- distribution, sales agent, US strategy
How do you find your first US distributor? Do you choose a distributor or sales agent? What legal issues should you be concerned about when making your contract with them? Learn more here!
At our May 18 2017 event, kindly hosted by LEMAN, we heard interesting histories about how Toms, Holmris, and Stelton each developed their US distribution, and how their strategies have changed over the years. We also heard from Thomas Thorup about the various legal considerations you should have, when reviewing your contracts with your chosen partners, whether they be direct sales, agents, distributors, or combinations of these.
Participants received the slides, but some of the key advice included:
- Understand the different types of partners from a legal perspective
- Basically, a sales agent does not sell your products or services, but only facilitates sales. Once a sale has been set up by the agent, you sell directly from your Danish business to the US customer, and the agent typically receives a commission
- A distributor, on the other hand, buys the products from you, and then resells them to the US customers, thereby earning a profit for him- or herself
- You can also, of course, use your own sales staff to sell directly to US customers (direct sales)
- Another strategy is to acquire a US company who already has distribution
- Know that it’s normal for your strategy to change over time, depending on your degree of knowledge about the US market and the size of your own organization. In some of the examples, companies went from using a distributor first, to direct sales, to a combination. Others used distributors or agents but switched partners over time.
- Finding them is very industry-specific and can be difficult. Find out which are they key trade shows and fairs or conferences in US for your industry, visit them and set up your own stand, visit your ideal customers, find out who they buy from
- Focus on a niche first (one type of customer, or one region/city) – it is impossible to tackle the whole US at once
- Know your company’s USP (Unique Selling Proposition) and be able to give an elevator speech on why you are different and better than competitors – why potential partners should be lucky enough to get to sell exactly YOUR products
- Go through your contracts very carefully. Every word matters. US and Denmark are very different regarding contracts and US takes them very literally – so there are high risks to having something stated incorrectly. You are free to strike out parts you don’t like and you SHOULD do that with Americans – it’s not always expected that you’ll accept everything – it should be negotiated
- Know if you have “nexus” – a physical presence for tax purposes. Nexus rules differ depending on whether you have a distributor or an agent. When using a distributor there is generally no tax nexus but when using an agent it depends whether the agent has authority to accept contract on your behalf
- Interview the different distribution candidates to get a better impression of whether they will be the right choice for your company. Are they people you can feel comfortable working with long term, travelling with etc? Ask them and get a feeling for:
- Company history and stability?
- Company brand portfolio?
- Experience in your area? Even if with competing products, could be useful
- New product launch success stories?
- Examples of creative selling?
- Business Planning Model / Yearly Plan?
- Cost to serve?
- Enthusiasm for your company and brand
- For many industries, it’s important to have stock in the US and have a US organization, before you can sell. Your potential sales partners won’t be ready to deal with you if they aren’t certain stock is quickly available
- Can they assist you with things like a US website, US e-commerce, US customer service phone line, pick & pack for very small customers etc.? Certain partners, like LEMAN, can offer this very valuable type of help
This was just the tip of the iceberg on advice you can get from other members of DABF. You can learn more from our full distribution whitepaper here: Distribution Partner Guide. The original event agenda from May 18th is here.