When Should you Consider Multiple Distributors in a Territory
Read Time: 4-minutes
Happy New Year everyone. Sorry I haven’t published in a while; I decided to take a step back at the end of the year from both LinkedIn and the newsletter to refresh myself a little bit.
I had a conversation this week with a company interested in utilising Alchem as a sub-distributor in the UK, the parent distributor being in the UK as well.
They wanted to check I would even be open to the idea before putting more meat on the bones as it were and, naturally, I responded with – yes, but it depends...
…they also are a really interesting company with some great products, but more on that another time!!
Today though, I’ll explain why you might want to use more than one distributor in the same region, something I have instilled successfully myself when with a manufacturer, but something which seems counter intuitive.
By the end of this article, you will know the key points to consider and the steps to take if you chose this route.
It’s important because buyers and suppliers in the chemical industry must make smart choices when it comes to distribution partners. It can help avoid shortages, limit price swings, and ensure reliable supply. If distributors are managed well, you should see stable logistics and stronger relationships throughout the supply chain. Ultimately, improving yours and your company’s reputation and future growth.
Many companies fail in this area because they rely too much on a single distributor. This over-reliance can lead to supply disruptions if the distributor faces unexpected problems. It can also limit your ability to compare market prices and check the quality of different suppliers.
Another mistake is not paying enough attention to each distributor’s strengths and weaknesses. If they are not guided properly, confusion may arise. Often leading to poor customer service.
Key takeaways
Wider Market Reach
Better Risk Control
Price Flexibility
Stronger Negotiation Power
"He who fails to plan is planning to fail."
– Winston Churchill
Wider Market Reach
Having multiple distributors can help you tap into different parts of the market. Each distributor may have unique local connections that can open doors to new customers. In the chemical industry, local expertise might mean better understanding of local regulations, language skills, or existing client bases.
Working with more than one distributor can allow you to cover a larger area or offer more specialised product lines. This approach also offers a sense of comfort to potential buyers who prefer working with a distributor they know and trust in their own region.
If you go own this route though, it must be clear what the boundaries are, and which client falls to which distributor. You can apply the same principles as I wrote in the structure article. i.e. industry vertical or stratification.
Better Risk Control
Relying on a single distributor can make your supply chain fragile. If that distributor faces issues with stock, transport delay, or any other problem, your entire supply might be at risk.
When you use multiple distributors, you spread out your risk.
If one distributor cannot deliver on time, you have another option to keep your supply chain running. This can reduce anxiety and frustration during uncertain times. It can also boost confidence among customers, who see that you have solid backup plans in place.
Price Flexibility
When you have different distributors, you also have the chance to compare prices and negotiate better deals.
In the chemical industry, raw material costs can vary based on global or local factors. By working with multiple distributors, you can look at each offer and decide which one is most favourable at that moment. This can be important for those who need to stay competitive on pricing. It also helps maintain fairness in pricing, as no single distributor can raise prices without the risk of losing your business.
Stronger Negotiation Power
Working with more than one distributor gives you extra leverage in negotiations. Distributors understand that if they do not meet your needs, you might move your orders to a competitor.
This can push them to provide better customer service, faster delivery, or more reliable quality checks. As a result, you can maintain stronger relationships with your distributors. They are more likely to respond quickly to problems and offer better terms because they want to keep your business.
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So, there you have it.
Although it may seem counter intuitive, there certainly is an argument to work with multiple distributors in a single region. It’s certainly more complicated though. In order to do it effectively, you’ve got to have good levels of trust (in both directions) and clearly defined boundaries too.
When done correctly though, this approach can give you greater reach, reduce your risk, and improve pricing.
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Thanks for reading, and see you next week.
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