How to Evaluate Potential Overseas Distributors

by Laurel J. Delaney, excerpt from Exporting:  The Definitive Guide to Selling Abroad Profitably

A distributor or importing wholesaler buys products from you (the seller or exporter in this case) in large volumes, and then warehouses, distributes, and resells them to its customers. It also takes care of after-sales service. It is the most common first-tier buyer you will find when you start exporting and can offer the most efficient and profitable way to get your product to the consumer.

When evaluating prospective overseas distributors, look for the following critical characteristics:

1. They trade in the geographic areas where you want to sell your product.
2. They have experience in importing, selling, marketing, and promoting your type of product.
3. They have distribution channels in place that will reach your targeted consumer.
4. They distribute products that are similar to yours but are noncompeting.
5. They are large enough in size to accomplish the desired results.
6. They have the financial strength to meet the demands of your business over the long haul.
7. They have a substantial number of sales outlets and a record sales performance.
8. They have facilities to warehouse your products.
9. They have a reputation in the marketplace for scrupulous honesty, reliability, and regular customer service.
10. They deliver the kind of after-sales follow-through you’ll be proud to have associated with your product.
11. They understand local culture, know how to negotiate the ins and outs of government regulations, and might even have helpful political connections.

After you find a distributor or two that match this criteria, I recommend that you meet with each one—preferably in person (post-COVID), or via Zoom if you are conserving expenses and practicing good safety measures—and decide which one comes closest to sharing your views on market penetration.

You will be establishing an important and long-term relationship, ideally, and that means you should find out everything you can about them well before you structure any contract. When you interview them, use the following list of questions as a guide:

1. How long have you been in business?
2. Can you share a few success stories about similar yet noncompeting products you have sold?
3. Have you represented other foreign companies? Explain what you did.
4. How long has your relationship lasted with the top three companies you represent?
5. How will our line fit in or complement your existing portfolio of products?
6. What’s your game plan for building our brand in your country?
7. Do you have good market coverage, including a trained and educated sales force?
8. What specific territory, customer type, or product range are you interested in covering (either exclusively or nonexclusively)?
9. Can you deliver on pre-agreed sales targets?
10. Where do you see our brand in three, five, and ten years?

Laurel tip:  Conducting serious due diligence on a distributor who intends to buy a large volume from you consistently over the course of years can spare you from headaches later on. You don’t want to doubt your partner throughout the relationship. The relationship should be fluid, trusting, adventurous, and growth oriented.  For more information, read, “Questions to Ask Distributors Before Working Together:”  https://www.thebalancesmb.com/prescreening-overseas-distributors-1953335