistics and reverse logistics operations
- Lower warehouse/inventory costs
- Provide forecasting for more accurate production planning
- Provide wide product exposure through catalogs and other marketing materials
Besides pricing, you will also need to provide to the distributor your marketing strategy which may also include sales contests and spiffs (monetary sales incentives) for their sales reps to push your product to retailers.
Also, you will need to have an exit strategy for each individual product you sell to the distributor. Just like retailers, the distributor does not want to be caught with excess inventory.
The key is to remember that distributors evaluate your product using criteria different from your eventual customers’. No matter how exciting or innovative the product is, if your company will be a pain to deal with and, more important, the distributor can’t make a profit, they won’t buy from you.
If you manage your assortment with a distributor and assist with marketing and sales, your product will be exposed to more retail opportunities and your business will make more money in the long run and isn’t that why you are in business?
To learn more how to sell your product to distributors, visit www.retailbound.com
