Packaging distributors and traders: when they help and when they take your customer

A packaging trader earns their place by reaching buyers your plant could never serve. Think of the hosiery unit that wants 300 boxes on credit by evening, or the machine shop that needs five sizes. A trader takes your customer when the accounts they hold are big enough for you to serve directly and you do not know their names. So let traders serve small, scattered buyers freely. For any account above a size you choose, set written terms on who registers it, who holds the specification, and what happens if the buyer asks to deal with you.

What a trader does that your plant cannot

A box plant runs on full lorries and thirty-day bills. A small user wants a few hundred boxes, a roll of tape and some stretch film, delivered by tempo the same afternoon, on credit from someone who knows whether the buyer pays. The trader carries that credit, holds mixed stock, collects small sums from many buyers and knows which of them are slow. Your sales team could not do this for two hundred small accounts. It should not try.

For that work the trader's margin is fair pay. Whether a manufacturer should sell through dealers at all is worked through in our post on selling through dealers or directly. Packaging has a twist that post does not cover. Here the trader can end up holding the specification, and whoever holds the specification can move the customer.

How a trader ends up holding your customer

Nobody decides it. It happens one order at a time. Watch for these signs:

• The trader orders a box under their own reference code, and you never learn the end buyer's name.
• The box carries no mark of your plant, so the buyer cannot tell who made it.
• One or two end buyers account for most of what the trader orders from you.
• Requests arrive for your spec card, with board grade, flute, GSM and die drawing, "for the buyer's file".
• A quote is asked for a buyer you already supply directly.
• Your rate turns up in another plant's negotiation.

Whoever holds the die drawing, the board specification and the buyer's name can move the job to any plant in a day. If the trader holds all three, the account is theirs, whatever your invoices say.

The account-sharing terms, on one page

Write these down with each trader. They protect the trader from you as much as you from the trader, so a trader who adds value has reason to sign.

1. Small accounts are the trader's. Below a size you agree, measured in boxes per order or value per year, the trader serves and you do not approach the buyer.
2. Larger accounts are registered by name. Above that size, the trader registers the end buyer with you. Registration protects the trader's account for an agreed period, as long as they keep ordering for it.
3. House accounts stay yours. List by name the buyers you already serve directly. The trader does not quote them.
4. Specifications are issued by the plant. Spec cards go out in your plant's name. Copies for the trader carry the box details, not the die drawing.
5. A plant code goes on the box, on an inside flap, unless the end buyer has a reason to refuse it.
6. Direct requests are shared. If a registered buyer asks to deal with you, you tell the trader. Then the terms decide: the trader keeps the account, or earns an agreed share for an agreed period, or the account moves.

Terms between a supplier and its resellers about customers and territories can raise competition law questions, and those rules change. Have your lawyer read the page before anyone signs. Keep it to accounts and specifications, and not to the trader's selling price.

Imagine: a box plant near Rajkot

Imagine a corrugated box plant near Rajkot that sells about half its output through three traders in Rajkot and Jamnagar. The figures are illustrative. Most of what they sell goes to small engineering and brass-part units. The largest trader also handled a Jamnagar brass fittings exporter buying five-ply export cartons in large lots. In the plant's books it was simply "code 14".

A plant in Morbi offered that trader a slightly lower rate. The trader moved the export cartons there, with the Rajkot plant's spec card in hand. The plant lost a fifth of that trader's volume in one go, with a gap in the order book it took two months to fill, and learned the exporter's name weeks later.

The owner then drew up the one-page terms with the two remaining traders. Accounts above an agreed size are now registered by name. Spec cards go out in the plant's name without the die drawing, and a plant code is printed on each inside flap. Now and then the owner visits the largest registered buyers together with the trader, so each buyer knows both faces. One trader signed straight away. The other refused, and the plant now sells that trader stock sizes only.

When to let the trader keep the relationship

Sometimes the trader owning the customer is simply what you pay for not running a sales team. A small plant with no appetite for collecting from two hundred buyers, and a full order book from a few large accounts, can let traders own the small market outright. Spread the volume across several traders so that losing one is survivable, and keep the specification in your name.

Cut a trader back to stock sizes when they refuse registration for every large account and most of their volume sits with buyers you cannot name. The rest of a converter's selling job is on the packaging manufacturing page.

Name the buyers behind each trader

List your traders, and under each one write the end buyers you know by name. Then mark the large accounts you cannot name. That second list is your risk, and it is where the first conversation about terms should start. If you want help drafting the terms through a dealer and distributor programme and having that conversation, tell us what you need.