How To: Find Distributors
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When Ronn King started his own company to make a new type of paint mixer, the toughest part wasn't coming up with the idea--or even figuring out how to manufacture it. The toughest part was persuading retailers to stock it.
Most national retail chains would rather buy a hundred products from one supplier than one product each from a hundred different suppliers. So small manufacturers have a tough time breaking into the game, says King, 47, co-founder of Site-b in Spokane, Washington.
King's company makes a paint-stirring device called the Squirrel Mixer. More than 120,000 were sold worldwide in 1997 through such major stores as Home Depot.
The inventor's success came with the help of distributors and independent sales representatives. These allies can pioneer your product into new geographic areas, get it into stores that won't even talk to small manufacturers, and provide valuable services, such as fast order fulfillment.
But distributors can be as difficult to woo as retail buyers. Winning them over takes time, research and hard work. Here are nine steps to success:
1. Get your product market-ready. "Most new manufacturers aren't prepared to go to market," says Joseph Coen, president of ASKCO Marketing Services in Kure Beach, North Carolina. Coen's company serves as a matchmaker between manufacturers and distributors to food, drug and gift retailers. Before going to market, manufacturers must resolve issues ranging from the most appealing packaging to the best way to ship their products, he says. They also must find a price consumers will pay that still means good profit margins for retailers, distributors and, of course, themselves.
"The product needs to have a point of difference," Coen says. "If the product is lotion, the only difference is the fragrance and maybe a few ounces [more product] per bottle. The manufacturer must create a perceived difference with packaging or marketing."
New manufacturers must prepare sales materials that tell retailers the product's benefits and its statistical information, such as how much space it needs in the warehouse and on the shelf. Production capacity is also a major issue, Coen says: "You can't sell to Wal-Mart unless you're ready to manufacture millions of units."
2. Understand whom you're selling to. Most manufacturers don't sell directly to the consumers who eventually use their products. Instead, the manufacturer's marketing strategy must aim at sales through dealers or distributors.
Most manufacturers, distributors and independent sales reps deal with a narrow range of products. They know each other and refer work to each other. That worked to King's advantage when he first tried to sell to retail chains. Several turned him down, but one buyer referred him to a manufacturer's representative who carried dozens of products for many companies. That rep took on the Squirrel Mixer and referred King to reps in other areas.
A distributor or sales rep wants to carry products that sell in high volume. If you can't promise huge sales, you might have to lure distributors with high profit margins, King says. If you can't raise the retail price, that extra margin will come out of your profit. "It sounds expensive," King says, "but compared with the cost of reaching customers yourself, it's not."
3. Target your market. One way to focus your marketing is with targeted mailing lists, which you can often find through trade associations.
If you use such lists for direct-mail advertising campaigns, plan to send out at least three separate mailings, then follow up with phone calls, advises John Metscher, a business analyst with the Central Ohio Manufacturing Small Business Development Center in Columbus, Ohio. "One mailing is a waste of money. Don't give up; you'll be surprised at the results," says Metscher. He also recommends advertising in carefully selected trade journals targeted at the industries most suited to your product.
4. Create demand. The manufacturer--not the distributor or retailer--must make consumers want to buy a product. That can involve cooperative advertising campaigns with retailers, display stands, signs, fliers, brochures and other marketing materials, Coen says.
"Each year, about 25,000 new mass-market items are introduced," Coen says. "The manufacturer must do everything possible to encourage [consumer] acceptance."
5. Prove your product will sell. A new company may have to prove its product will sell before distributors and major retailers take notice, King says. He first started selling the Squirrel Mixer by mail order and to a few local retail stores to prove consumers would buy the device. "Distributors' sales forces started seeing the Squirrel Mixer in several stores and asked [the stores] about it," King says. "Even then, the distributors didn't call us. We had to call them."
6. Ask questions. Many new manufacturers don't even know where to look for distributors and sales representatives. King found many of his by asking questions. He asked retail buyers for names of distributors; he called manufacturers of similar products and asked whom their distributors and sales representatives were; and he studied industry magazines for names and ads.
Many trade groups have distributors and reps as members. Encyclopedia of Associations (Gale Research) lists thousands of associations; look for it in your local library.
7. Attend trade shows. "Take an exhibit booth, either by yourself or in partnership with another company with complementary products," Metscher says. As with other marketing efforts, choose a trade show targeted to your market.
At the show, collect business cards from prospective distributors or sales reps, then follow up after the show is over. Even if you can't afford your own booth, attend the shows that target your industry. "Shows are good places to network and identify the people and companies that will buy your products," Metscher says.
8. Select distributors and sales reps carefully. Ask others in your industry for referrals to good sales reps and distributors. When considering reps, ask for their credentials and references. Look for reps and distributors who carry similar but noncompeting products and who sell to the same geographic territory and type of retailer who carries your type of product.
Distributors usually buy some of your product and store it at their warehouses. Good ones fill orders quickly and accurately and help build a market for your product. Independent sales reps don't buy your product, but they should aggressively sell your product in markets you can't reach.
"You need to check out each representative,' " says Jill Ford, author of Gift Trade Marketing (J. Ford Co., $33.95, 949-240-3333). "We recommend you hire three. You'll find one will produce, one won't, and one will be somewhere in the middle."
9. Find private label partners. Even though King has succeeded in getting the Squirrel Mixer into thousands of stores, attracting distributors "continues to be a problem for small companies even when you prove you have a good product," he says.
That's one reason he allows some major paint companies, such as Hyde Manufacturing and Red Devil, to put their brand names on his mixer. This is called a private label agreement. Larger companies have more products to sell, which distributors and retailers prefer, and have more extensive distribution channels. Like building relationships with distributors and sales reps, attracting private label deals takes time and effort but can be a valuable part of your marketing strategy.
Jan Norman is a freelance writer who specializes in small-business issues. She can be reached at firstname.lastname@example.org
Give And Take
The relationship between a product's manufacturer and a distributor is a two-way street. Each must fulfill certain tasks to get the product to market and keep it on the shelves.
The manufacturer's role:
- Make a quality product.
- Use advertising and other means to create demand for the
- Provide marketing materials.
*Have the capacity to fill any order the distributor gets.
- Offer incentives to distributors' sales forces.
- Don't undercut your distribution network. When customers
call you directly, pass their orders on to your distributor or
- Provide technical support or other quality customer service.
The distributor's role:
- Respond quickly when the manufacturer passes on sales
- Provide storage for products prior to sale.
- Fill customers' orders quickly and accurately.
- Assist in building a market for the product.
*Give customer feedback to the manufacturer.
A Closer Look
Before you sign on with a distributor, know what to expect from the relationship by asking these questions:
1. What are the distributor's credentials and background? Check references.
2. Does the distributor cover a territory you want to reach? Does it compete with your other distributors?
3. What other products does the distributor carry? Are they compatible with yours? Do they target similar customers?
4. How well does the distributor know the market and its potential?
5. What are the terms of the distribution agreement? Are they too costly?
6. What are the terms for terminating the agreement?
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