How can I deal with retailers that don't want to sign an NDA?

rilojag · May 30, 2009

Hello, I have set up company as a distributor of a new consumer electronic device. I have contacted a number of companies both by phone and email and when I mention that I have an exciting new product to them. They always ask what's the product. I try telling them a bit about the device without giving away the name. They press me for the name, so I just say I would prefer to tell you at the presentation that I would like to give in person. Their response is that they need to know what the name of the product is before the presentation as their sales team don't want to walk in blind at the presentation. I told them the only way I can give you the name is if you agree to signing an NDA. They always say that they won't sign anything until they know what the product is. The thing is there is no point in me getting the retailers to sign an NDA if they know before hand what the product is. As then I am no way protected, once they know the name of the product, they could just cut me out and go straight to the manufacturer of the product to get a better price. I have asked the company behind the product if they can offer me sole distribution for the UK, but their answer was they want me to pay them an exclusivity fee which is something I have never heard a company ask for before, which makes me think this company is on a tight budget and they need a lot of money despite quite the hype their product is getting. So maybe I am missing something but is there any kind of trade secrets that could help me? I could really do with some help as I am running round in circles now. Any help much appreicated Many thanks in advance

Tej · May 30, 2009

If you are so excited about the product, and have faith in its potential.. why don't you sign the exclusivity deal with the manufacturer and pay the fee?

By the same token, i would imagine most retailers have never heard of a NDA either.
Old saying " put your money where your mouth is".

JamieM · May 30, 2009

I don't even think an NDA would help you here. I don't see how it would stop them selling the product supplied by the manufacturer.

I think you will need to negotiate with the manufacturer if you can't afford the exclusivity at the moment. Just explain your situation saying that you don't want to spend time and money marketing their produxt if you can easily be cut out.

Try and negotiate a deal based on performance. i.e. ask for first refusal on exclusivity after 3 months if you have sold 5000 units or whatever.

I don't there is anything you can do at the retailer side. Focus on the supplier.

rilojag · May 30, 2009

Many thanks for your replies

Tej said:
If you are so excited about the product, and have faith in its potential.. why don't you sign the exclusivity deal with the manufacturer and pay the fee?

By the same token, i would imagine most retailers have never heard of a NDA either.
Old saying " put your money where your mouth is".

All retailers have heard of NDA's it's common place in the retail world. I know the product has been well received in American and Canada by the press and consumers. But the product still hasn't sold that many units, judging from research I have done the unit has not even had sales in excess of 5000 units yet. I am starting to lose faith in the company, they seem very professional in the way they have brought their product from the ground up to a finished product. But there marketing efforts have been awful and I don't think they have very good business sense. If I was in the company I would not waste any time with this product and try to get it across all channels which clearly this company is not doing. I have the money to be able to buy an exclusivity fee but I won't. Simply because firstly I have never come across a company that would ask to pay such a fee. It seems the CEO of this company is making up the rules as he goes along. In the past I was offered by a company to be the sole distributor of their product in Italy. I did not have to pay any exclusivity fee. They simply said that I would have to meet a sales target of about 80,000 units in the first year, and if I dropped significantly below that they would drop me as a sole distributor but keep me on as a sub distributor. Later I learned that this wasn't the right product so I turned them down.
Also at this point I would not want to risk paying an exclusivity fee if that's what I am going to have to do. The reason is because I believe you have to draw a line in business, you are either an investor or a distributor and I'm the latter. I honestly don't know how well this product will be here in the UK. It may turn out to be awful even though it's well received in other countries. So I am not going to risk paying any fees just yet until I know the retailers will be interested in the product. Now this product is very different to the other product I was once offered. So 80,000 units on this product is out of the questions. About 15,000-20,000 unit's is more of a realistic figure for year 1 sales.

JamieM said:
I don't even think an NDA would help you here. I don't see how it would stop them selling the product supplied by the manufacturer.

I think you will need to negotiate with the manufacturer if you can't afford the exclusivity at the moment. Just explain your situation saying that you don't want to spend time and money marketing their produxt if you can easily be cut out.

Try and negotiate a deal based on performance. i.e. ask for first refusal on exclusivity after 3 months if you have sold 5000 units or whatever.

I don't there is anything you can do at the retailer side. Focus on the supplier.

Well firstly about the NDA, I went to a lawyer to get them to draw me up a NDA. The NDA has a number of clauses which protects me the discloser from allow them the recipient from being able to contact the manufacturer of the product directly and if they do they will face legal issues. This is standard procedure in the sales of goods internationally.
I have been pressing the supplier and they said they understand that what I am doing is a lot of hard work. They also said that they understand that I don't want to be cut out and basically said that as I came to them first, I will get like first star treatment. Such as if someone else wants to distribute their product here in the UK. Then they will always come back to me first with any new developments. I guess they say this to see If I can beat their sales volume that the other distributor proposes.
Originally I wanted a sole distribution agreement to last as long as the contract between me and my retailers. Recently I had spoken to the supplier asking them for a sole distribution agreement that works on a two way basis. Either it's 6 months long or it ends when I place my first order which ever comes first. Still this didn't work well. The supplier wants £125,000 exclusivity fee. Originally he wanted £350,000 which included a share in his company now it's just £125K for solely the exclusivity fee.
I am lost, I really am lost at what to do. I don't understand why the supplier is being like this, surely if you were a supplier with only a sale of 5000 units in America and Canada, you would take any advantage you could at this point, such as give someone a sole distribution deal. So their company could hopefully catapult up the league and actually make some real money.
I really hope you guys could come up with all sorts of ideas that may help me out. I do have this other idea about not bothering with sole distribution and instead get the supplier to sign an NDA between my company and theirs. After the signing of the NDA, I would then basically give them a list of the retailers that I have been in contact with, then if my retailers who won't sign NDA's if they contacted my supplier direct, then as my supplier is under NDA with me they will say to the retailer that 'we can't talk, but I can put you in contact with one of our distributors' and then they would pass my name and contact details on to them. This way the supplier will only be under NDA with me, and not have to enter into any formal agreements such as a sole distribution agreement.
Anyway hopefully you guys could assist me further on this.
Any help much appreicated

Many thanks in advance

BusinessIdeas · May 30, 2009

A very interesting problem. May I ask if the manufacturer will supply you with the product without any exclusivity in place? If you can order a reasonably large amount of the product and sell what you order, then you can get exclusivity later using the profit from that you generate from the initial orders.

simonread · May 30, 2009

I would suggest organising a good agency agreement with the manufacturer. Presumably you are trying to prevent any potential customers from buying from the manufacturer directly. An agency agreement can cover this as you can 'own' the relationship with any customers you introduce. It would be in the interests of the manufacturer to help you establish a market in the UK so they should be quite helpful.

rilojag · May 30, 2009

crewgirl25a said:
A very interesting problem. May I ask if the manufacturer will supply you with the product without any exclusivity in place? If you can order a reasonably large amount of the product and sell what you order, then you can get exclusivity later using the profit from that you generate from the initial orders.

Many thanks for your reply crewgirl25a Yes the supplier will sell to me without an any exclusivity in place. The minimum order is by the container with this particular product that's about 825 units. I am hoping that I can get exclusivity later from the profits I make. I am in a good position with this product as even though this product is of moderate size that's 825 units to a container compred to other consumer electronics which are so small that one container would come to about 2000-3000 units. Which if I was to order 1 container it would come to 2+ million pounds. In this case 1 container of 825 units is still going to cost me over £550K.

simonread said:
I would suggest organising a good agency agreement with the manufacturer. Presumably you are trying to prevent any potential customers from buying from the manufacturer directly. An agency agreement can cover this as you can 'own' the relationship with any customers you introduce. It would be in the interests of the manufacturer to help you establish a market in the UK so they should be quite helpful.

Many thanks for your reply simonread This good agency agreement you speak of I have never heard of before. You are right I don't want any potential customer from buying from the manufacturer directly well at least in this context. My worry is the retailers that don't sign an NDA and then want me to tell them what the product is, that's my biggest threat, as when they know of the product they will cut me out and go straight to the supplier. Can you tell me a bit more please about this agreement? I am currently googling it. You have been very helpful, Many thanks in advance

BusinessIdeas · May 30, 2009

I doubt that a retailer would cut you out, with the minimum order being 550k. Retailers like to spread their risk over lots of product lines. If you do have a concern over this, then go to smaller retailers first. They definitely will not spend 550k on stocking this. Approach the chains later maybe?

rilojag · May 30, 2009

from doing a google on 'agency agreement' I found this {sorry, had to remove the link as it won't allow me to post it} It seems an agency agreement is not what I am looking for, it says in the wiki quote: 'An agent should be distinguished form a distributor in commercial parlance, a distributor will buy stock from the supplier or principal and then sell it on to his customers at a mark-up, whereas an agent will find customers for the principal who then sells direct to the customers and pays commission to the agent.' This agency agreement is for an agent who sets up the deal between the buyer for the supplier and then gets commission from the supplier. This is not what I am after, I want to be the distributor, so I will be buying the goods direct my self. Whereas the agency agreement makes me set the deal up so the supplier sells direct to my retailer. I think this is what my supplier had in mind at the start when I first got in contact with him. As I remember him saying 'will my company get access to your retailers' my reply was as the distributor that information won't be passed on to your company, and that I will buy by the container and sell direct to my retailers.

rilojag · May 30, 2009

crewgirl25a said:
I doubt that a retailer would cut you out, with the minimum order being 550k. Retailers like to spread their risk over lots of product lines. If you do have a concern over this, then go to smaller retailers first. They definitely will not spend 550k on stocking this. Approach the chains later maybe?

If the minimum order was a lot less say £90,000 do you think the retailers would still cut me out? I ask as there is another product I plan to distribute if this product doesn't work out so well.

May 30, 2009

I think I would be more concerned that the manufacturer has a proper patent in place.?

Earl

BusinessIdeas · May 30, 2009

Small retailers wont spend 90k IMO, but look at it this way: Retailers are in retail, that is what they know, most of them wont even consider trying to go direct. apart from anything else they wont know that you dont have exclusivity, and you certainly arent going to tell them.
In fact on this occasion maybe a little white lie might be permissable

Make a point of boasting that you do have it!!! they are unikely to doubt you if you say it convincingly enough.

rilojag · May 30, 2009

sirearl said:
I think I would be more concerned that the manufacturer has a proper patent in place.?

Earl

The product has many patents

crewgirl25a said:
Small retailers wont spend 90k IMO, but look at it this way: Retailers are in retail, that is what they know, most of them wont even consider trying to go direct. apart from anything else they wont know that you dont have exclusivity, and you certainly arent going to tell them.
In fact on this occasion maybe a little white lie might be permissable
Make a point of boasting that you do have it!!! they are unikely to doubt you if you say it convincingly enough.

Well I don't think I can tell the retailers that I have been in contact with, that I am the sole distributor. As I have already repeatedly asked them to sign an NDA every time they say they wouldn't sign one. So If I went back and told them the product and didn't bother getting them to sign the NDA anymore they would know something is up and do their checks, as if I am not the sole distributor they could then get a better price and cut me out. Saying a little white lie to other retailers that I have not been in contact with is okay I guess. But the problem is if I go to big retail chains then they have their very own legal departments and they have the skill and technical experience to deal with all matters. I am sure they would do their research and check before hand to see if I am really the sole distributor. As well they may ask me to prove it, I am sure retailers ask to bring a copy of the sole distribution agreement for proof. So I guess I am screwed either way. Just if my supplier could help me out some way, unless there is some other kind of trade secret that you guys know of?

ADW · May 30, 2009

Does the manufacturer supply many retailers direct in their own back yard or do they primarily supply wholesalers? You seem to be after non-circumvention rather than non-disclosure. Would your retailers be more inclined in signing one of them as it is a more specific reason.

JamieM · May 30, 2009

ADW said:
Does the manufacturer supply many retailers direct in their own back yard or do they primarily supply wholesalers? You seem to be after non-circumvention rather than non-disclosure. Would your retailers be more inclined in signing one of them as it is a more specific reason.

Could a non-circumvention not be made between him and the supplier meaning they couldn't interefere with his clients?

Even if a non-circumvention won't work that way, can you not make some kind of agreement with the supplier where they agree not to supply your customers? At least whilst you work towards obtaining exclusivity?

If they are not willing to support you like this then you really have to try and find out what the grounds are for their objection.

rilojag · May 31, 2009

ADW said:
Does the manufacturer supply many retailers direct in their own back yard or do they primarily supply wholesalers? You seem to be after non-circumvention rather than non-disclosure. Would your retailers be more inclined in signing one of them as it is a more specific reason.

As far as I know a non-circumvention agreement is for protecting a broker who brought a buyer and seller together. Which doesn't work for me as I am the seller and distributor. I sell to my retailers and they buy from me not from the supplier. The supplier is selling to a number of online stores in the USA and Canada directly. They have also done a deal with a distributor to get their product out to several thousand retail stores but this deal was made about a year ago and I have see no sign of them selling yet in any retailer. I believe perhaps the deal was turned down or it has been put on hold. Like I said previously I don't believe they have sold any more than 5000 units.

CVRO · May 31, 2009

Are you sure the NDA would help you? I'm not convinced it would.

For example:

- Where is the suppliers based? Would that country recognise your NDA?
- The NDA usually prevents the other part to disclose information about the product, deal, etc to third parties. Would the NDA prevent them from speaking to the manufacturer? I doubt it.
- It is highly unlikely your laywer would be able to put together a water-tight document. If the retailer is really big and ugly they'd probably have better laywers and they'd find a loophole in the agreement.
- I've seem cases where big retailers managed to get round sole distribution agreements! Ok, it was not in the UK but he big retailer just went to the manufacturer and offered a much larger order and guess what happened...
- Would the NDA be signed by the retailer, right? If they were really interested in bypassing you they'd could get another company from the same group to buy the product.

As someone mentioned before, you should concentrate your efforts on finding a way to have the supplier being loyal to you.

Good luck and whenever you can let's know what's the product, it must be very good... Or perhaps, it's one of those products that should, in theory, sell well but never catches on.

rilojag · May 31, 2009

CVRO said:
Are you sure the NDA would help you? I'm not convinced it would.

For example:

- Where is the suppliers based? Would that country recognise your NDA?
- The NDA usually prevents the other part to disclose information about the product, deal, etc to third parties. Would the NDA prevent them from speaking to the manufacturer? I doubt it.
- It is highly unlikely your laywer would be able to put together a water-tight document. If the retailer is really big and ugly they'd probably have better laywers and they'd find a loophole in the agreement.
- I've seem cases where big retailers managed to get round sole distribution agreements! Ok, it was not in the UK but he big retailer just went to the manufacturer and offered a much larger order and guess what happened...
- Would the NDA be signed by the retailer, right? If they were really interested in bypassing you they'd could get another company from the same group to buy the product.

As someone mentioned before, you should concentrate your efforts on finding a way to have the supplier being loyal to you.

Good luck and whenever you can let's know what's the product, it must be very good... Or perhaps, it's one of those products that should, in theory, sell well but never catches on.

Many thanks for your reply To answer your question yes I am absolutely convinced the NDA will help me.

My supplier is based in the USA but I am not getting my supplier to sign an NDA. I want to get a sole distribution agreement from my supplier.

My retailers are located here in the UK and these are the people that I hope will sign the NDA. The NDA does protect the retailer from speaking to the manufacturer. The NDA really doesn't have any loop holes. Generally speaking you can get around NDA's but not sole distribution agreements but it has been done. But it also depends on how well termed the sole distribution agreement is. If it was written well it can protect even others from making a better offer with the manufacturer during a required time period of the agreement.

If we go back to the NDA, it protects me from a retailer using another company from the same group. I am covered by concessions, subsidiaries etc.

Don't worry this is one of those products that do catch on, it's about to in North America. It's obviously going to take some time here in the UK. I had researched this product enough to make sure my hard earned money was not going to be wasted.

Still if you guys know of any other way I could get the supplier to offer me sole distribution or some other kind of agreement, that would be most helpful as the retailers may not sign the NDA.

Many thanks in advance

campbeji · May 31, 2009

Hi Rilojag,

I have read through this thread and to be honest it seems to me that you are overcomplicating things a little,

Just to clarify the details a bit

Your supplier has sold 5000+ units
Minimum order is 1 container of 825 units
Minimum order cost is £550,000+
Cost per unit approx £670

A few things jump to mind, your supplier dosn't seem to be selling a lot, your first order will be about 6% of their total sales to date so I would assume most of their sales have been fairly local to them, probably where the minimum order is a lot smaller. Unless the product is really radical and catches on very quickly I doubt that the large chains will be looking to source it for some time, why would they want to take a chance on an unproven product with no history to speak off. Even if you were to sell to the large multiples you would have to give them a great deal on it and I don't see an NDR having any affect on them, I doub't they would even consider signing one.

As for smaller companies, again nothing to worry about here, most retailers will be looking for small quantities with an easy supply of the item, they will not want to spend over a half million on stock.

If you want an exclusive deal then go out and sell loads of them over the next few months and then when you have shown your commitment to the product go back to your supplier. If your sales are up to 15% to 20% of the companies turnover they will probably give you an exclusive deal and if your good a reduction in the cost per item.

I'd say if the product is good and will sell and if you are willing to risk all of that money then go for it and don't worry about the NDA, just trust that most people will take the easy way.

Good Luck

Jim

rilojag · Jun 1, 2009

campbeji said:
Hi Rilojag,

I have read through this thread and to be honest it seems to me that you are overcomplicating things a little,

Just to clarify the details a bit

Your supplier has sold 5000+ units
Minimum order is 1 container of 825 units
Minimum order cost is £550,000+
Cost per unit approx £670

A few things jump to mind, your supplier dosn't seem to be selling a lot, your first order will be about 6% of their total sales to date so I would assume most of their sales have been fairly local to them, probably where the minimum order is a lot smaller. Unless the product is really radical and catches on very quickly I doubt that the large chains will be looking to source it for some time, why would they want to take a chance on an unproven product with no history to speak off. Even if you were to sell to the large multiples you would have to give them a great deal on it and I don't see an NDR having any affect on them, I doub't they would even consider signing one.

As for smaller companies, again nothing to worry about here, most retailers will be looking for small quantities with an easy supply of the item, they will not want to spend over a half million on stock.

If you want an exclusive deal then go out and sell loads of them over the next few months and then when you have shown your commitment to the product go back to your supplier. If your sales are up to 15% to 20% of the companies turnover they will probably give you an exclusive deal and if your good a reduction in the cost per item.

I'd say if the product is good and will sell and if you are willing to risk all of that money then go for it and don't worry about the NDA, just trust that most people will take the easy way.

Good Luck

Jim

Many thanks for your reply oops I have made a typo, I meant to write £150,000 is the cost of 1 container. That's with my markup to the retailer. At that kind of cost per units which is moderately expensive in the same league as some mid range media players. I would think an NDA should be signed as the product would take on fast. The retailers may cut me out. Wouldn't you agree?

hughlss · Jun 1, 2009

It seems to me that you should have created a brand name - get this product badged by the manufacturer - and your first consignment, you should be retailing yourself by ecommerce and, maybe, using eBay too (more for advertising) - as well as selling into retailers.

The first in with any product has an advantage, and perhaps you will have to accept that you can't prevent competition - that is business.
It's in the best interests of the supplier to form a good relationship with you as a potential distributor but if you have no track record with them they can't be expected to put all their eggs into one basket. They want sales and relying on one person is high risk until you've proved yourself.

I buy from China - one of the largest manufacturer in what I sell supplied me with an initial order which I sold very quickly on eBay selling c20% below the usual retailer price. I then put in a very much larger order but in the meantime one of the established dealers went to China and put pressure on the company who then, with great reluctance, cancelled my order. In the end it didn't matter as I have good relationships with other manufacturers where my margins are even better.
The points being that the supplier will look after you if you get the sales, and can be seen to be putting effort into advertising and establishing the product, but also that you cannot stop another company manufacturing an identical, or similar, product. You just need to be the first and the best - and getting a good brand should be a priority, IMO.
Hugh

campbeji · Jun 1, 2009

Hi Rilojag,

OK, that will bring the cost down if a retailer wanted to cut you out. You havn't said how much of a markup you have, but lets say the cost to you (or your retailer) was only £50,000. Now I don't know your customers but that is still a lot of risk for them to shell out £50 grand on the assumption that they will save money by the time they sell it all. Maybe if you were to get to know your customers buying habits better, would the type of shop that you think would sell this item be inclined to hold this sort of value of stock for an item that is unproven. Most of them, i'll bet, would rather have a minimal stock level and a maximum credit line to reduce the risk to themselves.

To be honest i think your biggest risk to you would be from other people who are thinking of doing the same as you, importing direct and the distributing. The only way I see you dealing with this is to sell as much of the product as quickly as possible, make the manufacturer worry that you might drop them if they don't give you a good deal.

Good Luck

rilojag · Jun 7, 2009

double post please delete

rilojag · Jun 7, 2009

I have been quite busy lately,

Something has come up and I wanted to know what you guys think. I have been thinking about becoming an agent for the company of this product that I have. So as the agent I would put the deal together between my supplier and the retailer. If I did this I would get an agency agreement in place but do you guys know how much of a commission you get, is this based on a price per unit that you sell or is it a percentage you get for the overall cost of the deal, e.g say the cost of the product is £150 and the supplier sells to the retailer for £225 then they make £75 profit. But as they would sell a container with say about 800 units to a big retail chain would I get a small commission of say £5 per unit, so that would be like £4000 or is it more like a percentage of £75 per unit. If anyone knows much about this please tell me?

Many thanks in advance

Tej · Jun 7, 2009

rilojag said:
I have been quite busy lately,

Something has come up and I wanted to know what you guys think. I have been thinking about becoming an agent for the company of this product that I have. So as the agent I would put the deal together between my supplier and the retailer. If I did this I would get an agency agreement in place but do you guys know how much of a commission you get, is this based on a price per unit that you sell or is it a percentage you get for the overall cost of the deal, e.g say the cost of the product is £150 and the supplier sells to the retailer for £225 then they make £75 profit. But as they would sell a container with say about 800 units to a big retail chain would I get a small commission of say £5 per unit, so that would be like £4000 or is it more like a percentage of £75 per unit. If anyone knows much about this please tell me?

Many thanks in advance

Your commission/price per unit whatever, is what you can get with your negotiation with the supplier/manufacturer. Its up to you. There is no hard and fast rule.

James.Dunford · Jun 7, 2009

rilojag said:
If the minimum order was a lot less say £90,000 do you think the retailers would still cut me out? I ask as there is another product I plan to distribute if this product doesn't work out so well.

Think about it. You have a retailer who has between 1 and 3 stores. The shops aren't massive, employing maybe 3 or 4 people. Do you think they would want to spend £90,000 on one prodcuct? You would have to be talking pretty large retailers to spend that! The idea of a retailer is to have a range of products, and at times like this no one would want to put "all there eggs in one basket" as they say!

Paul Kelly ICHYB · Jun 7, 2009

Rilojag,

having been in similar positions as a buyer and a seller, very large company and own business, primarily in consumer electronics/electricals, I know 'where you are' at the moment. Here are a number of thoughts/comments

- The bottom line is based around trust - you do not trust the customer or supplier to cut you out. If you cant trust people/companies, dont do business with them!

- In all be a very few cases, NDA's are not worth the paper they are printed on, especially as it would cost you a lot of money (in most cases) to invoke it, especially as it crosses international boundries

- You say that the product has been well received in the US - sales tend to disprove that. No matter how much good press there has been, sales are the only indicator!

- Bare in mind that you may be very excited about this product, however, the retail reaction may be the same in the UK/Europe, so you may be working yourself up over nothing!

- Sit on the side of the supplier - some one who they (probably) don't know well wants to tie them down to a contract, where, is the buyer fails to perform, they are stuck for the length of the contract. Would you be happy with this?

- It is not unusual for American companies to steam in, all arrogant, demanding 'heavy' contracts, payments. I have seen many fall by the wayside after their 'next best thing' quickly becomes a 'not event hasbeen!'

- Big retailers will be approached a dozen times a month by companies who have the next big thing. In all but a very few, rare, cases, they are not. The process a big retailer has to go through to sign an NDA is not as simple as reading and signing. Being a legal document, it will probably have to go through their legal department, which takes time and is more effort than they really would want to expend.

Look at things in the cold light of day. If you think this product is a winner, order a container. This shows commitment from your side (if you want to be cheeky, add an exclusivity line into your purchase order and see if they spot it!). If it is as good as you think it is, there is little risk (isn't there?). When you want to order the second container, you have greater 'power', as they will, more than likely, really want that order. You are in a much stronger negotiating position.

The worst that can then happen is that you have made profit on one container of sales (make sure it is worthwhile), to at least give some returns, especially if you are eventually cut out!

There are also several other things in the supply chain to reduce costs that you may also not have thought about.

Finally, is this item the only of it's kind? Is it design, feature or technology led? You will be surprised how many of these great 'new' inventions were just sourced from a factory in Asia.

Good luck.

tonyelectric · Jun 7, 2009

Hi there. I would suggust you to persuade the manufacturer to sign one year period order contract, part-shipments allowed, separated deposit and balance for earch shipment. Show them your sincerity and your capability in promoting the certain product in your local market. They would easily accept the exclusive selling terms in this kind of long term business relationship without paying exclusivity fee.

Good luck to you!

rilojag · Jun 7, 2009

Many thanks guys for all the replies. there is a lot of detailed information from a lot of you, please don't think I am being rude if I don't answer all of your replies.

James.Dunford said:
Think about it. You have a retailer who has between 1 and 3 stores. The shops aren't massive, employing maybe 3 or 4 people. Do you think they would want to spend £90,000 on one prodcuct? You would have to be talking pretty large retailers to spend that! The idea of a retailer is to have a range of products, and at times like this no one would want to put "all there eggs in one basket" as they say!

I have been in contact with a number of big retailers, one of them having about 700 stores in the UK and another 1400 stores throughout the rest of Europe and Australia. I could see this store to be more than happy to spend £90K. That's if they think this product is as good as I think it is which I believe they will.

consultant said:
Rilojag,

Finally, is this item the only of it's kind? Is it design, feature or technology led? You will be surprised how many of these great 'new' inventions were just sourced from a factory in Asia.

Good luck.

This product is a one of a kind, it has several patents, it's manufactured in the far east. Simply put you are not going to find another company making a knock off, it's been highly protected. Before all this get's really confusing, can someone please outline for me or give me an example of usually how much a supplier pays commission to an agent for setting up deals between the supplier and retailer? Either I will order the container my self or I will become an agent for the company.

James.Dunford · Jun 8, 2009

rilojag said:
Many thanks guys for all the replies. there is a lot of detailed information from a lot of you, please don't think I am being rude if I don't answer all of your replies.

I have been in contact with a number of big retailers, one of them having about 700 stores in the UK and another 1400 stores throughout the rest of Europe and Australia. I could see this store to be more than happy to spend £90K. That's if they think this product is as good as I think it is which I believe they will.
.

That is totally different then! I meant (as i said) smaller retailers, even a retailer with upto 50 or so shops. Once you get to shops that big, they may not hesitate to buy that many. That is why it is best to start of small, then make sure the product is selling, then try the larger stores, if you haven't got enough moeny to go to the big retailers straight away.

BusinessIdeas · Jun 8, 2009

James.Dunford said:
That is totally different then! I meant (as i said) smaller retailers, even a retailer with upto 50 or so shops. Once you get to shops that big, they may not hesitate to buy that many. That is why it is best to start of small, then make sure the product is selling, then try the larger stores, if you haven't got enough moeny to go to the big retailers straight away.

Yep, totally agree with this approach. I held this view, when I first replied and I still think that this is the best option -

rilojag · Jun 8, 2009

James.Dunford said:
That is totally different then! I meant (as i said) smaller retailers, even a retailer with upto 50 or so shops. Once you get to shops that big, they may not hesitate to buy that many. That is why it is best to start of small, then make sure the product is selling, then try the larger stores, if you haven't got enough moeny to go to the big retailers straight away.

Many thanks for your reply

I have not got a problem with money which is why I am trying to go with the big retailers first. The problem I am having is getting them to sign NDA's and the other problem is me getting the sole distribution agreement with my supplier. I guess I will have to build this business up small and work with the small retailers first. So I can get some business which may help my business relationship with my supplier. Then I can start negotiating an agreement in place so I can go to the big retailers who refuse to sign NDA's.

freshlogistics123 · Jun 8, 2009

I must say, is it me?
I think you are trying to sell ice to the eskimo's. The retailers play this game all the time with long established highly finacially geared businesses, with big pro teams. Just because you saw it first does not make it your IP. The other company who invested, invented, manufactured and went to market owns the IP. It sounds like you are trying to cut into lunch and I am positive this is only a short term game for you. You actually have nothing in term of this product.- if you are serious about this product - invest something in the product - and then go to the UK market. Then you have deserved the right to the IP

Alan

rilojag · Jul 19, 2009

Okay I have gone back to my supplier and been pressing him for a sole distribution agreement.

I have had all sorts of ideas which I have presented to him but he won't budge.

The problem now is he has more distributors in the UK who are interested in his product, but the product is still not selling yet in the UK.

He said the problem is if he gives me a sole distribution and then I don't perform as well as others might then things are not so good.

He also mentioned that sole distribution isn't the norm. I find that difficult to understand.

He furthers mentions they don't want to even offer sole distribution at the moment.

Finally he mentions that the only way he can offer sole distribution is if someone in the UK makes a good number of orders.

Now that leaves me with not many options. I don't understand how these other distributors that have contacted him would stand to sell this product when they aren't able to get sole distribution, wouldn't each of them asked to of been the sole distributor?

I just can't see myself competing with other distributors, it would be so complicating and just wouldn't work.

So as my retailers won't sign NDA's. What do I do? Will I have to just tell them what this product is hoping they would not cut me out?

If you can please help as I am running out of options

Many thanks in advance

campbeji · Jul 19, 2009

Hi Rilojag,

So would it be safe to assume that in the 6 weeks or so since posting your original question not much has happened?

The situation as I understand it is, 1/ You haven't made any orders of product from the supplier, 2/ You haven't sold any of the product to the customers.

I think that basically you are not sure wheter to take the plunge with this or not, it seems you want to eliminate all of the risk in this venture, you want to tie it up so no one in the UK (Europe) can buy this thing without going through you. Fair enough, if you can do it, but what is it you are bringing to the table to make the other players agree to this, what reasons have you given them to make them think you are the man for the job. Have you demonstrated to the manufacturer that you are dedicated to his product and will do the best job possible, are you outselling any of the competition, is the volume of product you are selling a major part of their turnover? As for the retailers, why would a major company such as the one you have described let you come and do a presentation to them, they will have a system of operating and I doubt they will change it for you unless you have something special, such as a proven track record with them or in the industry. You don't mention your experience in this sector, but I'm assuming from the tone of your posts that you are in unfamilliar waters, if that is the case I would be hesitant to plunge straight in to negotiations with the big boys, they have been known to be vicious and could hang you out to dry, especially if you annoy them with unnecessary, as they see it, conditions.

OK so whats best to do now. First decide what you want to do, go for it or not. Second, decide on the risk you a willing to take, Third decide if taking this risk will provide the return you need/want, Forth decide if your decision in step one is still correct.

If it was me and I was happy with the risk etc I would order a container of the product (or a smaller amount if possible) and try to sell them to smaller retailers and online/ebay and see how it goes. If it sells well then keep going if not cut your losses and run. I wouldn't worry about the competition, If I can sell enough items fast enough then I'll be able to get the sole distributorship, if I couldn't sell enough to get it I'd be content with what I could get or move on to something different.

Good Luck

Jim

rilojag · Jul 19, 2009

Many thanks for your quick and highly detailed response.

I am trying to take no risk at all

what I want to do is first get the retailers into a contract and then order a container from my supplier. So the idea was first to get a sole distribution agreement, then offer a presentation to the retailer, then get the retailer a trial order of 1 container, then order the container from my supplier, wait for delivery into the UK and then deliver to my retailers and take payment.

Now I would need to do all the above but without a sole agreement which makes things very difficult. I can be cut out very quickly, so I am lost to the best way of doing this.

I cannot see myself like in your case ordering a container as I have no buyers yet, and if I did order a container it may sit in a warehouse and never sell.

What's the best way to do this, would a retailer really cut me out without a sole agreement?

campbeji · Jul 19, 2009

Hi Rilojag,

I see what your saying, I really do, but I think to get this set up will be tough and could fall over at the slightest twitch from any of the links in the chain. I must admit your working in a sector I'm not familiar with so I don't know the main operating procesures you and your suppliers and customers would expect to work with. However I do know a fair few people in business and now of them have a set up like that with next to no risk, they would want it, but not likley to get it.

would a retailer really cut me out without a sole agreement?

Yes, in a flash, unless you offer something that they can't get from the next level up. I have been trying to get better deals on a lot of my supplies, but on others I have been happy to pay a premium because of the convenience of having the supplier in close proximity to me. Other reasons might be speed of delivery, or stock levels, or convenience. So a small shop will be happy to pay a higher price if they don't have to fork out a large amount of money, deal with import, find storage, take the risks, wait 6 weeks for delivery, etc. Larger companies will not be so worried by some of this, but will have other requirements, do your best to find out what they are and fill them.

I think it will be difficult to avoid all of the risk, but you might be able to minimise it, have you tried to order say a pallet load to test the market (OK delivery will be higher, but thats the price you pay), how about getting an investor to share the risk, do you have a friendly bank manager, how about a sale or return agreement with the supplier, I'm sure there are other possibilities but at the end of the day it'll be tough to make it totally risk free, I'd suggest that if you can't live with some risk this sort of venture may not be for you, but i'm sure you could find a venture with less risk if that is important. I know you feel that this has good potential but if you are going to put yourself into an early grave worrying about it then I'd say the potential isn't quite worth it.

Good Luck

Jim

rilojag · Jul 20, 2009

Many thanks for your reply

As my supplier won't offer a sole distribution agreement, do you think he may sign an NDA between myself and his company. This way once he signs the NDA then I would give him a list of all the retailers that I'm in contact with. I could state in the NDA that his company cannot contact my retailers and if my retailers contact them then he would have to say that retailers can only deal with our distributors and then pass on my contact details to them. Do you think this would work?

I think the above could work as I don't think my supplier has the funds to deal with retailers direct. I say this because obviously if my supplier did have the funds he would of dealt with the manufacturing in advance and sold to a large number of retailers in Europe by now. He must of gone to every retail chain and none of them were interested. I say this because my supplier probably wanted payment in advance and the retailers wouldn't do that as there is no proven track record of this product in Europe. I think the company has spent so much money to bring this product to market that they may be have a lot of debts to pay off. So he is relying on distributors who have the funds to buy the goods so he can manufacture them. On this basis would you agree that there is a possibility that if he signed the NDA he may not break it by dealing direct with my retailers in effect cutting me out?

Shauni · Jul 20, 2009

Dear Rilojag,

I fully understand your situation and have been in similar ones myself where I have tried to have all angles covered before making any financial commitment myself. However it may be a product no matter how much you like is not accepted in the UK and if it is so good why have non of the main players taken it on? Finally having NDA's and sistributor agreements in place but only if you are able to defend them if the need arises.

Good luck and I hope you get what you are looking for and if and when you do please let us all know what this product is as the suspense is killing me

campbeji · Jul 20, 2009

Hi Rilojag,

Your supplier may or may not be willing to sign an NDA, but at the end of the day if you don't have the means and the will to enforce it if it is broken then it is just a piece of paper. Would you take your supplier through the courts, probably in the USA at a cost of £x00,000's to enforce it?

Your problem as I see it is basically that you are worried about being cut out by your supplier and/or customer, would that be accurate? I understand how this can be a worry but I don't think at this point there is much you can do about it except make yourself so valuable to your supplier that they will be more worried about losing you than stealing any of your customers, and remember they are in the business of making these things not selling them, thats why they have a network of distributers.

Something you can do that may ease your mind is to talk to another distributor in another area (non-competing obviously) and find out how the product sells and and how their relationship is with the manufacturer etc.

You did mention that the product didn't have a proven track record in Europe, now I'm not an expert so I might be wrong, but the big retailers like Tesco's Dixons etc don't seem to me to be risk takers, will they stock a product that has no immediate demand. They might put it into one store as a test, but if that dosnt go well your sunk. You might be better to go to the smaller people and sell to them, they are more likely to promote your product to their customers on a 1 to 1 basis. In the big places you'd probably have to put in promo staff to demonstrate it etc.

Good Luck

Jim

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