Know-How Exchange : Strategy

The situation you're describing doesn't usually happen. I can think of one example where a video games distributor paid a premium and committed to large forward purchases of games to obtain exclusive distribution rights for that game or a range of games.

The distributor took a risk by doing so and expected to command a premium price in the marketplace for that risk.

However, a number of smaller distributors purchased overseas through sub-distributors of the OEM manufacturer and sold the same games in-country at a lower price.

The 'exclusive' distributor sued some of the key parallel importers and generally won, depending on how well the supply contracts were written. This cycle repeated frequently for any new games that were released that were likely to be in high demand.

Meanwhile the main (exclusive) distributor continued to commit to products from the manufacturer that were in lesser demand and supported them through thick and thin. The small distributors would simply 'cherry pick' when 'no-brainer' titles were released. They rarely parallel-imported where there was a risk the could get stuck with unsold product.

So the events you outlined did occur, but not as happily as your question seems to indicate you might have anticipated.

What's the reason for your question?

I have not heard of any 'happy situations' for both the parties. But there was a case when Rothmans licensed their brand to a manufacturer to make the product locally. The grey market imports were preferred to the locally made one because they were cheaper and perceptually more 'authentic'. The local licensee very soon stopped manufacturing the cigarettes locally.

Distributors rarely buy from distributors. They buy from manufacturers. The manufacturer may have one set price, which provides their margin. But shipping, taxes etc in one country vs another will add a layer of cost which is passed on to the end user.

I can think of about 4 examples in the Automation, Electrcial and commercial HVAC industry. These are all B2B markets. The distributor adds a great deal of value to the end customer.

There have been issues, especially with large multinational companies that can check prices of products anywhere in the world via a couple of computer strokes.

Want to talk more, contact me via my profile.

Dear ziczacxann21,

As for brands of products that are much more expensive in one country than another that have resulted in a big parallel market, while the official distributor is still making money, well, diamonds and refined gasoline spring to mind.

But the thing that interests me more is your follow-up statement:

"I'm facing the problem of parallel imports and wonder if I can
be like Nokia and Apple."

Here's the problem with this statement.

Unless you have MASSIVE reserves of capital and HUGE marketing budgets to sustain your message in a market in which there are established category leaders, and unless you can do this over a long period of time in a large (meaning in a wide) market, the gap between your initial start up and your eventual profitability for products in the sectors you're talking about (Nokia and Apple) is wider and deeper
than you'll ever be able to cross or climb out of.

Your competitors will see to this because in terms of share of mind,
they already rule the roost, and because the Apples and the Nokias of the world have deeper and richer marketing war chests than you might have access to.

There are ways to get around this. For instance, by being the first
in a category or niche with a new product.

Or, here's another way:

Might the answer here be to shrink the size of the market you're selling in, and to then become the best in that category, for that audience, and in that niche?

Might this strategy make your marketing budget work that much harder and far more efficiently? And might this then, because you're selling to
a narrower audience, help trim your costs, permit you to maintain your pricing, and to therefore help you maximize your profits?

Just a thought. I hope this helps.

Gary Bloomer
The Direct Response Marketing Guy™
Wilmington, DE, USA