Product distribution can be a very profitable and rewarding business. However, starting such a business requires a lot of planning and feasibility studies. Here are some of the things you need to consider when venturing into a distribution business.
1. Business plan
When starting a distribution business, most people fail due to lack of a good business plan. Before taking any other step, you need to have a clear plan which will guide your business in the long term. Here are some of the questions you need to ask yourself:
- What kind of products are you going to deal in?
- Which manufacturers can supply these products?
- What is your budget?
- How do you plan to market your products?
- What are your targeted sales and profits?
2. The manufacturer
It is very important to assess the manufacturer you want to work with. Here are some of the things you need to look out for.
- Reputation – Find out if the manufacturer has a good reputation in the industry. One of the best ways of getting information is by talking to individuals who have done business with them previously. Alternatively, you could search using the manufacturer’s name on Google to find out what people are saying about them.
- Terms and conditions – Before signing on the dotted line, take time to carefully analyze the manufacturer’s terms of business. Make sure the deal is favorable for you, and not just for the other party. For instance, you need to know if the company accepts rejected goods, and if they are ready to offer credit or a replacement. Ideally, they should be able to provide replacements right away. This will enable you to maintain a good relationship with your customers. Finally, you need to find out if the manufacturer’s terms give you the freedom to opt out of the deal in future.
- Support – You might need to get some specialized training before selling some products. Find out if the company is ready to offer this training for you, as well as your staff. In addition, check if the company holds frequent gatherings where distributors are informed about the latest products and services.
3. Marketability of products
This is a very important consideration when starting a distribution business. The products you are targeting should have a relatively good demand in the market. You need to ensure that the profit margin from your sales will be sufficient to sustain your business for the long haul, and not just for the short term. One of the best ways of establishing the marketability of products is to check the performance of other distributors over the past years. Is there any improvement in the level of sales over the years?
4. The competition
Find out who your competitors are in the business and study their distribution strategies. Take note of their strengths and any effective strategies you can adapt. In addition, identify their weak areas and consider how you can fill any gaps that have been left. When studying your competitors, you should also remember to check their prices for different products. This will give you an idea of how to price your own products. You could either sell them at a lower price or at the same price but with more value-added services.
Take time to carefully think through the logistics which will be involved in distributing your products. For instance, you need to consider how close the warehouse is to your customers. This will give you an idea of how much time it would take to deliver the products, as well as the costs involved.
Just like any other business, product distribution comes with its own risks. However, with good preparation and a never-say-die attitude, you will eventually succeed. Be sure to read trade publications regularly to stay updated on the latest trends and industry developments.