Our survey about relationships with distributors has been running for two years and more than 300 companies have responded. The data enables us to see a clear pattern. If you are dissatisfied with your distributor, as over 60% of our respondents are, keep reading.
Highlights of the survey results:
- 65% of Swedish companies want to change their distributor
- 78% feel that their distributors are slow to react to market needs
- 76% feel that their distributors are not transparent with them
- 81% feel that distributors play the ”culture card” — this is how its done in my country — to hide their failure
- 35% of distributors feel that Swedish companies are not providing enough support
Be aware of your distributor’s behaviour
A Swedish engineering company explored their sales growth in sub Saharan Africa. Their distributors for 30 years had been growing modestly at 8–10%. However, their relevant product market was exploding at over 25%. Clearly, the distributors were merely skimming the market, with around 35% mark-up!
Another company had a flat growth in Europe, but in Poland sales were growing faster than the market. While the Dutch and Belgian distributors were struggling to keep customers, the hyperactive Polish distributor was approaching other territories through ecommerce, being more service minded, price conscious and constantly present. Of course, this riled their other European distributors.
Go for active distributor management
In both cases above, the Swedish companies had a hand-off approach which impacted both sales and morale of their distributors. We recommend active distributor management to secure best performance and behaviour from the distributors. Strive for active communication with your distributor.
After selecting a distributor, many companies tend to leave their distributers without much guidance. This lack of strong expectation setting process leads to poorer performance. Companies who are available to guide and support their distributors, find them performing better.
When is a good time to move on?
In our study, we found two major inflexion points for when distributor’s focus on their principle companies changed:
1. Contribution to revenue > 10%:
Many distributors of Swedish products keep these high quality premium products as a door opener for cheaper products. However, as soon as the revenue contribution from the Swedish company is more than 10% they tend to add resources and do more branding and sales initiatives. Therefore you want to select a distributor to whom your product contributes significantly. Rather a small distributor with a strong focus on you, than a large one who doesn’t focus on you. If you are not contributing enough to their revenue, they will not focus on you — time to move on.
2. Change in the ownership or management:
Most often the distributors are family owned businesses. Many companies find that a generation shift of owners lead to changes in priorities. In sub Saharan Africa, many old distributors said that lack of sale growth was due to lack of passion for industrial products from their sons who took charge. Find a distributor who has passion for your industry and products. Passion changes as management changes, so keep an eye on that, and move on if its not aligned with your products.
Keep questioning your distributor strategy
The distributor strategy is one of the go-to-market strategies. As your market realities changes your distributor strategy might too. Keep asking yourself “How can I get more out of my existing distributors and grow my sales?” As you explore this question, further sub-questions would need to be answered:
- How to manage inert distributors in the markets where they were “chosen”?
- When to move from distributor led sales to more in-house sales?
- How to motivate a complacent distributor to perform and grow?
- When and how to move from a single distributor to multiple distributors in a market?
- Whether or not to acquire a high performing distributor?
A distributer led sales channel is the most common and popular choice. However, getting the best out of your distributors requires patience, communication and resolve.
Get professional help to find the right strategy
At Business Sweden, we deliver over 100 projects each year, across continents and industries, helping Swedish companies to grow their global sales through new and existing distributors.
If you have a question regarding your distributor strategy or a low performing distributor or market, we would be very happy to discuss your situation and share our experience.