Getting a Product Everywhere Without Being Everywhere

A new product usually starts with the founder selling it. That teaches you things nothing else will: the objections, the real use cases, the price people actually pay. It also caps out. One person can carry a territory, a few accounts, maybe a first retail chain. Beyond that, growth means other people selling on your behalf.

Distribution is not free reach. You hand over 25 to 50 points of margin, and often the customer relationship with it, in exchange for coverage, local inventory, credit, and a route to buyers you cannot reach. Whether that trade is good depends on when you make it and how the agreement is written.

When to Move From Direct to Distribution

Move too early and you hand a partner an unproven product with no marketing behind it; it sits, it gets dropped within a year, and you lost the territory for the length of the contract. Move too late and a competitor with better shelf coverage takes the market.

The readiness signals are concrete. You have sold enough directly to know your conversion rate and your objection list. Returns have stabilized under a few percent. Production can absorb an order five times your biggest to date. You have packaging, a manual, and photography that stands up on someone else's website. And your unit economics survive the distributor discount, which is the test most founders fail.

Run the margin math first. If your landed cost is $12 and retail is $49, a two-step chain taking 25 percent at distribution and 40 percent at retail leaves you selling at about $22, a $10 gross margin before overhead and marketing. That may work. At a $22 landed cost on the same $49 retail it does not, and no negotiation fixes it. The chain arithmetic is set out properly in how to price a product, and it has to be settled before you speak to a single partner, since retail price is very hard to raise later.

Decide what distribution is replacing, too. If most revenue arrives through your own store or a marketplace, physical distribution may create channel conflict rather than growth; the tradeoffs are in marketplace vs your own store.

Distributor, Rep, or Dealer

The three are routinely confused and they carry very different risk.

A distributor buys inventory, takes title, sets its own resale price within limits, carries the credit risk, and often provides warehousing and local support. You get paid on shipment. You lose visibility into the end customer.

A manufacturer's rep never takes title. They sell on commission, typically 5 to 15 percent, and the order flows to you, so you keep the customer relationship and the margin but carry inventory and credit risk. Reps suit technical products with long sales cycles and few, large customers.

A dealer or reseller buys smaller quantities, usually from a distributor, and sells to end users. Dealers are the last tier, not a partner you manage directly. Most hardware companies end up with a mix by territory and segment, and which structure fits which market is worked through in sales rep vs distributor.

Screening a Distributor

Founders take the first partner who says yes. That is how a territory gets frozen for three years under someone who ordered once.

Ask these before anything is signed:

  • What else do they carry? Adjacent, non-competing lines are ideal because their team already calls on your buyer. A catalog of four hundred lines means yours gets no attention.
  • Who are their top ten accounts, and can you speak to two? A serious distributor will arrange it.
  • How many field salespeople, and how many calls per week? Coverage is people, not a website.
  • Do they handle technical support and returns, or does every question route back to you, and what is their warehouse capacity and inventory turn?
  • Will they commit to a first order and an annual volume in writing? The answer to this one question separates real partners from optionality collectors.
  • What marketing will they fund, and what do they expect from you?

For overseas territories, add regulatory competence: who holds the local approvals, who is importer of record, and who handles local-language labeling. Which country to enter first deserves its own analysis, covered in choosing your first international market.

Trade shows remain the most efficient place to meet distributors, because the good ones walk the aisles looking for lines to add, an approach described in trade shows for new products.

The Agreement Decides the Outcome

Every distribution relationship is defined by what the contract says about performance and exclusivity.

Never grant open exclusivity. If a partner wants exclusive rights to a territory, price it: exclusivity conditional on a minimum annual purchase volume, reverting to non-exclusive automatically if the number is missed. Set the first-year minimum from their own forecast, not yours, so they cannot argue it was imposed. The clauses that matter most are listed in exclusive distribution agreements.

Also fix in writing: term length, ideally one year with renewal on performance; territory and channel definition, including whether online sales into the territory are yours or theirs; the discount schedule, with volume breaks structured as in volume pricing tiers for B2B customers; payment terms and currency risk; how the brand may be used; warranty handling and who pays for field failures; sell-through and inventory reporting, since sell-in figures hide a channel filling with unsold stock; and termination rights with a defined buyback for remaining inventory.

Managing the Network

Signing is the start. A distributor sells what is easy to sell, and a line nobody supports goes to the bottom of the bag.

Train the partner's sales team, and retrain when they turn over, which they will. Supply a kit that removes work: images, spec sheets, comparison tables against the competitors they will face, objection handling, and a demo unit per salesperson. Review quarterly against the numbers in the agreement, focused on sell-through rather than sell-in. Run joint activity, whether a shared show cost, a co-funded campaign, or a spiff for their reps. And never undercut your distributor's price on your own site; the relationship is over even if nobody says so.

Expect churn. A network takes two to three years to build, and roughly a third of first partners will underperform. Build the agreement so replacement is possible without a lawsuit, and keep enough direct sales running that you never lose your own read on the market.

Build the Channel Before You Need It

Projects House helps clients get a product ready for distribution: the cost structure that survives a two-step margin chain, the packaging and documentation partners expect, and the technical materials a distributor's sales team needs. Tell us about your product and your target markets through our contact form.