A common industry debate revolves around the size of the distributor (or broker) you choose to represent your brands. Does your company prefer to be positioned as one of many brands in a leading distributor’s portfolio? Or is it your company strategy to be a “big brand” in a smaller companies operation? Read below to understand the “pro’s and cons” of each alternative.
Big Distributors Can Deliver Big Benefits
Large distributors offer scale versus smaller competitors.
Their strong portfolio of brands gives them more clout with retailers, and deeper coverage, particularly outside the main cities and “down the trade to smaller shops”. This critical mass usually generates logistics efficiency and cash flow that a distributor can reinvest in people, technology, and broader services. A successful big distributor shares “best practices” from their different principals. Importantly, a big distributor is an essential partner to their local retailers, with good access to senior management and the ability to get paid “first” in challenging economic environments. A big distributor (or broker) thrives by bringing more principals into their “model” to offset the cost of fixed investments in people, technology, and infrastructure. This presents a challenge, as many manufacturers compete for the same resources and share of attention.
Small Distributors –Entrepreneurial Spirit
Pioneering a new brand or smaller company is a challenge. Smaller distributors are willing to accept the mission to build a brand they believe in. Small distributors offer the same fundamental services of key account sales, retail coverage, brand management, and logistics. Their size does not provide the scale or depth of coverage as a large distributor. Small distributors have fewer principals, so they tend to be responsive and flexible. The distributor (or broker) owner will probably be involved in the management of your business. These companies are “hungry” and are experts at delivering results with limited investments in marketing support. Key challenges usually relate to the financial resources to compete in technology and store level coverage. This can be an issue as a brand strives to build market share towards leadership in a large category.
When is Bigger Better ?
Big distributors tend to be a better solution when you have a large, existing, business that requires a full array of services at a competitive rate. They succeed in countries where it is necessary to maintain massive “in-store” sales and merchandising teams to cover small stores and remote areas. Big distributors are also a good choice in countries where financial stability is a consideration, as they can leverage their ample brand portfolio for prompt repayment .
Good Results in a Small Package
Small distributors function well in a start-up situation for a new company or smaller brand. Their entrepreneurial spirit can deliver good results with limited investments. They often have excellent relationships with retailers that can be leveraged on your behalf. Small distributors (or brokers) can be a good alternative in countries with lower population or consolidated retail environment. Smaller distributors serve as an option for larger companies that seek to be the leading principal for a distributor or in countries where they allocate lower investment levels of marketing support.
People Make a Difference!
There is no magic formula to determine whether a big distributor or small distributor is the right choice to build your business. My preference is to identify a passionate team who demonstrate enthusiasm and the time and commitment to develop the brand. Most markets feature many distributors with the basic “tool kit”. The key is your ability to motivate your partner to apply distributor resources for the benefit of your brand.