Bypassing Local Distributors... issue?

CapedCrusader

Hi folks,

I have two businesses one retailing in country A and the other in country B.

Just say I have a warehouse in country A and a warehouse in country B.

A particular manufacturer deals directly with customers in country B but uses a local distributor in country A.

Is there any issue with me buying from manufacturer in country B, putting the stock on a boat and then selling it in country A via the local business there?

Local distributor in country A will obviously be losing out, but is there anything wrong with this? In peoples' experience, will the manufacturer have an issue with this?

A potential issue I can think of is that some countries may have differing regulations, so manufacturers can use local distributors to control the sale of product in that jurisdiction to ensure compliance etc.

Would be interested to hear thoughts.

DoMyBooks

In my experience it will generally come down to the relationship Local Distributor has with the manufacturer. If she/he is buying a lot and has a good relationship the manufacturer may stop you. There also could be contracts involved.

antoinolachtnai

If they are both in the EU, there's not much he can do in law, though there can be 'funnies'. (Look up the recent case about the Jacobs brand which is owned by different companies in Ireland and the UK.)

If you are getting a discount from the manufacturer in one country and then expand into another, there is no particular reason why the manufacturer wouldn't continue that discount, even if you actually received the goods through the distributor. This is what used to happen in the high-end server business (for example, Sun).

On the other hand, PC World doesn't go through Irish distributors (as far as I know). They deal more-or-less directly with manufacturers. They don't need support from the local channel.

A lot depends on the type and amount of support required. Consumer products will work well the latter way, complex B2B products will be more like the former.

You can always 'share the wealth' between the two upstream channels, and see if you can gradually get an improvement in terms from the distributor, rather than engaging in shock tactics.

You should definitely talk to the manufacturer, in a nice, non-confrontational way about the issue.

Code Red

It's a business, do whats best for your business. Normally that will mean buying at the cheapest price from the larger distributor in the larger country.