Should a manufacturer sell through dealers or directly to buyers? Decide by the reorder

A distributor wants sole rights for the whole state, yet your biggest account buys straight from the factory gate. Do not answer for the whole company. Answer line by line, buyer by buyer. Sell direct where the buyer is a named organisation that reorders on a schedule, or buys once for a project and needs your engineer. Use dealers where many small buyers reorder when something breaks and expect it on a shelf that day. A dealer gives you reach and credit to the trade, and keeps the buyer's name. The question is which buyers you can afford not to know.

Two questions decide it

Who is the buyer? Either a named organisation with a purchase department and a vendor code, or hundreds of small buyers you could never list. Think workshops, contractors, shops, farmers and mechanics.

How does the buyer reorder? On a schedule, because a production line or a plant consumes your product steadily. When something breaks or runs out, with no warning and no patience. Or once, for a project, and then not for years.

The reorder pattern matters more than owners expect, because it decides who has to hold stock and where. A scheduled buyer can be planned for from your factory. A breakdown buyer needs the part in their own town, today, and only a dealer's shelf can do that across a whole state.

The grid

Put each product line, and each kind of buyer for it, into one cell.

Many manufacturers find their lines land in two or three different cells. That is the answer: two or three routes, each written down, rather than one route forced onto every buyer.

The route between the two: an agent who holds no stock

Some named buyers are too far to visit and too few to justify a branch. A commission agent fills that gap. The agent introduces you, follows up locally and tells you what is happening inside the buyer's plant. But you quote, invoice and ship directly, so the purchase order, the vendor code and the buyer's name stay with you.

This works for project buyers and distant plants. It does not work where the buyer needs local stock or credit, because the agent provides neither. Put the commission, the accounts it covers and how long it runs in a written agreement; your lawyer should word it.

For example: a cable maker in Pithampur

Imagine a maker of brake and clutch cables in Pithampur, near Indore. The details are illustrative. It has three kinds of buyer. A tractor maker buys cables for its assembly line. Spare parts shops and mechanics across Madhya Pradesh replace worn cables. And a fleet operator orders now and then.

Two mistakes had crept in. The tractor account had come through a local trader, who invoiced it, so the vendor code at the tractor maker was in the trader's name. When the trader asked for a larger cut, the owner found he had no direct relationship with his biggest buyer.

The second mistake went the other way. Annoyed by distributor margins, the owner put two salespeople on the spare parts market in Indore to sell direct to retailers. The orders were small and the retailers wanted credit. Collections slipped within weeks. Meanwhile the distributor, undercut in its own market, started pushing a rival brand to the same shops.

The grid sorted both. The tractor line is scheduled and named, so it went direct. The owner registered with the tractor maker himself and paid the trader an agreed introduction commission for a fixed period. The replacement line is breakdown-driven and sold to hundreds of shops, so it went back to distributors, each with defined districts. The two salespeople now visit retailers to take orders for the distributor and collect mechanics' names for the brand. The fleet operators stayed direct, on a rate contract. The change was not clean: the trader took the commission badly, and two of the retailers the salespeople had won stayed with the direct price for a year.

When each choice is the wrong one

Going direct is wrong if nobody on your team will follow up, or if you cannot carry credit to small buyers. It is wrong, too, when buyers expect the part within hours in towns where you hold no stock. A direct route with slow replies is worse than a dealer.

A dealer is the wrong choice where the sale is won at the design stage. If an engineer specifies your part into a drawing, the dealer cannot hold that conversation and will not try. Do not let a dealer hold a vendor code at an OEM on your behalf. That account is yours or the dealer's. Make it yours.

Running both routes needs the split on paper: which accounts are yours, which are the dealer's, and whose price applies when they overlap. Our post on preventing channel conflict covers that agreement, and dealer first or direct first covers the same choice when you enter a new state. For auto parts makers, the OEM and replacement split is a natural starting point. The manufacturing hub has more for other trades.

Put each line in a cell

List your product lines down the side of a page. For each, write who buys it and how they reorder, and put it in a cell of the grid. Where a line sits in a different cell from the route you use today, that is the one to rethink. If you want help choosing the routes, see route to market and distribution strategy or tell us what you need.