How do i get exclusive distribution rights

Discussion in 'General Business Forum' started by Tangerine, Dec 5, 2008.

  1. Tangerine

    Tangerine UKBF Newcomer Free Member

    Posts: 38 Likes: 0
    Hi all, this is my first time using the forum and i'm hoping to gain a lot here. I am liaising with a comany in the US as i want distribute their product in the UK. I have been asked to put together a business profile and give an indication of targets. To be honest i'm not quite sure how to go about it, particulary the targets bit. The profile bit seems straighforward but what do i have to do in order for them to have confidence in a small 2 person business like mine.
    Posted: Dec 5, 2008 By: Tangerine Member since: Nov 1, 2008
    #1
  2. stevon

    stevon UKBF Newcomer Free Member

    Posts: 338 Likes: 43
    I assume what they mean by targetting is:
    a) defining a target market
    b) how you intend to serve this market

    To go into a bit more detail...

    a) Defining a target market means you have to segment the market (break it up into smaller, managable peices based on demographics. Demongraphics they'd be expecting would be things like age, sex, location, socio-economic status, etc.) You'd be able to do this by conducting some form of research... Depending on the market it'd require either conducting your own research to get the specific information you're looking for (this could impress them, especially if you could get a sample size of 100-1000 to bring the accuracy of your research upto the 90%+ mark, although I don't know what your time limitations are) or using secondary research (research which is already available, but collected by someone else, possibly for a different purpose), this makes it easier and quicker to get larger sample sizes but the results may not be as relevent. Also check the dates if you're doing this; it mightn't be relevent anymore and discredit you.

    b) Stating how you'd intend to serve this market would basically be your channels of distribution and justification. How do you intend to sell the product? How much will this cost? How much of a margin will this method leave you/them with? What are the alternatives, why aren't you using these alternatives, etc.

    Be honest with them and if you're not what they're looking for (do they want someone to roll their product out across every related company in the UK over 6 months? Or do they just want a small supplier to the UK market?) then look at something else - don't promise things you can't deliver. Set out some clear aims and objections/projections with them so you know that everyones clear.

    Hope this helps a little. Good luck.
    Posted: Dec 5, 2008 By: stevon Member since: Mar 26, 2008
    #2
  3. Tangerine

    Tangerine UKBF Newcomer Free Member

    Posts: 38 Likes: 0
    Thanks Stevon. I believe by targets they meant, sales targets. Found your advice very helpful though.
    Posted: Dec 8, 2008 By: Tangerine Member since: Nov 1, 2008
    #3
  4. FireFleur

    FireFleur UKBF Newcomer Free Member

    Posts: 1,869 Likes: 440
    Short answer is with a legal contract stating that fact, and with signatures of both parties witnessed by a trusted third party.

    More often it is used as a bit of hot air, what normally happens is you both agree to be unique, then if one of the parties breaks that agreement, the other re-evaluates the relationship.
    Posted: Dec 8, 2008 By: FireFleur Member since: Oct 29, 2008
    #4
  5. Tangerine

    Tangerine UKBF Newcomer Free Member

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    Thanks FireFleur
    Posted: Dec 9, 2008 By: Tangerine Member since: Nov 1, 2008
    #5
  6. movietub

    movietub UKBF Newcomer Free Member

    Posts: 4,664 Likes: 1,091
    Lets be honest, they want to break the UK and to do this its a lot easier to sell through a UK distributer. So far you're all good. The red tape and contract issues need not hold things up. they will (must) be handled through your solicitor. The real issue is they want to make sure you are a good horse to back. they will not be impressed if they sign sole distribution rights to you and 12 months later you have not sole anything. You need to be clear about what your plan is and not shy about facts and figures. If you have a 20k marketing strategy planned don't keep it to yourself. Nothing will matter more than evidence you are going to invest in promoting their brand.

    I would assume that since you want their product to sell you have a plan as to how you will sell it. Make them understand this plan.

    Do NOT be fooled by imagining their definition of targets comes down to promised sales figures. There is nothing you can do with their product that they have not seen done on a geogrpahic area 40 times bigger than you have to play with. They would be fools to expect you can accurately predict sales in a new region (although you should make some attempt at potential figures) They simply need evidence you have a strong sales strategy and are ready to go.

    Good luck!
    Posted: Dec 9, 2008 By: movietub Member since: Nov 6, 2008
    #6
  7. Minnsy

    Minnsy UKBF Newcomer Free Member

    Posts: 165 Likes: 14
    As others have already said, three key things with any exclusivity deal is
    1. geography
    2. revenues
    3. timescale

    So how much can you sell, in what timeframe, and in what region... if you acheive the figs, then you keep exclusivity, if you don't then the company has the right to terminate the contract, might be an idea to have a 'review' halfway through the exclusive period.

    Bottom line is to be realistic about what you can achieve, and keep a good business dialogue going with the other party. If something comes up that effects your ability to sell/market the product, then in most cases let them know.
    Posted: Dec 9, 2008 By: Minnsy Member since: Nov 28, 2006
    #7
  8. stevon

    stevon UKBF Newcomer Free Member

    Posts: 338 Likes: 43
    Whenever I've been asked to give a projection of my sales figures etc. I ALWAYS, ALWAYS, ALWAYS under-promise and over-deliver.

    Not to the point where I would give a ridiculous estimate, but something that I would feel they are expecting. Then when you double it, which I always intended on doing anyway... They're so impressed you can demand better terms.

    Depends on what you're doing though - don't do that if the supply isn't there to meet the demand, obviously. Couldn't agree more with the 3-step approach though... Just remember be realistic and as long as you have a belief in yourself and the product you'll be grand.

    Good luck.
    Posted: Dec 9, 2008 By: stevon Member since: Mar 26, 2008
    #8
  9. Tangerine

    Tangerine UKBF Newcomer Free Member

    Posts: 38 Likes: 0
    THanks Movirub, Minnsy & Stevon. This has beena great help
    Posted: Dec 14, 2008 By: Tangerine Member since: Nov 1, 2008
    #9
  10. Tangerine

    Tangerine UKBF Newcomer Free Member

    Posts: 38 Likes: 0
    Thanks Movietub, Minnsy & Stevon. This has been a great help
    Posted: Dec 14, 2008 By: Tangerine Member since: Nov 1, 2008
    #10
  11. Tangerine

    Tangerine UKBF Newcomer Free Member

    Posts: 38 Likes: 0
    Does anyone know who bears the cost for shipping the product to the UK, the manufacturer or me? Also what the costs likely to be involved? Any other information would be mush appreciated, such as can i claim back import duty, etc. Thanks
    Posted: Apr 25, 2009 By: Tangerine Member since: Nov 1, 2008
    #11
  12. Pap_sak

    Pap_sak UKBF Newcomer Free Member

    Posts: 341 Likes: 92
    Hi Tang,

    Imports/customs would be you unless otherwise stated. It seems you are slightly above your depth here. I would seroiusly think of find a really good distribution network to "link" onto, because warehousing, customs and taxes take a huge chunk and if you lucky money will only start coming in after 60 days after shipment. And I am sure they not shipping out using the royal mail. Sounds like a jacked operation and you will lose everything unless you be the middle man - the organizer. expect around 2-3%, 5% and you laughing for a quick seller as the middle man with no money down.

    good luck (in SA we have a saying "vasbyte" it basicly means gripping on with your teath, and do it, be a pro - start with comunication, they must think you a large organisation , not a 2 man start-up)
    Posted: Apr 26, 2009 By: Pap_sak Member since: Mar 12, 2009
    #12
  13. Page

    Page UKBF Newcomer Free Member

    Posts: 2,735 Likes: 185
    It is business - it all depends on what you negotiate/agree.

    They may well have quoted a price ex factory - you pay the rest.
    Posted: Apr 26, 2009 By: Page Member since: Jul 28, 2007
    #13
  14. Paddymac

    Paddymac UKBF Newcomer Free Member

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    My only advice would be to ensure a legal professional checks out the contract, I made the error of not doing this some years back and regret it, hidden in the jargon it was all very one sided.
    Transport is usually covered by you unless you can negotiate on that.
    I imported from E.U. so dont know about stateside.
    I agree with Stevon, keep your "targets" managable, much better to exceed their expectations but this can come back to bite you, I exceeded the agreed import levels within a few months, and upon renegotiation they wanted ridiculous figures as by then the market was reaching saturation, so you may have to reign it in a bit later on.
    Last edited: Apr 26, 2009
    Posted: Apr 26, 2009 By: Paddymac Member since: Apr 25, 2009
    #14
  15. i234i

    i234i UKBF Newcomer Free Member

    Posts: 2,273 Likes: 243
    What sort of product are you looking to distribute?

    I have done this with a US product for the UK, which built up nicely.
    I have some answers to what your looking at, it could be two different ways depending on what the type of product is... just a general idea?
    Posted: Apr 26, 2009 By: i234i Member since: Jul 16, 2007
    #15
  16. Tangerine

    Tangerine UKBF Newcomer Free Member

    Posts: 38 Likes: 0
    Hi i1234i, thanks for your reply. it's a beauty product



    What sort of product are you looking to distribute?

    I have done this with a US product for the UK, which built up nicely.
    I have some answers to what your looking at, it could be two different ways depending on what the type of product is... just a general idea?
    Posted: Apr 26, 2009 By: Tangerine Member since: Nov 1, 2008
    #16
  17. dagr

    dagr UKBF Newcomer Free Member

    Posts: 1,879 Likes: 316
    Hi Tangerine,

    Some good points already been answered.

    From my point-of-view, don't be put off by relative size (i.e. you v's supplier), but you have to be realistic in terms of sales and forecasts. If they are doing, say, $10M turnover in the USA alone, and you claim to be able to reach a turnover in Year 3 of say, £50K, then you have a slim chance of getting an exclusive contract. Likewise, a claim of £5M in Year 2 will also put them off. It also depends on their expectations for the UK: Is it just a little extra (51st state) that can be added to their main turnover, or do they have a marketing strategy for the UK and Europe where they want to become a global player, etc.

    What you need is a 1 or 2 page mini business plan for this product in the UK, stating what the target market is, the sales channels, the target pricing, what marketing strategy and budget you have, your forecasts for the next 3 years, .... It doesn't have to be exact as I understand there is no real market data for that specific product, but begin by putting down some basic market UK facts that the USA will not typically be aware of if they have no previous UK dealings: (I'm making this up, but you get the idea). Potential nb of end-users (e.g. women 20-40yrs), nb of UK beauty salons, % products bought on-line/in-shop, your expected market penetration, etc. A guestimate of sales figures will fall naturally out from this data.

    ... and why YOU are the one to do this.
    (You'll need this for yourself anyway)

    You'll need to do your homework, maybe looking at similar products in both USA and UK to get rough expectations of relative sales volumes and pricing. If you are unsure about some aspects, then say so and maybe give an upper and lower figure and say they are your best guesses at present.

    Put yourself in their position. What if they sign an exclusive contract with someone who doesn't put in any effort (no advertising, no booths at major shows, etc.), then they are stuck for a while with a lame duck, and have effectively lost a market for 'n' months.

    Even if you do a good job selling yourself, you may still not get the contract, and they may use your data / business plan, but this is just a business risk you have to accept.

    In terms of importation, most contracts will be FOB or ex-factory, meaning you will have to pay transport costs. If the product is subject to duty (check HMRC website for product types and duties), then you'll have to pay that up front along with the VAT before you get your hands on the goods. If you are VAT registered, you will claim the VAT back, but not the duty. That is "lost".

    For payment terms, there are all sorts of time-consuming, costly methods. Unless it's really big sums, the easiest and cheapest way is to go for a staged payment schedule. This requires a bit of trust on both sides, but could be as simple as, say, 50% wire transfer with order, 50% wire transfer on receipt of goods, or 1 month after receipt of goods.
    Posted: Apr 26, 2009 By: dagr Member since: Aug 30, 2005
    #17
  18. Tangerine

    Tangerine UKBF Newcomer Free Member

    Posts: 38 Likes: 0
    Thanks page, paddymac & dagr. this has been really helpful
    Posted: Apr 26, 2009 By: Tangerine Member since: Nov 1, 2008
    #18
  19. Tangerine

    Tangerine UKBF Newcomer Free Member

    Posts: 38 Likes: 0
    thanks everyone for all the fantastic advice. just to let you know that i got the exclusive distributorship & know onwards & upwards
    Posted: Jun 19, 2009 By: Tangerine Member since: Nov 1, 2008
    #19
  20. chunky311

    chunky311 UKBF Newcomer Free Member

    Posts: 1 Likes: 0
    Excellent info guys, I am just starting this and came across this site. Very grateful for the help.

    If there is more information please do add it.

    Thanks
    Posted: Aug 11, 2009 By: chunky311 Member since: Aug 11, 2009
    #20