In just a short space of time, the global business landscape has been put under unprecedented stress. With the entire world dealing with the impact of the pandemic, it is safe to say that times are indeed, unusual. What we knew to be true two years ago, may or may not hold true today. What we did know two years ago was that many Swedish companies felt their distributors were slow to react to market needs, were not transparent, and they didn’t provide enough support. Over several years, we have seen this trend hold steady with approximately two-thirds of Swedish companies expressing a desire to change their distributors.

In times of stress or pressure, it often becomes clear how poor or well a distributor or partner is performing. The enormous strain on business, global supply chains, and growth ambitions during the pandemic means Swedish companies need to ensure that all aspect of their operations are working at optimal levels. And this means stress-testing distributors to get an accurate picture of their performance, not just a feeling.

Knowledge is power

Analysing your distributor relationships can provide insight and clarity about growth patterns and be a prompt for change.

For one Swedish engineering company operating in sub-Saharan Africa, a review of their sales growth and distributor performance showed that over their 30 year relationship, sales had grown modestly at 8-10 per cent. However their relevant product market was exploding at over 25 per cent. By taking a microscopic look at the relationship, it became clear the distributors were skimming the market, with around a 35 per cent mark-up. These extraordinary revelations are not isolated.

Another company had flat growth in most parts of Europe, but in Poland their sales were growing faster than the market. The company’s Dutch and Belgian distributors were struggling to keep customers while the hyperactive Polish distributor was approaching other territories though e-Commerce, being service minded, price constant, and constantly present. While this did not sit well with their other European distributors, it gave the company knowledge to be able to make business critical decisions.

actively manage your distributors

In the examples above, the Swedish companies had taken a hands-off management approach which impacted both their sales and the morale of their distributors. After the distributor analysis, these companies took the Business Sweden advice to implement an active distributor management approach to secure best performance and results driven behaviour from their distributors. By opening up the communication channels, the distributor relationships started working more effectively towards the companies’ growth ambitions.

A common pattern among Swedish companies is to take a step back after the selection and leave distributors to operate with minimal guidance. When strong expectations and boundaries are not implemented, this leads to poor performance. Companies who actively guide and support their distributors are rewarded with better performance.

onwards and upwards

Our study has revealed two major inflexion points that influenced when distributors shift their focus from their principle companies.

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 exceeds ten per cent, they tend to add resources and do more branding and sales initiatives. It is important to select a distributor that relies significantly on your product; it is better to have a small distributor that has a strong focus on you than a large one whose attention is on more profitable products. If you are not contributing enough to their revenue, they will not focus on you. That is when it is time to move on.

2. Change in the ownership or management:

Distributors are often family owned businesses and many companies find that a shift of owners to the next generation leads to changes in priorities. In sub-Saharan Africa, many old distributors blamed the next generation for lack of sales growth, primarily because the younger generation lacked passion for the industry products they inherited. Assessing the focus of your distributor after a generation ownership change will help you to identify if there is still a passion for your industry and products. Be prepared to move on if the management change is not aligned with your products and growth ambitions.

question, question, and question again

The distributor strategy is one of the critical go-to-market strategies. As your market realities change,  your distributor strategy might too. Continual questioning the role your existing distributors play in your sales strategy will be a catalyst for change before your growth is negatively impacted. This questioning will also lead to further questions including:

  • 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?

While a distributor led sales channel is the most common and popular choice, getting the best out of your distributors requires patience, communication, and resolve.

build the right strategy with expert help

The right strategic partner can streamline both your distributor analysis and ongoing relationships. During the corona pandemic, Business Sweden has been committed to keeping business moving for both Swedish companies in global markets, and international companies operating in Sweden.

With the global shift towards localisation hubs, distributor performance is critical for ongoing strategic growth. Business Sweden has a presence in nearly 40 markets around the world and across industry and sector boundaries, and our expert teams on the ground have both the global and local knowledge to help Swedish companies make informed and market relevant decisions about new and existing distributors relationships.

Are you ready to make your distributors align with your global growth ambitions?