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What is a distributor?

    • 63 posts
    January 18, 2012 11:45 PM EST

    An entity that buys noncompeting products or product lines, warehouses them, and resells them to retailers or direct to the end users or customers. Most distributors provide strong manpower and cash support to the supplier or manufacturer's promotional efforts. They usually also provide a range of services (such as product information, estimates, technical support, after-sales services, credit) to their customers.

     

     


     

    • 355 posts
    April 23, 2007 8:21 AM EDT

    Hi GrillCharmer,

     

    Just a word of caution.  Verify the person you are dealing with is actually what they say they are.  An author in another forum was contacted by a “book distributor.”  He set up a deal to purchase roughly 50 copies of her book.  The author was told she would receive a check via Fed Ex to pay for the books plus freight cost.  The author was to cash the check, keep the purchase cost and send the remainder of the money via money gram to a representative (address to be provided) who would then arrange shipping.   

     

     

     

    The check (drawn against an out of country bank) arrived and was for far more than the agreed upon purchase costs and estimated freight fees.  Approximately three times more.  There was also a note with the check telling author to cash the check and subtract the purchase cost plus ten percent for author’s inconvenience.  There was also an address the author could use for the money gram for the remainder of the amount.  The check turned out to be a bogus check and the author had to make good on the check at the local bank.

     

     

      

    A valid distributor will have a web address and a list of other companies they represent.  You should be able to look these other companies up on the internet and see if the company you are communicating with is actually one of their distributors. 

     

    I bring this up because I just finished writing an article on another company claiming to be a textile distributor.  They were a fraudulent company.

    nevadascul2007-4-23 15:11:54

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    The older we get, the more excuses we make for not chasing after our dreams. But truth is, goals are attainable at any age.

    • 355 posts
    April 24, 2007 7:57 AM EDT

    Hi GrillCharmer,

     

    Have you thought of contacting the major barbeque grill manufacturers to see if they would be interested in your product as an accessory?  You can look them up on the internet.  Or, go to Thomasnet.com.  Thomasnet.com used to be Thomas Registry.  They list business by name, category and several other ways.  You can look up contact information for most companies operating in the U.S.    

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    The older we get, the more excuses we make for not chasing after our dreams. But truth is, goals are attainable at any age.

    • 51 posts
    April 18, 2007 4:12 PM EDT
    Distributors are the intermediaries. You would want to use them if they can get to customers that you cannot get to for lack of time, resources or inability to properly serve the account.

    For example, you may ship in pallets but some customers may want cartons. Your business may not be geared to support small orders but the distributor can.

    The typical margin scenario that you suggested is consistent with my experience in hardware, food and automotive channels. The more margin you offer to the distributors, the more they will push your product over the other lines that they typically carry.

    When you get a call from someone seeking to be a distributor, ask some questions:
    - how long have you been in business
    - what lines do you carry
    - what is your customer base
    - what percentage of your business is with each of those customers
    - do you have a sales force - how many employees
    - sales force on commission or salary
    - do you have your own trucks/warehouse/accounting/EDI/marketing/etc

    These are a good start to filter out the folks that want to add you to get some deals but cannot execute your programs.

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    A good idea is a good idea NOW![sup]TM[/sup]

    ethnicomm inc. | sales | marketing | web | strategy consulting

    • 376 posts
    April 18, 2007 2:55 PM EDT

    Here’s the situation… I got a call out of the blue today from a gal in the Mid-West who happened upon my product and website.  She is a distributor for complimenting products (gourmet spices and foods).   Here are my questions (and there are many) .  What EXACTLY is this enigmatic entity called “distributor” ??  I know what the dictionary says so regurgitating Wikipedia isn’t what I need, I need the real skinny.  What is it REALLY?  In a very generic sense, what do they expect? What are their terms?  What should I expect? Using your standard COG $2.50-Wholesale price $5.00-MSRP $10.00 where do they fit in?  Do they normally keep an inventory?  I need the nitty gritty.  The term seems so vague to me and I don’t know what I should expect to give and receive from someone calling out of the blue saying “I want to be your distributor” 

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    Leslie
    Founder and President
    Charmed Life Products LLC
    Grill Charms™… The MUST HAVE grilling accessory that is revolutionizing the American Cook-out AND The perfect gift for any occasion!
    Grill Charms
                                                                                                        

    • 376 posts
    April 19, 2007 9:29 AM EDT

    Thanks guys!!  It’s all becoming a little clearer.  So a distributor actually purchases my product as a price lower than what I am offering to my retailers but at larger volumes right? 

    Storybook, thank you for the link, I’ve got tons of reading to do from Entrepreneur. Com

    Ethniconn, great questions, I will most certainly ask and CookieMonster, you have made it very clear and it make complete sense.  ( I think it is just hard for me at this stage to imagine being in such high demand that I can’t fulfill all the orders, but that’s a mindset I need to get VERY comfortable with because that’s where this train is heading!)  You are absolutely right!  (It is so funny you should use the Dole example, I lived in Hawaii for 6 years and I can still remember the smell of the factory on the way to Honolulu)  I actually toured the plant on a school field trip… memories)

    Steve, thanks for the book, I’ll see if my library is cool enough to have it!  I just want to be clear that a distributor actually buys your product in bulk then what he does with it, is his business right?  By this logic, is there ever really a drawback?  It’s a sale right?  And a pretty big one at that usually?  (I KNOW full well that I’m showing my naivety with these questions, but I’m playing devil’s advocate because I want the real scoop and I know you guys will tell me)  Do distributors want exclusivity?  If they do, then most certainly I can see how selling to the wrong one would be bad because you have locked out anyone else from distributing your product, but if not, what’s the downside?   Okay, I’m not using the right term.  A bad distributor is bad yes because they represent your product, what I mean is “small”.  I don’t think this gal has tons of business and I think she’s more of a 1 or 2 person operation, but if she’s “good” and just isn’t’ a big dog, what would be a reason to not give her a shot?  (Assuming she has a good business, customer service, etc…)  Enlighten me more oh great ones!!!!

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    Leslie
    Founder and President
    Charmed Life Products LLC
    Grill Charms™… The MUST HAVE grilling accessory that is revolutionizing the American Cook-out AND The perfect gift for any occasion!
    Grill Charms
                                                                                                        

    • 376 posts
    April 19, 2007 1:49 PM EDT
    I kinda figured there were no simple answers, but I was hopeful  I`m learning that the term "distributor" means so many things depending on who your talking to.  I`m thinking that no two people or companies that call themselves "distributors" will have the same or even close to the same terms or even services.   (some hold inventory, some don`t, some are involved in "sales" but most aren`t)  YIKES!   As with every other aspect of this biz, I`m going to learn and read all I can, and just jump in with both feet! 

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    Leslie
    Founder and President
    Charmed Life Products LLC
    Grill Charms™… The MUST HAVE grilling accessory that is revolutionizing the American Cook-out AND The perfect gift for any occasion!
    Grill Charms
                                                                                                        

    • 376 posts
    April 20, 2007 6:30 AM EDT

    Craig, yes, you are right.  I think "sole distributorship" would be dangerous!  I will certainly read the find print and try to be smart about negotiations.  I have not heard back from this gal, so looks I can save the stress for another day.   Once I have my product I`m going to have TONS more questions!

    GREAT suggestion Steve.  I`m not good with computers so I didn`t even know such "programs" existed!  THANKS!  I`ll will put your post in my "marketing" folder and the second I get my product in hand, I`ll start pounding the grates!

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    Leslie
    Founder and President
    Charmed Life Products LLC
    Grill Charms™… The MUST HAVE grilling accessory that is revolutionizing the American Cook-out AND The perfect gift for any occasion!
    Grill Charms
                                                                                                        

    • 376 posts
    April 22, 2007 3:49 AM EDT
    You are exactly right.  I am now thinking of all of these things and I have the great book reference.  Funny you should mention Chris, as she has my mentor to some degree.  Even though our business are very different, she has been such a wealth of knowledge and inspiration.  Thank you all for getting me thinking as you said, and I`ll be back soon with lots more questions!

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    Leslie
    Founder and President
    Charmed Life Products LLC
    Grill Charms™… The MUST HAVE grilling accessory that is revolutionizing the American Cook-out AND The perfect gift for any occasion!
    Grill Charms
                                                                                                        

    • 376 posts
    April 23, 2007 9:12 AM EDT
    Nevadascul, THANK YOU!  I asked this women to email me some information about her and her company and she never did.  Warning huh?  It is a very good reminder to be ever mindful of the predators out there. Thank you for your cautionary tale.  I will certainly take it to heart.  (Heck, I`ll probably be posting again next time I get another call!)  I feel safer in numbers!

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    Leslie
    Founder and President
    Charmed Life Products LLC
    Grill Charms™… The MUST HAVE grilling accessory that is revolutionizing the American Cook-out AND The perfect gift for any occasion!
    Grill Charms
                                                                                                        

    • 376 posts
    April 24, 2007 9:25 AM EDT
    Thanks nevadascul !  I actually have though of several strategic alliances so to speak.  Year 2 and 3 of this biz is going to be very interesting!  I`m just dying to get my product done! 

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    Leslie
    Founder and President
    Charmed Life Products LLC
    Grill Charms™… The MUST HAVE grilling accessory that is revolutionizing the American Cook-out AND The perfect gift for any occasion!
    Grill Charms
                                                                                                        

    • 376 posts
    April 25, 2007 6:14 AM EDT
    Good to know we are on the same page... That is also part of my plan...  I also planned on approaching spice and rub companies like McCormick w/ the McCormick collection and if people bought so many spices they would get a free Charm and within 6 months people could have the entire Limited Edition "Mccormick Collection".  Yep, I`ve got TONS of marketing stuff up my sleeve   Keep it coming!  Man I am so ready to launch these suckers!!!  (still working on the manufacturing though...)

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    Leslie
    Founder and President
    Charmed Life Products LLC
    Grill Charms™… The MUST HAVE grilling accessory that is revolutionizing the American Cook-out AND The perfect gift for any occasion!
    Grill Charms
                                                                                                        

    • 394 posts
    April 18, 2007 9:38 PM EDT

    A distributor also optimizes transaction speed. Dole Foods does not want to ship to every single grocery store. They want to ship their pineapples to 50 places instead of 50,000. Distributors then use their network to handle point-to-point distribution.

    Imagine a white sheet of paper. Put a picture of a pineapple in the center. Now surround the pineapple with thousand and thousands of dots representing stores and connect those dots to the pineapple. This would be a very inefficient network graph as it requires one transaction per store. Since there is friction associated with each transaction, margins are decreased. Since there are a lot of transactions, the margins can decrease a lot. Sometimes exponentially, but usually linearly.

    Now imagine that same white paper with the pineapple in the center. Surround the pineapple with a hundred dots, each representing a distributor. There are only 100 transactions here, instead of 50,000. That is a much more efficient network. Thus less profit is dissipated because of the decreased transaction scale. This is called transaction granularity. Too much granularity is very inefficient unless the friction of each transaction is very very very low.

    The great thing about distributors is that they often have the ear of retail buyers. So a distributor looking at your product might have access to retail buyers - retail buyers who probably wouldn`t even return your calls. They have their weekly conversation and the distributor mentions this new gadget... the retailer says "great, i`ll take ten". The distributor has a similar conversation with the next buyer and pretty soon there is an order for 1000 gadgets. You sell your gadgets to the distributor. The distributor adds their own mark up and sells them to the retailer. The retailer adds a markup and sells them to consumers.

    I hope this helps. I can recommend a few books on transaction granularity and measuring network efficiency if you`re interested.

    • 394 posts
    April 19, 2007 11:52 AM EDT

    The Strategy & Tactics of Pricing is a great book. I recommend it from time to time. Not a light tome but worth reading.

    Anyway. There aren`t any real simple answers to your most recent questions. Yes, distributors sometimes want exclusivity. Sometimes if they buy a product from you, it`s their business. Sometimes they might force you to accept unsold inventory. There are many variables.

    Sales minimums are also variables. There are probably as many approaches as there are companies. I do know that retailers tend to have individual contracts with distributors with different terms. So... I can`t really give you more specifics.  

    • 1 posts
    March 28, 2011 8:19 PM EDT

    Distributors are the primary electricity billing agent, dealing directly with residents and tiny businesses and the giant majority of distributors are municipally-owned.

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    ZoomBits

    • 234 posts
    April 19, 2007 4:26 AM EDT
    CookieMonster hit the nail on the head. The greatest value of a distributor is their list of contacts who already are doing business with them.

    Your goal is to sell a product to a consumer. That doesn`t mean you have to do it all yourself. It`s no different than deciding not to open a store just to sell your product. It wouldn`t be cost effective. For you to make the rounds of gourmet stores selling just your product would not be cost effective either. The distributor is already in the store on a regular basis. Adding your product to their offerings gives them something more to offer. At the same time it expands your reach beyond what you could do on your own. A good distributor is worth every penny or percent you pay.

    Since you mentioned standard markups I thought I`d recommend a great book someone else on SUN told me about called The Strategy and Tactics of Pricing. A must read.
    • 234 posts
    April 20, 2007 5:21 AM EDT
    Just as with any other transaction or partnership, both sides need to know what is expected of each. Best to put everything in writing. As with most business issues there may be "industry standards" but really everything is negotiable.

    Have you considered an affiliate program for people who sell or blog about all things grilling (barbecue sauce, mustard, rubs, etc.)? They`ve already got the traffic. You pay a percentage for each sale resulting from a click-through from their site or blog. As soon as you`re ready to ship you could send samples to the top gourmet bloggers to get the ball rolling.

    • 20 posts
    April 26, 2007 7:07 AM EDT

    Hi Leslie

    I agree with majority of what has been said. However, note that some distributors will want exclusivity in a region or on a product. Be really careful here as normally you dont want to bind yourself to one particular distributor unless they can guarantee you volume sales.

    SC

    www.jekm.com

     

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    Business Development Services

    • 158 posts
    April 18, 2007 3:21 PM EDT

    Hi Leslie - me again ;0)

    I don`t know `the skinny` just yet, but here is a very interesting article with alot of information about distributors:

    http://www.entrepreneur.com/growyourbusiness/howtoguides/art icle80784.html

    It seems as though distributors work almost the same as a sales representative would, but without the sales end of it, and on much larger scale. They may also take on addition responsibilities, such as warehousing, invoicing, ect - basically acting as a go between, for you and your retailers. Here`s another definition of distributor:

    1. Distributors. Also known as wholesalers, brokers or jobbers, distributors buy in quantity from several manufacturers and warehouse the goods for sale to retailers. Although their prices are higher than a manufacturer`s, they can supply retailers with small orders from a variety of manufacturers. (Some manufacturers refuse to fill small orders.) A lower freight bill and quick delivery time from a nearby distributor often compensates for the higher per-item cost.

     

    Hopefully that will help!

     

     

    storybookstudio2007-4-18 20:30:35

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    Melissa Yamello
    Owner/Designer
    Storybook Studio
    www.storybookstudio.net

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