Be an Exclusive Distributor

Becoming the exclusive U.S. distributor of a foreign product can be a great way to secure startup success.

After studying Japanese in college and living in Japan for part of the '90s, James Allard always wanted to do something in business that was Japan-related. When he and Steve Rosen decided to start a business in 2004, they went to Japan to search for a product they could import to the U.S. In a Tokyo department store bathroom, they spotted an electric hand dryer made by Japanese conglomerate Mitsubishi.

"Neither of us had ever thought about hand dryers," says Allard, 40. "But we were both kind of enamored with it and thought maybe this was it." Following a year of correspondence with Mitsubishi, Allard and Rosen, 39, became exclusive U.S. distributors of the Jet Towel hand dryer, an item long popular in Japan because of its quick-drying features but never sold in the U.S. The Jet Towel license formed the foundation for Seattle-based Pacarc LLC, a five-person company for which CEO Allard expects to post yearly sales of $1.1 million by the first quarter of 2007.

Having an exclusive license for the giant U.S. market is one of the more solid foundations a company can start with, even if it's not a sure thing, according to Kenneth D. Weiss, a Gaithersburg, Maryland, import-export consultant and author of Building an Import/Export Business. "If you can get exclusive distribution, you're not likely to have competition directed at that same product, although you're very likely to have competition directed at similar products," Weiss says.

The Pacarc co-founders felt likewise. "We figured if we were going to put all this time, energy and financial resources into the product, it made the most sense to be an exclusive distributor," says Allard. "Otherwise, our work might end up benefiting other distributors."

If you'd like to ink a similar pact, Carl Nelson suggests looking to your own experience. "The entrepreneur who wants to become an exclusive foreign distributor has to say, 'What do I know?'" says Nelson, a professor of international business at the California School of International Management in San Diego and author of Import/Export: How to Get Started in International Trade. "Do I know refrigerators or gold or jewelry? What do I think I can sell?"

Next, ask yourself what kind of business you want to start. Will you sell to high-end or mass markets? To wholesalers or retailers? This will help you focus on products that fit your vision.

Once you have an idea of the product, you obviously need to start looking for it. "Keep your eyes open for products in foreign countries that might be useful in the U.S.," Weiss advises. One advantage of traveling in search of products is that, while in a foreign country, you may get to meet with the manufacturer.

Large trade shows in foreign countries are often stocked with manufacturers looking for U.S. distributors, Nelson says. Another approach is to check with foreign trade offices in U.S. embassies. The U.S. government won't help you import foreign products, Nelson notes, but the foreign trade offices can usually provide lists of manufacturers to help you get started.

Internet matchmaking sites represent a recently introduced tool for finding products to import to the U.S. These sites normally collect a commission for deals arranged through their services, Weiss says. You can also look at print and online newsletters for foreign manufacturers in search of U.S. distributors. Industry export councils representing manufacturers in a particular category can help you identify potential distribution partners as well.

When you start talking to manufacturers, scrutinize individual products to see if they meet your needs. Key criteria include the product's foreign sales history and the potential size of the U.S. market. Evaluate the product's appeal to U.S. buyers and what the profit margins would be at the likely sales price.

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This article was originally published in the October 2006 print edition of Entrepreneur with the headline: The One and Only.

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