Love- Hate relationship between Supplier and Distributor Part 1/2

Traditionally, when a medical company would want to expand their territory , the first thought would be to find a appointed distributor that would handle everything from registration, marketing, distribution and to logistics. These are some of the common problems observed while dealing from both sides:

Three common problems that are happening always from Supplier to Distributor:

Meeting in progress!
  1. Unrealistic expectations of the distributor
    • Principals would often based on a country’s demographics or statistical figures to enforce a volume and cost price to their distributors. Realistically with every new product launch, there is heavy marketing, education and branding campaigns involved before the product could be moving at a swift pace off the shelves. This process could take about 3 years minimum. This is neglected by many suppliers. There should be a pragmatic approach to conducting a ground check first for the estimated volume of the product and allowing the flexibility of volume for the 1st year quantity. This will build confidence and trust for both supplier-distributor relationship.
  2. Expecting distributors to take on a lot of responsibility while reaping the benefits of a good sales
    • We understand that a long term business relationship requires cooperation from both ends to work. When a distributor signs that distribution agreement, it is their responsibility to make the product work in the market so that they can continue to give higher forecast each subsequent year. Instead of numerous clauses pushing the entire marketing capacity to the distributor, it will help greatly if the supplier could provide as much support as possible in terms of sharing similar market experiences and offering promotional materials and samples to assist the distributor to stabilize and gain market share for the product in the territory.
  3. Trying to “seize back the business” from your distributor for their hard earned efforts to build the brand
    • When there is a seemingly consistent growth of sales coming in with a good reputation in the local market, some principals are tempted to make plans to take back the marketing rights for themselves. Although it is stated in the agreement explicitly concerning termination and a timeline provided for transfer of licence to the next appointed licence holder, it can be certainly an unpleasant moment when this is announced to the distributor. To mellow down the damage from both ends, it is advisable to inform them at least 6 months in advance so that they can plan out their resources. It is good to offer support and a reasonable timeline for transition period to ensure good relationship can be maintained even with this decision.

In mitigation of such issues, distributors are diverting their resources to own label products. Suppliers are starting to open up to the idea of owning the licence rights in the market. The above trend has eased the regulatory burden of distributors as Principals share the cost in marketing by registering the product first and also allowing the distributors to dedicate more of their resources more on marketing and sales of the products. The Reg Consultants Pte Ltd function as a neutral party to assist in such issues. We can help to register the products locally as well as mediate the coordination of such transfer. Do leave your comments below and we are more than happy to assist!

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