Congratulations! You just got your product into a pet products distributor! Let’s go over what you need to know.
The good news is that the distributor serves many purposes for your business. One of the key things is assuming the credit risk. I remember back in my days of selling directly to pet stores and calling a deadbeat 50 times to collect $50. In today’s economic climate, most distributors only deal with credit worthy customers, but even those skip payments and can be difficult to collect from. The other good news is that you only have to ship to 1 warehouse instead of shipping onesie, twosie orders. The other thing that is nice is the opening “pipeline” order to support their customer base.
The first Bad has to be the margin requirements. Most pet distributors require a margin of around 30%. This is unheard of outside of the pet business. In Consumer Electronics for instance, the margin for a distributor are about 15%! Not sure why this is, but it is. So the simple math goes like this…
Your price * 1.3 (30% margin) = Distributor Selling Price * 2 = Retail price to Consumer
Here is an example…
$1.5 * 1.3 = $1.95 * 2 = $3.90. See how quick your wholesale price more than doubles by the time it reaches consumers? Sometimes this can be a showstopper. This is also why most companies have 2 price lists – one for distributors and ones for “Dealer Direct”. The distributor gets the lower price so your ultimate retail isn’t through the roof!
The second bad is the distributor’s “sales force”. I put sales force in quotes because they are usually pretty weak order takers at best – not a sales force. To their credit, they are dealing with thousands of products across many categories. They focus on what sells and what is top of mind to make their bonuses. What chance does your product have of being pushed to their customers?
Getting into a distributor is only half the battle. The reality is that you as the manufacturer are responsible for helping the distributor sell your product. You need to get involved in their SPIF (Sales Promotional Incentive Fund) offers – basically a bounty for selling your product. You will have to attend their open house to push your products to their dealers and participate in any special advertising they do for their dealers, etc. You will also need to advertise your brand in the leading Trade Magazines (Pet Product News, Pet Business, Pet Age). It’s helpful to list your distributors in the ad if you only have a few.