The potential problems of this traditional distribution model in China
First of all, it's true that distributors in China can help you sell, but they can not help you grow. In fact, the distributor has little loyalty to the brand, especially if its sales in China are modest or if it is a brand still relatively new in the market.
Just Sales Channel
Remember that having a distributor is just a sales channel, but does not provide a long-term strategy. Many international brands are satisfied with their distributors, but this is because they generally have much more control over marketing activities and can communicate with local conditions.
They will often enjoy a stronger position in the market, long-term relationships with distributors and the benefits of advertising and word of mouth in the domestic market. It's easier for the relationship to be win-win.
Working with wholesale agents or Chinese distribution companies is the first step to exporting to China. The creation of your own subsidiary is often troublesome because of the many regulations. Due to the size of the country, your Chinese sales agent or distributor may be much larger than your own business and require a different approach than you are used to.
Distribution Channel management includes wholesalers, e-commerce websites, catalog sales, consultants, direct sales and retailers.
Advertising and other marketing methods would then attract the attention of the buyer. However, the best promotion or marketing will not be sold if the product is sold or distributed in the wrong place. Send feedback History Saved Community
I am going to link all the above to the distribution relationships in China, or at least you should be, since the title of this message is "Sell in China: Is your distributor your friend?" Well, there it is.
That's because on my return flight from China , I read a very good article from Forbes magazine, written by Frank Lavin, CEO of Export Now, a US-based company that helps "brands succeed in the Chinese digital space. The article is titled Sell to China: Is Your Distributor agood partner?
West VS CHINA
And it discusses the "disconnect" between Western Brands and their Chinese distribution partner. This article stimulated this post. it begins the article with the following example of this disconnect: A global sports equipment company has recently been frustrated by its sales in China. explained this website
The company was growing strongly thanks to the tennis racquets it manufactures, but its badminton sales were a disappointment.
Logistic and Support
Why contrasting fortunes? Because the brand's distribution partner in China refused to stock the company's badminton equipment.potential problems of this traditional model in China First of all, it's true that distributors can help you sell, but they can not help you grow. In fact, the distributor has little loyalty to the brand, especially if its sales in China are modest or if it is a brand still relatively new in the market. Remember that having a distributor is just a sales channel, but does not provide a long-term strategy.
source https://www.chinalawblog.com/2018/12/selling-to-china-is-your-distributor-your-friend.html
Many international brands are satisfied with their distributors, but this is because they generally have much more control over marketing activities and can communicate with local conditions. They will often enjoy a stronger position in the market, long-term relationships with distributors and the benefits of advertising and word of mouth in the domestic market. It's easier for the relationship to be win-win. Working with wholesale agents or Chinese distribution companies is the first step to exporting to China. The creation of your own subsidiary is often troublesome because of the many regulations. Due to the size of the country, your Chinese sales agent or distributor may be much larger than your own business and require a different approach than you are used to. Channel management includes wholesalers, e-commerce websites, catalog sales, consultants, direct sales and retailers. Advertising and other marketing methods would then attract the attention of the buyer. However, the best promotion or marketing will not be sold if the product is sold or distributed in the wrong place. Send feedback History Saved Community
"Do not blame me," protested the distributor. "Badminton is not popular in China." The distributor thought that if he stocked his stocks, he would not be sold to the country's pros shops.
Responsability
This is not how relations between manufacturers and distributors are supposed to work. In the traditional model, the distributor assumes responsibility for marketing the products and developing the business. It is the distributor who establishes partnerships with wholesalers and retailers, supplying them with the latest lines, stocking their stocks, and can in return benefit from a 50% higher margin.
Lavin then notes that in the West, the relationship between the distributor and the brand owner is more advantageous for all parties, the two companies collaborating to create the brand. This is not generally the case in China, however, as Chinese firms tend to focus more on short-term profits:
In China, however, these conditions rarely apply. The brand is often new on the market, does not generate (yet) high turnover, and the distributor can process between 40 and 200 different brands. Why should they care about yours, especially if other brands are growing faster?*
Marketing and frustrating situation
You could end up in a frustrating chicken-egg relationship. The distributor does not want to promote your product if it is not a winner, but the only way to make it a winner is to expand its distribution.
My favorite answer is the following and I put it in almost every speech I made, as was the case in my two speeches in China:
or distribution contracts, that is to say clearly what your distributor is required to do and the penalties if it does not do so. In particular, it means being able to sell through additional channels if your Chinese distributor is not working diligently enough for you. Or as Lavin says from the business point of view:
Is your distributor your friend? NO.
Kind of. However, the best approach in China could be to cultivate the distributor relationship for your high volume items and rely on ecommerce for the full product line, new product launches and customer engagement activities. . Distributors are more likely to help you when they see you have an e-commerce strategy. The best way to cultivate a friendship with this distributor is also to cultivate a friendship with e-commerce.
