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Signing Distribution Agreement with Distributors/Agents

To enhance distributors' competitiveness and boost sales, distribution agreements may specify distributors' market positioning and business development directions as well as measures to be taken by manufacturers to help distributors in the process.

9.2.1  Positioning and Development of Distributors

1. Modernised distribution and warehousing centre. Distributors are the primary suppliers of goods and services to retailers and wholesalers. Distributors must have good infrastructural facilities, attractive rewards, standardised operation processes and efficient management so as to provide customers with new, stable and timely products. By offering value-added goods and services (such as storage and transportation of products and credit), distributors can gain reasonable profits from their customers.

2. Potential suppliers providing manufacturers with coverage services. Distributors can provide coverage services to manufacturers by recruiting, training and managing the sales teams, and are paid a "coverage service fee" by manufacturers based on their service quality.

3. Potential suppliers providing management services to small and medium-sized customers. Distributors can provide e-commerce management, store promotion, inventory management and sales management services to small- and medium-sized customers and collect a management service fee.

9.2.2  Characteristics of Distributors

1. Size. In the distribution and sales coverage sector, competitiveness in size is obviously important.

2. Efficiency. Efficiency is the key to profit generation. While application of technology and change in business model are the major ways to raise efficiency, lowering costs and enhancing productivity are also crucial. The major goal of the distributors is to satisfy the manufacturers' needs.

3. Standardisation. Standardisation in business operations forms the basis for distributors' long-term, healthy development.

4. Professional services. Distributors should strive to build a professional image and offer professional services to cater to the needs of the shops.

9.2.3  Ways to Improve the Distribution Network

1. Alignment in strategies is key to the joint development of the manufacturer and distributor. The strategy of the manufacturer should be to build a network of distributors who are strategic partners possessing size, efficiency, professional services and standardisation in addition to strong financing capabilities. These distributors must also assign top priority to the manufacturer's business.

2. To improve the business environment of the distributors and increase the confidence of the strategic partners, the manufacturer should take action such as granting preferential payment terms or core business development fund to the distributors.

3. The manufacturer can assign distributorship rights through open tender. This can help distributors realize that distributorship is a valuable intangible asset which can only be obtained through competition and bidding. This can also motivate distributors to pay more attention to sharpening their competitive edge and carry out reforms.

Content provided by Hong Kong Trade Development Council
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