Owning it: the tricky manoeuvrings of selling direct to customers

Nixing middlemen and establishing owned sales and distribution promises greater rewards – but not without a fair bit of increased risk. Thankfully it’s not an either-or proposition.

When growth goes well it’s natural to start thinking about how to own more of the process – and more of the profits. But determining whether or not that’s the right decision will require careful consideration, says NZTE customer director Alan Koziarski. First off, is it even possible to sell directly to customers, and if it is, can you realistically do it better than the current distributor? And what’s the strength of the relationship?

NZTE customer director Alan Koziarski

“Do you represent 0.001% of their business and have 10 slots in a catalogue of thousands, or do you represent 40% and have an equal sense of priority in each others’ business? Who has the biggest brand, you or the distributor?” he says. Answers to these questions can help determine whether going it alone is the best option, rather than switching distributors or working through issues with the current one, Koziarski says.

“Our advice is to get a sense of this dynamic and be realistic and practical about it.” If there are problems, he cautions that before jumping ship from a distribution deal, companies need to be sure of where the problem lies and that expectations are realistic. It’s important to establish how mutually beneficial the relationship is between exporter and distributor. Peta Conn, NZTE’s trade commissioner in New York, says companies often underestimate the value and strength of distributor relationships with buyers when they are considering dumping a distributor.

NZTE New York trade commissioner Peta Conn

She says it is a mistake to assume your own sales staff will necessarily always or easily be able to duplicate those relationships, especially where they are longstanding and entrenched. But sometimes even when third-party distributors work well, they’re still no substitute for a business’ own staff putting passion into the brand, gathering market intelligence and keeping in close contact with head office back in New Zealand. And if travel costs to a particular region are mounting, appointing permanent staff can result in cost savings, even without accounting for the extra potential business wins. That’s been the case for bark and moss producer Besgrow, which recently took the plunge and appointed its first full time sales associate in Australia. The appointee will work alongside an existing distributor rather than replacing it – and is in fact a shared venture - but chief executive Andy Doherty says he does expect the business will win from the increased focus.

“It’s about having someone that’s focused 100% on our product. Often within a business you’ve got other products to compete against – and with a lot of export business the workload goes and comes with you,” says Doherty. “So as you visit a market they increase and as you leave the market it decreases. Obviously the more time you spend in the marketplace, the more traction you’re going to get by having someone totally focused there 100 percent of the time. That just focuses exposure completely.

“A lot of [the benefit is] internal, taking away the noise and potential blocks of making business simple,” says Doherty. “Someone’s on tap to answer a phone or answer an enquiry. Even though there might be someone in another country ready to do it, it just makes it that much simpler to have someone there.” ×