Export distributors: how to pick one and what to ask

A distributor abroad writes asking for exclusive rights to your product across several countries, and sounds keen. At home, you would visit the godown and ask the shop next door. Abroad you cannot, so the first steps of the work are done by question and by document. Pick an export distributor on three things. What does the distributor already sell to your kind of buyer? Will they pay on the terms you set? Will they do the slow work of building your brand? A polished website proves none of them.

Plan three contacts, not one

Do this in order, and do not offer an agreement until the third is done.

Contact one: a video call. Ask the market questions below and note what the distributor cannot name. Say clearly that you will ask for papers afterwards.

Contact two: the papers. Ask for what backs the answers. That means customer references you can call and two supplier references. Add whatever your adviser says is normal before a first shipment.

Contact three: a second call, with your terms. Put the area, term and minimum in front of the distributor and watch how they negotiate. A distributor who agrees to everything at once may not have read it.

Questions about the market

• Which cities and channels do you cover? Name your ten biggest customers by type.
• Which brands in my category do you carry now, and which have you dropped? Why?
• Do you sell to retail, to the trade or to institutions, and how is your sales staff split?
• How do buyers there choose in this category: price, certificate or relationship?

Listen for specifics. A distributor who names the types of customer and the brand lost last year knows the market. One who says "we cover the whole region" has told you nothing.

Questions about money and risk

• What payment terms do you expect, and what would you offer for better ones?
• Who approves payments in your firm, and how did you pay the last new supplier you took on?
• What duties, certificates or labels does my product need there, and who handles each?

Listen on that last question for where the distributor is strong and where it is guessing. Import rules, standards and labelling differ by country and product, and they change. Do not rely on the answer alone. Check it with your export adviser. Ask your bank about securing payment on first shipments. Those options, their costs and rules belong to your bank and adviser, and this post sets no terms for you.

Questions about the work

• How many people will sell my range, and what share of their time?
• What would you do in the first months to introduce a brand nobody knows there?
• What do you need from me: samples, catalogues, local-language material, a visit?
• What happens to complaints and returns?

Notice whether the distributor asks anything back. One serious about your brand is likely to ask about warranty, minimum order and lead time. One who asks only for your lowest price is shopping.

Exclusivity: late, small and conditional

Give it last, and give it small. A fair first agreement fixes the area, a first term, a minimum purchase in each period, and a clause saying exclusivity lapses when the minimum is missed. Add a right for you to sell directly to named customers, such as a government buyer or a customer you already have.

A lawyer who has drafted international distribution agreements should write the contract. It should cover area, duration, minimums, pricing and how it may change, and use of your trademarks. It must also cover payment terms, termination, what happens to stock, and where disputes are heard.

An invented example: a coir-mat maker in Alappuzha

Take an invented coir doormat and matting maker in Alappuzha. A distributor in Nairobi writes asking for exclusive rights across East Africa, promising large orders. The website showed a warehouse, a catalogue of other Indian brands and a long list of "partners".

The temptation was to say yes, because exclusivity looked like the price of a large buyer. The owner put the questions to the distributor instead. The answers named customers in one city only, two Indian brands dropped after a season, and a request for ninety days of credit on the first order.

The owner offered exclusivity for that one city. It would run six months, with a purchase minimum. The first order would be against payment secured through the owner's bank. If the minimum was missed, the area would reopen. The distributor grumbled about credit and placed a smaller first order. The owner got a test of the market without handing over a region.

It could have gone the other way, and the distributor could have walked. The owner accepted that, since losing a deal was better than being locked in with a partner who could not name their own customers.

When a distributor is the wrong choice

When your volume is too small to interest a good one. A strong distributor wants a range and steady supply, and a maker with a handful of designs may do better selling directly to a few importers or retailers. Another case is a product that needs on-site service or training. The distributor must then be able to do it, or you need an agent.

The wider route to overseas buyers, including registrations, is in how to get export orders.

Before you reply

Put the three question lists on one page, tell the distributor you will call, and ask for documents and references in advance. Appoint for one area and a short first term, and put the way out in writing. Export and international market development is the service that helps shortlist distributors and structure the first agreement, and the rest of our sales work sits under sales. To begin, tell us what you need.