Your wholesale distributor could be one of your greatest assets - or your Achilles’ heel. Not all distributors are created equal. There are some who truly contribute value to their clients, while others quickly become a liability.
How can you tell the difference between the great ones and the others? Use these 5 criteria to evaluate whether your potential distributor is the right fit for your business.
1. Do they have a good reputation in the industry?
This is a simple question, but in my experience, it’s one entrepreneurs all-too-often don’t ask. Make sure you do your due diligence on each wholesaler you’re considering. Contact the appropriate professional organization, like the Chamber of Commerce or an import-export organization, and ask for references. Search internet forums for dissatisfied customers or former employees. Ask the wholesale distributor themselves for customer references.
By sifting through the information from all of these sources, you should be able to piece together a whole picture of their record.
2. Are they financially stable?
You don’t want to be faced with the linchpin in your supply chain going bankrupt. The distributor may not give you a copy of their financial statements, but there ways to get an idea of how financially stable there are. Their time in business is one indicator. If the company is less than a few years old, they may not have the capital to survive financial trouble. The company’s peers and the references you contact can also give you an idea as to how well the company manages its accounts. The other questions from this list you ask can also shed light on their position.
3. Do they have experience in your market?
Again, not all distributors are created equal. Does your candidate have experience selling your products - or at least similar products - to your target market? If not, can they demonstrate how they plan to successfully place your products on retailers’ shelves? Simply because the wholesale distributor has a great record and is financially sound doesn’t mean they can guarantee the success of your product.
If they do have experience, will they demonstrate their success in placing similar products with retailers? Will they let you know what competing/similar lines they carry and how they managed that success?
4. Are they sufficiently prepared to distribute your product?
Can your products be adequately warehoused in their facilities? If they’ve never sold a product like yours before, are they sure they’re prepared to meet the unique needs of your product’s storage requirements? Do they have adequate space? Do they even have such facilities? (You would be surprised how often that question is answered in the negative.). Find out if they have the right distribution channels prepared to move the amount of inventory you’ll be selling. Do they have sufficient sales outlets for the volume you plan to move?
5. Do they sell in your target area?
If you’re building your brand presence in a targeted geographic area, does your potential distributor even sell in that area? What are their relationships and how strong are they? Don’t rely on a simple “yes” from the distributor - ask for stores, contacts, and references. Verify the information they give you so you can be sure they’re adequately prepared to sell your products to your ideal market. Are their customers selling to your target market? Will the individual you’ve created the product for be able to find it on the store’s shelves?
It’s up to you to perform you due diligence on your wholesale distributor before making an agreement. Don’t assume they understand your product or the customer for whom it’s intended. Make sure they’re prepared to buy, stock, and distribute your product to your ideal markets. Your success is up to you!