DISTRIBUTOR VS. FULFILLMENT AGENT: Comparing potential partners in China
China is unlike any other market. It’s operational norms, sales strategies, laws and regulations are unique, and localization is essential to insuring success.
In fact, there are various prevalent Western revenue channels that are significantly less effective in the Chinese market and working with a single distributor is one such example. While in the West, this business model is utilized by many companies as a convenient and efficient way to secure sales, in China it is an outfit doomed for failure.
In China, the big do not eat the small but the fast always beat the slow. Companies who operate independently and own their sales channels autonomously are able to adapt quickly and effectively to their consumers needs and relying on a local fulfillment agent in China gives companies the power to do so.
Words provided by PTL Group
The distributor myth
It’s important to note that selling through a local distributor in China, who facilitates the sale of your products is without doubt the easiest way to sell in China. But if you’re looking for the easy way – think again.
- The Chinese market is in fact divided and separated into many smaller sub-markets and units, rather than a huge integrated marketplace.
- Hence, a distributor with a strong network of connections in Southern China might have no presence in Northern China.
- The Chinese attribute of “Guanxi” (relationships) inhibits a distributor’s access to all channels. Many business dealings are made on the basis of long held and personal links between stakeholders.
- You cannot assume that distributors to hold a supplier-distributor relationship as their top priority. Chinese distributors, like all others are ultimately businesses, who will always seek to maximize their own commercial success and prioritise their own profitability over yours. This reality means that fluctuations in market conditions or new and potentially more lucrative opportunities might change a distributor’s behavior or their loyalties.
- It is of no surprise then, that many companies who utilize local distributors experience a sudden and unexpected halt in their China sales, as their distributors liberally choose to promote a rival product that sells more easily or provides them with a higher markup. Put bluntly, you cannot expect distributors to be solely loyal to you and your product.
- The fact of the matter is that distributors will always stand in the way of you and your target audience in China and it will always be in the distributors best interest to not paint the fullest picture for you. They ultimately hold the knowledge and insights that your business requires.
Splitting the cake
In order to diversify marketing channels and spread presence throughout the country, international companies often employ several distributors rather than an exclusive one. But then there comes another problem – aligning the multiple distributors’ interests.
Choosing either the exclusive distributorship path or splitting the cake is a double-edged sword. With the former, you might lose the opportunity to increase sales in China. But with the latter, distributors might look for short-term benefits rather than long-term growth. And either way, you end up losing market share and foregoing profits.
Still debating whether an exclusive distributor is the best choice?
Read more about distributors and fulfillment agents in China.
Trusting single or several distributors isn’t the only option for sales in China. Instead of letting your distributor manage the sales process, choose a partner that provides you with control, transparency and independent management.
As we’ve mentioned, Flexibility and Autonomy are the 2 magic words crucial for any success in China. They are a fantasy made possible by the employment of a China fulfillment company, or a fulfillment agent. Outsourced China fulfillment services enable you to have full control over your business development and sales; management based on YOUR interests. You are not subject to the whim of a local distributor, but rather, thanks to this more direct operational approach, you get to be more involved in the sales, the learning and the growth of your business in China.
The advantages of a fulfillment agent
- Fulfillment agents are more cooperative and responsive, as they don’t hold their own sales channels nor do they have “ambitions” to gain more companies as their clients.
- Unlike distributors, fulfillment agents are in a neutral position, which reduces their conflicts of interests.
- Agreements with fulfillment agents are more binding and can include any and every service the agent is able to provide, on a clear and transparent fee structure.
- A fulfillment agent allows you to make and accept payments in RMB, thus increasing your potential client base and win many new sales channels.
In such a complex and challenging market as China, utilizing one distributor is pointless. It’s equivalent of tasking one sales representative with the job of managing all sales in Europe and America combined, while they’re also trying to separately sell hundreds of other similar products or services. Alternatively, fulfillment services in China would be a more strategic and effective solution, enabling you to manage your own network of distributors; to grasp the reins of your local sales channels; and to conduct your China business with complete flexibility and peace of mind.
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