It is a system in which goods move from the manufacturer to the outlet where the consumer purchases them; in some marketplaces, it’s a very complex channel, including distributors, wholesaler, jobbers and brokers.
When deciding how to distribute your product, use the traditional distribution model as a starting point. The conventional distribution model has three levels: the producer, the wholesaler and the retailer. This is a time-tested system with many well-established members at all levels.
The primary alternative distribution channel is direct distribution. This is the model Dell, Avon and many other successful companies use. It calls for you to sell and deliver your product yourself, using your own salespeople and warehouses. There are many ways to modify traditional distribution. Often, your choice of a distribution plan will be dictated–or at least strongly influenced–by various factors relating to your product, your customers and the way they’ll use it. We’ll help you decide whether your distribution model is right for you – and take you through the steps you need to develop a successful network.
A distribution agreement is a legally binding contract between the owner of the products and the distributor.
The agreement specifies:
- What territory they cover and whether they have exclusive rights to that territory.
- Which of your products the agreement relates to.
- Any restrictions on their sale of competing products.
- What your responsibilities are, in terms of supplying your product (normally, you would be expected to use reasonable efforts to continue to supply it), keeping it competitive and fulfilling orders.
- What your distributor’s responsibilities are, in terms of promoting your product and making sales?
- Rights and restrictions in relation to your intellectual property, i.e. the distributor’s rights to use your name, brands and logos.
- Terms and conditions of sale, responsibility for transport, delivery and insurance, and when ownership and risk in relation to products will pass from you to the distributor.
- Restrictions on disclosure of confidential information.
- Your rights to discontinue the products being distributed (you normally have this right).
What will happen if you or they wish to terminate the relationship?