distributors for my product. Advice, tips, pitfalls?

[Stirling]

I’m planning on reaching out to some distributors for to resell a small product line I have.

Machinist turned little businessmen…. So this is outside of my wheel house and i need to grow as an owner.

So as far as my conversations next week with an interested party, do you fellas have any advice? Tips, thoughts, pitfalls to watch for, gotchya’s….. what have your experiences been and what can I learn from you.

A million thanks!

 

[CarbideBob]

Be prepared for markups/disconunt that you will think unreasonable.

 

[jhov]

No experience here; I'm interested to see the answers. But considering ebay takes 13% for just listing an item and processing the transaction, I'd expect a distributor to take 30-50% depending on their size and customer base.

 

[Comatose]

Distributors or retailers?

For specialty stuff, a markup of 150% at retailers is the minimum they're going to want to play with, and they'd rather be more like 200%

A distributor that sells to shops is going to want 15-20% on top of that. So, selling through channels you have to be priced so that if you get half the retail price, you're making money.

Is that fair? *shrug*
Is that how it is? Yup.

 

[alek95]

My advice: do not allow anyone to be an exclusive distributor. Reserve the right to also sell direct to customers.

If your distributors are vital to your success, don't compete against them (do not sell at a price below MSRP), but never give away your right to sell your own product.

 

[goldenfab]

I talked with a guy a while back and he told me the story of a small product he had going that was selling in the $20 range through a big box retailer. The markup was like 400%, and I thought ebay was high. I can't imagine making any money if they are getting those margins. Check out amazon fulfilment services. I've briefly looked at it and it looked like all their prices are listed. This will at least give you another scenarios to crunch numbers.

 

[Garwood]

Your dealers will make way more than you do off every sale and will push any problems back on you. Don't expect them to give a shit about learning anything about it or caring about the customer after the sale.

Sell direct if you can. You have to make a website anyway- might as well be an e-commerce one.

Your dealers will probably fail to market your product effectively/correctly. You will probably end up doing marketing for your product yourself. Just to send folks to your dealers to buy it.

You're going to be shipping to your dealers or drop shipping. You can just not have the dealers and do about the same work for 200% more money.

Shopify. Ebay. Amazon.

 

[gustafson]

It depends what you are selling and who you are selling it to, and how expensive a product it is
Low dollar items need high markup just for a retailer to make money.
Mid priced items, say 200 bucks, you might still be in 100 percent markup range depending on volume

markup drops from there
you don't want distributors, you want retailers
reserve the right to retail, but at a price that you are not competing with your customers
stocking retailers get biggest discount.

Even with the internet, people are not looking for you, not calling or emailing you to buy things. Retailers can be useful, they deal with the one at a time stuff and let you sell the case qty
Everyone needs to make money.
Ebay can be a race to the bottom with guys putting your product up at too low a price and just having it there, even if they get no sales, will scare legitimate retailers out of selling your product.

 

[Comatose]

Distributors are super useful if you make something where there are 10,000 retailers, each of which will be purchasing 3 $10 items per month. Convenience stores, for example. No convenience store owner is going to spend the time to order those three products specifically, but if they can just throw it into the automatic reorder queue with xyz distribution co with a hundred other things? Sure.

Distributors are not valuable in a world where most of the volume goes through five big retailers. Sell those accounts yourself.

The more your product is part of a something else, the more useful retailers are. If you sell high end golf tees, you might sell some on your website, but you'd probably sell a lot more at pro shops.

I completely agree that expecting retailers or distributors to do ANY marketing or customer education is just going to end in disappointment all around.

If you told us what your product was, we might have more specific insight.

Me? I've sold product B2B to be incorporated in other finished goods, I've sold through specialty shops, I've sold through distributors, I've sold through Amazon. Never done big box or eBay.

 

[Scruffy887]

You have a wholesale and a retail price. You MUST have a profitable business at the wholesale price level. And you need to sell an awful lot of $20 items to make real money.
And if your $20 product is profitable and easy to make it will be copied. If you have a patent it will only be as strong as your first lawsuit to protect it.

 

[Stang Bladeworks]

My opinion is sell direct. I have found that once you factor in dealer margins a large chunk of profit disappears. A website is relatively straight forward and you can market on social media for free. I agree with a lot of the above comments. No one will care about your stuff as much as you. I’m no expert on any of this but I have learned a bit. If you want feel free to give me a call and I can try to point you in the right direction regarding a website, payment processing etc.