These are some tips to keep in mind when working with local distributors
Check that your distributor is able to manage your local sales before you sign up for partnership. Before you sign up for a partnership, here are some key points.
Capabilities in the logistical and sales networks
A distributor must have sufficient distribution channels to be able to sell enough products. It is also important to know the retailers to which the distributor sells the products.
These items must be included in the distribution agreement. They include the number of shops they have/sell their brands to, current brands they distribute, typical customers, and the annual sales volume.
You should check if the distributor is active on local eCommerce platform. Also, look at buyer reviews and delivery times. Also, make sure to review the warranty and customer service.
Certain products may require special storage conditions. All products require cold storage. International companies should also make sure that their local distributors are qualified to supply these facilities to end-users.
Distributors may be focused on specific regions. This is particularly true for larger countries like China and Vietnam. Before a distributor can be selected, it is necessary to conduct a market analysis.
To plan the most effective market penetration strategy, companies must have a good understanding of the market. This includes an in-depth knowledge of the market, including consumer trends and applicable regulations. This can be done by either accessing public data or consulting a professional market research agency that is familiar with the local market.
It is a smart idea for foreign brands to partner with local distributors if they are looking to establish a Vietnamese presence. This can lead to a lower initial investment, lower compliance risks, and the elimination or creation of your own sales and marketing department.
It is important that you point out the disadvantages of working with distributors. Every additional layer between the manufacturer and consumer reduces profit margins.
Although distributors may have the experience and networks to generate immediate sales, they might not be in your best interests. This could cause problems if the distributor already sells one of your competitors' products.
Before you decide on a distributor, make sure to check their sales and marketing skills. This includes reviewing sales history and creating a waterproof contract.
It is not easy to manage registrations and it can make it difficult for you to sell your products locally. To ensure all paperwork is in order, both the seller and distributor must manage the registration process.
There are some disadvantages to working with local distributors
While there are many advantages to working with Vietnamese distributors, you should be aware of potential disadvantages and risks. Let's take a look at some of the most well-known ones.
It is difficult to control the sales process.
You have no control over marketing, sales, customer support, warranty activities, and partnership with a distributor. You need to be in close contact with your distributor to maximize sales and meet consumer expectations.
Distributors often don't meet their expectations, regardless of whether they are acting intentionally or not. Distributors may demand exclusivity or deliberately keep sales volumes low to benefit other brands. It is important to set minimum sales quotas on a quarterly basis, in order to avoid these situations.
If you only work with local distributors, and don't have a direct relationship to retailers, it can be more difficult. It is easier to assume the role of retailer if the distributor does this. This is especially true for B2B products, as well as non-FMCG products. Manufacturers have greater visibility into sales processes and more negotiation power.