Notes for owners · Channel and customer growth
When to take on a distributor and when to sell direct
A decision guide for manufacturers on credit, spread and customer data: what a distributor takes off your hands, what a distributor takes from you, and a hybrid that keeps the accounts that matter.
The GullySales team · Updated 17 Oct 2026 · 6 min read
On this page
Take on a distributor when the jobs you cannot do yourself are carrying credit and reaching many small buyers. Sell direct when a few large buyers give you most of your volume and you need to know them. A distributor takes on your risk and your reach. In return you give up margin, sight of the end customer and some control over the price the distributor sells at.
The question underneath is who carries what
Do not start with the commission. Start with the list of jobs between your factory gate and the final buyer, and ask who will do each:
- holding stock near the buyer;
- giving credit and chasing payment;
- visiting small buyers regularly;
- fixing a complaint on the spot;
- knowing who the buyer is and what the buyer is planning.
A good distributor can do the first four. The fifth they will do for themselves and may not share with you. That can be the real price of the arrangement, more than the margin.
Three tests, applied account by account
Apply the tests to your buyers in groups, not to the business as a whole. Most manufacturers end up with a mix, so decide each group on its own.
| Test | Points to a distributor | Points to direct |
|---|---|---|
| Credit | Many small buyers, each needing thirty to sixty days you cannot afford to carry | A few large buyers who pay on a known date |
| Spread | Buyers scattered across districts you cannot visit | Buyers within reach of your own team |
| Data | The end customer's name does not change what you do | You need the buyer's plans, drawings or specifications to make the product |
If two of the three point one way, go that way for that group. If they split, start with the route that keeps the data, and add a distributor later for the group where one clearly helps.
What a distributor takes from you
Say these to yourself before you sign. Better to hear them now than from a lawyer after a quarrel.
Margin. The distributor's share comes off your price or sits on top of it. Work out your net rate after the distributor's share before you agree a territory.
The customer's name. If every order comes through the distributor, you will not know who uses your product, and you will not hear their complaints. When a rival offers the distributor a better margin, your customers may go with the distributor.
Price control. A distributor may discount your product to move stock, and the dealer next door sees it. Agree a floor in writing and keep an eye on the market.
Your attention. One distributor in a state is easy to look after. Twelve across states need a person whose job is to look after them. Our note on how to find dealers and distributors covers where to look; this post is about whether to.
A way to keep both: the carve-out
You do not have to choose once for everyone. Write down three lists before any appointment:
- Accounts you keep. Named buyers you already supply or will quote yourself.
- A size line. Any single order above a stated quantity is quoted direct, and the distributor earns a stated fee for the territory if the buyer is in it.
- Pass-back rule. Enquiries from the distributor's territory that reach you are handed over within a stated number of days. Enquiries the distributor gets about your carved-out accounts come to you.
Put all three in the appointment letter. They cost nothing to write and settle the commonest quarrels before they start.
An invented case: a PVC pipe and fittings maker in Alwar
Take an invented pipe and fittings unit in Alwar, Rajasthan. It sells direct to a handful of builders and housing contractors around Delhi and wants plumbing dealers in Uttar Pradesh without hiring a team.
The owner appoints one distributor in Lucknow for the dealer trade across the state. The distributor takes stock, gives credit to dealers and visits them. Within months the owner learns that a housing contractor in Noida, one of the owner's own direct accounts, is buying from the Lucknow distributor at a lower rate. Neither side did anything wrong. The distributor had surplus stock, and the contractor had found the distributor.
The appointment letter had no carve-out. The owner now writes one. It names the direct accounts, sets a size line above which the owner quotes directly, and adds a pass-back rule for enquiries that land with the wrong party. The owner also asks the distributor for a list, each quarter, of the dealers supplied. The quarrel over rates ends, and for the first time the owner sees which dealers are buying the pipes. The distributor, however, asks for a wider margin on the dealer trade to make up for the lost Noida sale, and the owner has to decide whether to give it.
When neither route is right yet
Do not appoint a distributor if your product has quality problems you have not fixed. The distributor will carry the complaints to your buyers and the market will remember. Do not appoint one if you have no capacity to supply extra volume, since a distributor who cannot get stock may go to a rival.
Do not stay direct only because you like the margin, if the real reason you cannot grow is that you cannot reach buyers or fund their credit. Count the buyers you could not reach last year, and put a rupee figure on the orders they might have placed. If that figure is bigger than a distributor's share, direct is costing you more.
Draw the three lists first
Take last year's invoices, sort the buyers by the credit, spread and data tests, and write the three carve-out lists before you speak to any candidate. For a decision on your own product and territories, route to market and distribution strategy is the service, the manufacturing hub has more for factories, and you can tell us what you need.
