Leading New Zealand exporters share seven secrets to distributor success in offshore markets.
Seasoned exporters know that finding the right in-market partner is a critical – if not the critical – ingredient in export success.
A good local distributor is not only an invaluable source of local market knowledge and networks, but can help you navigate cultural practices, establish sound relationships and develop and deliver the right messages for the market.
In most cases, hiring a distributor will be quicker and more cost effective than setting up your own market presence, and end customers often prefer to deal with a local.
A trusted distributor can also be your ‘eyes and ears’, continuously gathering insights to support market development.
But finding a good distributor in an unknown market can be difficult. In a recent Katabolt survey of 35 New Zealand exporters, 88 percent said identifying the right local distributor was their biggest and most difficult challenge. Some went so far as to identify the quality of the distributor relationship as the single metric of success for any offshore market.
We asked leading New Zealand exporters to share their secrets to distributor success. These strategies will help exporters find the right local partners and establish profitable, lasting business relationships.
1. Choose carefully
It’s worth investing time to find the right local partner – sometimes it can take as long as 12 to 18 months and several market visits to make the right connections. Ask other exporters for referrals and learn from their in-market experiences. A compatible company culture is also important. Consider inviting the CEO or senior management to visit your head office before the final deal is signed.
2. Use a structured process to analyse options.
Identify the core criteria for in-market partners to ensure a fit with your business vision, strategy, capabilities and culture. Set up a process to measure and compare potential partners and be prepared to independently validate your results.
Core criteria will vary according to the product and the market, but consider such factors as the distributor’s local knowledge and networks, scale, brand building expertise and objectives.
“We look for distributors who know how to build a brand and understand the importance of brand integrity,” says Allin Russell, marketing director at Sistema. “As service is a key aspect of our brand ethos, we look for distributors that can deliver category-leading service. They must have the cashflow and resources to meet our ambitious growth objectives. They must also be willing to invest in the marketing and promotion of our brand, and to use insights to drive product and category growth.”
3. Make a plan
Consider how you will work with the distributor. How much support will you provide? What are your expectations of the distributor? What constitutes success and will it be measured?
A distribution agreement should not only cover sales targets and promotional agreements, but establish mechanisms for regular market feedback to enhance the exporter’s market insights.
It’s also important to develop clear expectations around accountability and information sharing. “Sistema distributors must commit to complete transparency including pricing, marketing activity, sharing their marketing activity with all distributors globally and collaborating on what works and what doesn’t,” says Russell.
4. Set your targets
Be clear on what you expect from your market partners and communicate this robustly from the outset. Set target volumes and KPIs, agree how these will be measured and set an appropriate reporting cycle. Make sure your distributor knows it will be held accountable for its performance.
It’s also important to ensure everyone’s promotional expectations are aligned. Make a plan outlining how you will support your distributor and specifying your expectations in return.
5. Try before you commit
Start out with a trial period to ensure the fit is right and your distributor will deliver. You could also consider trialing a few low profile lines, before launching your primary product.
One innovative fresh produce exporter offers a one-year exclusive trial, with a subsequent option to negotiate a longer-term agreement if the partnership proves successful. Measures include milestones, KPIs and growth targets to validate the success of the trial.
Another option is to offer a long-term deal, with more frequent reviews (for example, a five year contract reviewed every six months), but remember to factor in the time and resources involved in assessing distributor performance.
6. Invest in market intelligence
Understanding market dynamics, consumer trends and consumer behaviour is critical to informing strategic decision-making. Successful exporters invest in market insights to identify market opportunities, product development and support their market partners.
Focusing on finding opportunities to add value to their processing capabilities and escape the price battle for commodity products is the approach taken by one iconic Kiwi food brand to build international markets.
Make sure your head office staff have the necessary tools and training to manage the information they receive and convert this into product and strategy decisions.
7. Keep your eye on the ball
Successful distributor relationships are measured, monitored and reviewed on a regular basis, to ensure objectives are met, opportunities are identified and obstacles are addressed before they become problems.
“Working closely with our partners not only feeds market knowledge and innovation, but enables Sistema to control market development and build our brand equity,” says Russell.
A good distribution partnership is a relationship of mutual trust. The final decision is always a risk, but by following these steps you’ll maximise your chances of starting your export journey on the right foot.
Christopher Boys, Andrew Jamieson and Campbell Naish are partners in Katabolt Limited, an international export consultancy helping Kiwi companies enter and expand in offshore markets and achieve results faster and more efficiently. Katabolt’s export processes are designed to save companies time and money by laying the groundwork for success from day one.
