International high-tech companies wishing to extend their global reach to new territories may opt for building up indirect sales channels. Using distributors is a common option.
Distributors may be defined differently in different industries and by their respective players. By a distributor we refer to a legal commercial entity in the target market which is legally and organizational wise independent from the international company and which:
• Commits to promote, sale and optionally provide implementation and first line support services, if applicable, to their local customers – within their market/territory – for a certain commission or revenue share.
• Potentially stores and distributes (wherever goods are concerned) and provides integration and localization (for software products) services, if applicable.
• The international company believes can either sell more successfully or provide better support and implementation services (if applicable) than its inside sales force or support team respectfully , or can conduct these activities at a lower cost or investment than if the international company would have taken any of these responsibilities directly.
This post does not deal with the common considerations of whether international companies should rely on their fully owned sales force or subsidiaries to build an indirect sales channel, or why to select the distributors model among the other indirect sales channels.
Our aim is to provide possible and practical directions on where and how to start the search efforts for potential distributors, if and once the international company has consciously decided to opt for this sales channel in some or all of its target markets.
Following is a suggested list of methods. Please note that in each one we try to identify the benefits not only for us (representing the international company) but also for our future distributor or any other party involved in the process:
• Companies which sale complementary products to ours in the relevant territory. In other words, companies whose local client base is comprised of our target customers and therefore:
• Are acquainted with the potential customers of our products (which could either be part of their client base or their potential customers) and should have some familiarity with our business or product category.
• Have an opportunity to extend and vary their offering to their client base.
• Local Competitors – we occasionally might find a local company which produces or develops products of the same category as ours that are already technologically outdated and therefore:
• Is familiar with our target customers and specific industry.
• Could potentially replace their obsolete products with ours, without the need for substantial investment in a new product development or production facility, or maintain two lines – ours for the high- end market and the original one for the other market segments and their respective probably lower prices.
• Distributors of our international competitors – we refer to local companies distributing products which compete with ours in some of the international markets. This is a very delicate issue and should only be tried wherever we have identified a sever weakness of our global competitor, which gives us enough confidence to approach a business partner that normally collaborates with a competitor. Such companies:
• Are normally very well acquainted with the market and therefore their learning curve is low. They are also accustomed to work with international firms.
• Their present client base is probably our potential customers.
• Might be interested in replacing their present declining vendor with another international company – in order to be able to retain their customers and continue to grow.
Note: We can begin our search for the three options mentioned above via the internet, online industry indexes or portals, social media channels, conference, exhibitions and other information resources as listed below.
• Our international business or technological partners – Companies can leverage the global and extensive presence of their technological and international business partners, which are normally large corporations with offices around the world. Our focal contact person may wish to help us and facilitate a meeting with their local office in our target market to assist us in locating a distributor. This way:
• We get introduced to a local office of an international company that can understand what our needs are (from the similar perspective of an international company acting in industries that integrate to theirs) and can benefit from their contacts and acquaintance with the local market.
• Our global business partner benefits from our potential increased sales, which should generate for it more revenues or sales, according to their business model.
• Economic representatives at embassies – We can approach the economic representative of our national embassies in our target markets and seek their advise, information and help. The purpose of these economic units is to promote and facilitate the trade and export of companies from the country they represent into our target market, where the economic representative is located. Therefore we can contact them and ask them to help us in the search and introduction of candidate distributors.
• Chambers of commerce between two or more countries which aim to achieve a growing level of economic collaboration between their member countries. They too might be a valuable source for business contacts and introduction of potential distributors.
• Industry conferences and exhibitions whether local, regional or international are known as common venues to meet potential customers, generate leads and support the direct sales process. However, some companies do not realize that these occasions can serve as excellent venues to observe and meet potential distributors – either among the attendees or among the exhibitors.
• Industry leaders can be indentified at conferences, or through professional magazines, reviews, websites, blogs or referrals from customers. By approaching them we:
• Can expect to be referred to potential distributors which are highly professional or technologically appreciated by an industry leader.
• The person, with whom we consult, will usually be happy to help, especially given the fact that by approaching him we’ve recognized his or her important role in our industry.
• As a byproduct, by interacting with such people during the process, we enhance the future collaboration between the contact person, the international company and the future distributor.
• Customers – sometime we neglect this source as we tend to consider our customers as organizations, with which we are not supposed to share our business plans in a given territory. But as a matter of fact, customers, if we have any at all in the target market, are an excellent information source, as are familiar with the industry and local players and no one could give us a more direct sense of the needs that the potential distributors should address, than them:
• Customers will usually be happy to assist and will appreciate that they were chosen to be consulted – this could enhance the relationship with this customer – even if the process does not yield a result.
• The customer may benefit in the future from having a local distributor who will provide them local support or other implementation services and in the local language and time zone.
• Personal contacts – we all have our network of contacts and therefore mentioning this here might seem too obvious. Still, I have decided to include it in the list in order to “institutionalize” this source in our searching efforts. Personal or historical business contacts that we have in a target market should be thoroughly addressed. These people are normally of great trust to you and you probably enjoy a high level of trust by them. Trust is a very good foundation for starting a renewed partnership. By systematically approaching these people we can:
• Consider them to build a new business dedicated to the distribution of your products, assuming they can cover the professional or technological gap to meet your company requirements.
• Help you with their own network of contacts to identify other potential local partners.
Have more ideas where to look for distributors in the international markets? Feel free to share them on this blog.