Post on Wednesday, March 14th, 2018 in Accounting
International distribution refers to entering international markets and new countries in order to sell products on a wholesale basis. It can be quite a challenging process because it requires a deep understanding of customs, taxes, terms and conditions in each country where you distribute your goods.
In this post, we are going to share some tips on how to start a distribution company for international markets. These are the steps:
You can ship your products worldwide without the need for a physical store.
This method will give you complete control over your international distribution. However, you should hire local staff, train them, define their salaries and take into account their cultural background. There is also the option to relocate your staff members into a target country, but of course not everyone is willing to move into another country, especially if it has a totally different culture.
You can partner with export management companies and consultants that can help you with your product distribution in new countries. They already have experience in shipping, promotion and importing, so such a partnership can save you headaches.
To start a distribution business, you will also need trusted distribution channels. We will share with you some tips on how to find and evaluate them.
Thanks to the internet, you can find information about any company, including the historical data and experience of the company on the market as well as reviews both of its employees and customers. Consider factors like location of offices and historical sales contribution by geographic location from the past 3 to 5 years. Finally, research how the channel is committed to the product and the market and evaluate their marketing skills, financial strengths, relationships with the supply chain participants and local government agencies.
Pay specific attention to the way the company trains its service staff to be sure that your product will be in reliable hands during the international distribution process.
When starting distribution business, research the foreign competitors of your potential distribution channel and find out whether it stands ahead of those competitors.
Ideally, the distributor and the supplier should have good relationships to optimize the distributor’s performance, because only the supplier can handle severe technical issues that might occur during the international distribution activities.
For instance, if your company needs more control over marketing, it can set up a sales subsidiary to work with wholesale outlets that are available on the target markets. However, in this case your company is fully responsible for warehousing, order processing, transportation, and communication with the channel partners.
When looking for international distributors, choose one that is able to work around the limitations of your inventory. You could also move to more efficient methods, like having inventory management software to make your methods more scalable.
Evaluate how much the international distribution activities will cost you and whether you can afford it with your budget. Such costs typically include locating the intermediaries and negotiating with them; maintaining further relationships; logistics, i.e. transportation, warehousing and storage; customer service; order processing; capital costs, such as the costs of inventory. accounts receivable, goods in transit and consignment inventory.
Calculate a reasonable wholesale price and define which part of the margin between the wholesale price and your cost price you should give away to the distributor.
We hope that this information is enough for you to learn how to start a distribution business. Good luck in conquering the international markets.
Adam is the Assistant Director of Operations at Dynamic Inventory. He has experience working with retailers in various industries including sporting goods, automotive parts, outdoor equipment, and more. His background is in e-commerce internet marketing and he has helped design the requirements for many features in Dynamic Inventory based on his expertise managing and marketing products online.
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