What sizes or types of businesses are best-suited for self-distribution?
Self-distribution is generally a good fit for smaller geographic footprints where a brand is holistically rooted inside the local community. Establish your brand vision and story in your own neighborhood first, before expanding further geographically.
A distributor can relay a brand vision and story to customers, but they typically cannot create a brand vision or story for you.
When should a small business owner consider using a distribution company or a wholesaler?
Growing pains are a natural, though difficult, part of any business journey. If you think you’re ready to distribute, ask yourself these key questions:
- Are you satisfied with your product’s availability and visibility inside its current market or geographic footprint?
-If you would like to have a higher concentration of products within that footprint, a distributor can help.
- Do you have enough resources (including salespeople, trucks, finances, etc.) to meet your goals for the brand inside the geography where you currently sell your products?
-If you need additional resources, a distributor might be able to help.
- Where do you want your product to be available and visible in the next 5 years? Think in terms of:
-Geographic Footprint. For example, your brand may be available in three zip codes right now, but you’d like to expand to ten zip codes.
-Presence at Trade Events. For example, you may have never been part of an industry conference, but you have a goal to join three trade shows next year.
-Specific Classes of Trade. For example, your brand is carried at small boutiques, which feels authentic to your brand. You would like to increase the number of specialty stores that carry your product, but you do not want to target big box stores because they do not fit your brand vision.
-Visibility. If you cannot get the visibility you want across these and other avenues, a distributor can make inroads on your behalf.
- Are there still large stores in your current footprint where your product is not available? What is the biggest roadblock to closing a deal with these stores?
-A distributor can usually alleviate those hurdles.
- Consider inventory levels; are stores selling out of your product before you can get to them to take the next order?
-While this is great for sales, it can strain the relationship. Distributors can typically smooth out this inventory issue.
How can small business owners find the right size distributor or wholesaler for their production volume?
It can be challenging to find the right companies to partner with, but the more you know about your brand, your goals, and your target market, the easier it is to evaluate potential distributors or wholesalers.
- Consider your 5-year plan and brand vision for the availability and visibility of your product. Also take into account the long-term plans and goals of the distributor.
- Execution benchmarks. Does the distributor have execution benchmarks against which they measure their business? Make sure those benchmarks align with your goals.
- Understand the scope and size of a distributor’s portfolio, including their market service and coverage. To leverage more business, this scope is their #1 resource and it’s essential for brand building.
- If there is a particular retailer would like to work with, find out which distributor serves that account. Retailers generally don’t want to deal with multiple distributors calling on them.
- Inspect a distributor’s portfolio of brands. Consider how your product would fit into that mix and what kind of availability and visibility your brand would receive within the market, given the other brands the distributor already services.
- Competitors. Find out which distributors your competitor brands work with.
- Talk to your current account base about their distributors, if your product is already stocked in some retail accounts. Find out who they prefer to work with and why.
How should business owners market their products to wholesalers and distributors?
Marking a product to distributors and wholesalers requires a different approach than direct-to-consumer marketing. The most important thing is to get inside the buyer’s world. Know what they see value in and what is important to them. Make sure you do your research.
What are the best tricks to get wholesalers to respond?
It can sometimes be tough for small, new brands to get noticed, so persistence is critical. That being said, having the right mix of information can go a long way towards getting the response you want. In any communications with a wholesaler or distributor, you’ll want to convey the following key elements to present a strong pitch:
- Passion: Demonstrate that you are passionate about your product and industry. Prove that you are focused on long-term growth, not just making a quick dollar.
- Quality: Is your product of high quality? Show that you truly care about the quality of the product from production, to the purchase point, to when it is consumed or used. Quality encompasses the actual product quality, of course, but also the quality of the packaging and the design.
- Product Differentiation: How is your product different from its competitors? What would drive consumers to the product? Consumer packaged goods (CPG) is a very competitive category, so something about your product must be unique. This could also be viewed as brand differentiation.
- Support: Be ready to demonstrate your support for the marketplace. Marketing, building a team, creating point-of-sales materials, and meeting to review and drive the business are all examples of support. It is certainly understandable if support is limited for smaller companies, but you should still offer some support.
- Investment: Prove your commitment to investing in your product, services, team (if applicable), and innovation to drive long-term growth.
- Partnership: View a relationship with a distributor as a positive thing. Come with ideas on how you can work together and provide mutual support to build your brand throughout the marketplace.
- Sense of Urgency: Provide evidence that you are looking to move quickly. If appropriate, do not be afraid to sell to the negative consequence that the distributor might miss out on the opportunity to work with you if they do not act fast.
How should business owners prepare for their first meeting with a distributor or wholesaler?
Your marketing strategies, pitch elements, and first meeting content for distributors and wholesalers should all work together to reinforce your brand’s message. Creating these marketing materials and writing your pitch will help you prepare to meet with distributors, but here are some clear to-dos before that first meeting:
What questions will distributors have in the first meeting?
Though you should be ready for anything, here are some of the most common questions distributors will ask at the beginning of a new relationship:
- What are your distribution expectations & pull expectations?
-“Pull” refers to your business’ ability to bring in customers.
- What are your strategies for keeping up with supply?
- What strategies are you going to execute in the market to help with pull & brand awareness?
- What is the budget?
- Is there a shelf life on this product? When the product goes beyond its shelf life, who’s responsible for the product?
You may not have an answer for every question, but that can be okay. If you’re unsure, just demonstrate your willingness to work with the distributor to find an answer that works well for both of you.
What are some best practices for maintaining a productive relationship with a wholesale contact?
The name of the game here is to consistently demonstrate value. You will always be selling back what your brand is bringing to the table. Therefore, you’ve got to understand what is important to the distributor (typically profit, among other priorities), and you should keep that benefit top-of-mind every step of the way. Some strategies to accomplish this include:
Expanding your small brand’s distribution can be a challenging task, especially when customer habits, supply access, and regulations are always changing and out of your control. But doing your research and taking the time to prepare your business for distribution will go a long way toward success.
For more resources from the Brewing the American Dream program, check out www.brewingtheamericandream.com.