There are folks who avoid selling to distributors like the plague and there are companies that sell primarily through distribution. In this industry, we see both crowds. Many companies could probably make more money by doing the hard work of selling direct and managing the books on bigger accounts rather than leaving it to their distributors. For the folks who don’t want to go the distributor route at all, it typically sounds like this:
“I don’t want to sell to distributors.”
“They take a cut that makes our profits look like crumbs.”
“I’m not ready for national distribution.”
It’s true. It feels much nicer to get your products directly to retailers and save some margin. And with bigger accounts, that’s a great solution. But what about the smaller guys? Is it worth it to do the shipping, bookkeeping, and everything else that goes into delivering half a pallet to a store?
It can be hard for many companies to see beyond selling products at a premium price point but this can be a trap we’ve watched many a nearsighted business fall into. In the end we want to make more money, and bigger margins seem to be a good way to get there. But big margins on 10 small accounts makes far less money than slightly smaller margins on 100 accounts.
But big margins on 10 small accounts makes far less money than slightly smaller margins on 100 accounts.
For many growing businesses, there comes a time to make the jump to distribution. Keep your key accounts, of course. But leave room in the year to secure distribution, too. This will mean selling to as many stores as possible–many more stores than you may be able to ship to, keep books on, or even find on your own. More stores, more sales, more profit.
Let me illustrate this:
When I wear my I-don’t-want-to-work-with-distributors goggles, I see:
I can sell to 10 retail stores.
I can sell 1 pallet per store at $1000 profit per pallet.
I can make $10,000 and have a nice sushi dinner.
When I put on the I-want-to-sell-more-product goggles I see:
I can sell to 100 stories via distributors.
I can sell 1 pallet for $400 profit per pallet.
I can make $40,000 and have sushi at Sukiyabashi Jiro and reinvest $20,000 into product development, hiring, etc.
$40,000 > $10,000, turns out.
In 2015, take a moment to analyze the options. Is it best for you to recapture some large accounts, increase margins, and decrease your distributor sales? Do you need to open up to the idea of smaller margin per product with the bigger picture in mind? Don’t leave the question unanswered before the selling season hits too hard! Cheers to the best in your 2015 sales approach.
Do you have a story or insight about working with distributors? End of the year bonuses, worthy wins, or wish-I-could-rewind-6-months painful lessons, we want to hear about it! Connect with us on Twitter, Email, or by phone (888-316-0226).