Know-How Exchange : Strategy

Unfortunately, when distributors sell product to large retailers and other mega customers - their gross margin goes down. Beware,because in some distributor contracts the manufacturer reserves the right to sell direct.

If you have further questions, I work exclusively with distributors and their supply partners and would love to chat. I can be reached via my profile information.

You need to do some research and find what the market will bear. Check out your competitors. Defining these issues is an art-- you do not want to leave any $ on the table nor do you want to price yourself out of the market.

While "several" countries may mean to us in the US as a large territory, it may mean small in your area. It depends on your population and BPI (buying power index) more than geography. Your 4 country region could mean less than the 3 states I handled-- 300K Square miles. Or less than the few square mile radius than a city like Chicago or LA.

So-- I will say without sufficient research we cannot provide a specific answer. And someone like Frank is justified in asking you to submit a project to research that number. In a typical US regional territory my experience has been 35%-- that was typical when one distributor handled one city or a multi state region -- again, based on BPI. Territories are granted -- lowered and expanded based on their potential. But that number is further adjusted as in Franks example, a larger national territory-- or with national mega accounts.

I'll give you some number to begin your research...retail model:

Retailer Retail $10.00
Buys @ 4.50
Margin 55%

Distributor sells @ 4.50
Must "own" around 2.25 to 3.00
Margin 50% to 33%
Inventory turnover critical (along with Accts Rec)

The product is new but is it useful?

Roughly, distribution involves customer service, transportation, warehousing, handling, inventory control, order processing, advertising...Then the 4 countries surrounding you..hopefully the same language is spoken throughout your territory otherwise, think of a translation for the label (if needed), custom taxes...