There will always be a buyer for a good product, but what if the buyer is domestic, but the product can only be bought from a foreign manufacturer? Not every potential consumer is ready to go to another country for the product they like, so you can start making money on this desire in Russia. But before becoming a distributor of a foreign company in Russia in 2019, you need to make sure there is stable demand.
Distributor or dealer - work in a chain
Having established contacts with a foreign manufacturer, an enterprising person will need to decide in what capacity he will be ready to work with him. There are two options: dealer and distributor. Unusual to Russian-speaking ears, the words translated mean: merchant and distributor. Despite some similarity of concepts, there are differences between them that determine their functional difference.
Difference in Definitions
Even a superficial knowledge of English will allow you to find translations of foreign concepts that have quickly taken root in our vocabulary since the 90s. And if in the era of the “wild” market no one delved into the details, now the chosen status also determines a set of rights and responsibilities.
Thus, a distributor (general or exclusive) is first of all obliged to organize the distribution of a product or service. This means that a domestic company or individual entrepreneur will be busy forming a network of wholesale or small wholesale distributors, as well as launching an intensive advertising campaign for greater brand recognition.
Contacts with small retail outlets and end consumers are mainly carried out by dealers. It is their responsibilities that include direct direct sales of goods and services.
Difference in rights
If we imagine trade relations in the form of a hierarchical chain, we get a simple sequence: foreign manufacturer - distributor - dealer. Based on the manufacturer’s sales policy, there may be one or several distributors in the country. The number of dealers depends on the intensity of work of the distributor himself. It is clear that commercial success in Russia implies the most developed network of those who work directly with the buyer.
How to organize an individual entrepreneur in Russia for a foreigner
It may happen that a citizen of another country expresses a desire to develop a potential market, confident that his products will be of interest to Russians. If a foreigner does not want to start a large business, but perhaps would like to launch a trial balloon, then the option of registering an individual entrepreneur in his own name is suitable for him.
The legislation of the Russian Federation does not exclude the possibility of official commercial activities of a foreign citizen. To register, he will only need his own and.
A foreigner can quickly and without hassle open an individual entrepreneur online through the proven service “My Business”. All you have to do is register, enter the necessary data, and the system will give you ready-made documents, which all you have to do is print them out and submit them to the tax office.
Become a supplier: the distributor path
Having chosen a foreign manufacturer whose products, in the opinion of the future seller, will be of interest to the Russian buyer, the main thing is to correctly carry out the presentation work and negotiations. A well-written business plan and forecast data on purchases and sales will help you successfully present your company to foreigners. 
Many foreign brands have their own set of requirements for potential partners. They can cover more than just financial indicators about minimum sales volumes.
Among the requirements for a future distributor may be wishes for location, availability of warehouses and industrial premises, equipment, personnel and retail space. The demographic and economic indicators of the region may also play an important role.
In addition, before becoming a dealer of a foreign company in Russia, it will be necessary to prove to the manufacturer that the company is able to establish and further develop a partner network.
Variants of work schemes
The form of cooperation between the manufacturer and the official distributor may have several options. A foreign company can choose a Russian distributor as the only one who has the right to import their goods and sell them on the territory of the Russian Federation. He may be given the broadest and sometimes exclusive rights to develop and expand the sales network. There is a scheme in which a distributor is selected for different groups of goods. Division by region is also possible.
Under an agreement with foreign businessmen, the distributor may be obliged to independently organize a network of representative offices and service centers and organize direct sales.
However, most often there are contracts under which the distributor can delegate authority to work with clients to smaller dealers, while he himself will be involved in promoting products and expanding the partner network. With this scheme of work, the distributor will be required not only to intensively search for new markets, but also to provide information support to dealers, organize seminars and representative events.
Documentation of cooperation
After conducting preliminary negotiations and receiving positive reviews of the cooperation proposal, it is time to discuss the draft agreement. According to established practice, a contract with a foreign company stipulates in detail many even small details. Most often it is compiled in two languages (Russian and English).
The main pitfall of such agreements can be considered that in any disputes the text in a foreign language will be taken as the basis. On top of that, lawyers often add a clause on foreign jurisdiction of cases under this document.
A positive aspect of such strictness can be considered a detailed description of all procedures and requirements, a list of information about information support and an appendix to the contract of a list of responsible contact persons.
Work on the basis of a dealer agreement
In addition to obtaining distributor status, a domestic entrepreneur can try to enter into an agreement with a foreign legal entity to work as a dealer. Such cooperation is suitable for those who are ready to work independently in the field of direct sales of imported products, without advertising support and service departments.
This is acceptable in cases where the manufacturer itself already has its own branch in the Russian Federation and is interested in developing a partner network. Most often, a dealership agreement involves work on an advance payment basis. If we are talking about the possibility of paying for a product after its sale and allows the return of illicit goods, then the manufacturer in most cases reserves the right to set maximum prices and return periods.
For an optimal approach to making an informed decision on the form of cooperation, it would be useful to familiarize yourself with information about.
How much working capital will such a business require?
The answer to the question about the costs of promoting products, purchasing several starting and presentation batches of goods, and developing a sales network should be announced at the stage of presenting a business plan and conducting negotiations. A scrupulous approach to preliminary calculation of financial investments is not only useful for ensuring a positive response from a foreign partner, but is also advisable for the potential distributor itself.
The amount of capital investment largely depends on the product being sold, and on the expected distribution area and the extensiveness of the dealer network. It is clear that high-tech gadgets or unique highly specialized equipment cannot be cheap, but the segment of a non-premium clothing brand will be more affordable in terms of material costs and capital turnover rate.
Ways to do business with foreigners without investment
If the preliminary calculation of capital investments before becoming a representative of a foreign company does not correspond to the available savings, draft contracts can be proposed with the distribution of the financial burden between the parties. 
To reduce the size of the initial investment, you can try to negotiate a free supply of at least a trial batch of products. Despite the riskiness of such a transaction, the contract can provide for some means of insurance (for example, financial guarantees from a bank or insurance). In addition, this option may become the only opportunity for foreigners to penetrate new markets.
Another way to promote a product without buying it is through an agency agreement. In this case, ownership of the goods does not pass to the distributor; he will receive only the commission specified in the contract.
Typically, the agent's profit is less, but in conditions of a lack of working capital, this option seems optimal.
Pros and cons of working on behalf of a foreign partner
An undeniable advantage of working under the terms of an official representative office is that the distributor is guaranteed support from the manufacturer. In the case of cooperation with a global brand, establishing sales is noticeably easier.
Constraint in decision making may be considered a disadvantage. In the overwhelming majority of cases, the manufacturer rather tightly controls the fulfillment of the image requirements of the contract, insists on increasing the minimum sales volumes, sometimes it comes to applying a system of fines or reducing the amount of remuneration based on the results of the audit sent.
Text by Daria Sharkova
Photo by Elena Ryazanova
For the first time in the “Success Stories” section we will talk about an alternative form of creating your own business - through distribution. Elena Lapko first became a distributor in Krasnodar, and then an official representative throughout Russia of the famous Dutch brand of accessories NOOSA-Amsterdam. Our heroine created her own network of regional distributors from scratch, overcame three financial crises in the Russian economy and learned to predict what jewelry customers in our country will like.
Elena Lapko
NOOSA-Amsterdam: the essence of the business
I am the official representative in Russia of the Dutch accessories brand NOOSA-Amsterdam. Moreover, she started as a distributor in her native Krasnodar, where she sold their products. And then she became the main partner and created her own network of regional distributors. Now I have a full-fledged business: my own team, my own channels for attracting clients and promotion, my own turnover and revenue.
My business is based on the distribution of accessories: I buy collections from the head office of NOOSA-Amsterdam in Holland, and then sell them in two ways - through distributors or in stores.
About the brand
NOOSA-Amsterdam - handmade accessories: bracelets, bags, belts, wallets made of leather. Replaceable buttons for them are made from natural materials: mollusk shells, wood, bone, resin and lava, as well as natural minerals. These items are created by hand by craftsmen in Nepal, Indonesia and Peru to order from the company. We also have a jewelry line called Relics, which features earrings, rings, bracelets, chains and pendants made of silver.
All leather accessories are decorated with removable buttons - each reflects the culture of one of the peoples of the planet and carries a sacred meaning. By choosing symbol buttons, our customers, for example, make wishes or protect themselves from what they want to avoid. The buttons are easy to attach and just as easy to remove. That is, buyers themselves create the design of their jewelry and can change its appearance at least every day.
For me, working with NOOSA-Amsterdam has always been not just a business, but a great love. If the brand’s accessories had not crossed my path in life, I would hardly have started another business.
Getting to know NOOSA-Amsterdam
I am one of those people who, in childhood and youth, never thought about the possibility of opening my own business. When I was in high school, I realized that I wanted to interact more with people, so I entered the psychology department. After university, she worked in various companies in Krasnodar. Positions include office manager and HR manager in a large Western company. At that time, as I wanted, I was in very close contact with different people. Perhaps, it was thanks to the experience of an HR manager that I began to understand how to find an approach to everyone, understand needs, and be able to listen and hear.
I met NOOSA-Amsterdam by chance. In 2012, I went to Amsterdam and met my Dutch friend in a cafe. We talked and drank coffee. I noticed on her hand a bracelet decorated with unusual buttons. The accessory captured my attention, and I realized that I simply needed to purchase the same one.
A friend took me to the store. It was a typical European multi-brand boutique, where current clothes could be complemented with various accessories. The treasured bracelets were in a display case near the cash register. When I asked the employee to show me the buttons, there were three large boxes in front of me - more than a hundred characters in total. It was a real delight! At that time I did not yet understand what all these signs meant, and I chose the replacement elements intuitively. The happiness of owning your very first bracelet cannot be compared with anything! I carried this emotion into my heart through all the years of working with the brand.
Many people who purchase NOOSA-Amsterdam products for the first time have very similar feelings to mine. I don’t want to take off my bracelet; without it, I feel like I left the house naked. The accessory becomes part of you! And so I returned to Krasnodar from that trip to Amsterdam with NOOSA jewelry on my hand.
The amount of the first purchase was 150 thousand rubles. I could choose the sales paths and channels myself
»The idea of becoming a brand distributor
All my friends and acquaintances, when they saw the bracelet on my hand, could not, like I did at one time, hide their curiosity and delight. This is the nature of our jewelry. They started asking me where I bought it. The interesting thing is that there was already a Russian representative office of the brand in Moscow. But few people knew about him. And after another question from a friend, the idea suddenly occurred to me that I could become a distributor of this company and tell many people about the accessories.
The amount of the first purchase offered by the brand to the distributor was (and is now) 150 thousand rubles. Compared to other retail companies, this amount is relatively small; In addition, the distributor constantly has the opportunity to make additional purchases, expanding the range and, accordingly, increasing turnover. That is, I needed to buy buttons, bracelets, belts and bags for this amount and boldly start selling them. I could choose the sales paths and channels myself.
At that time, I had no fear of starting a business: the reaction of my Krasnodar friends turned out to be eloquent - everyone really liked it. Without giving myself time to doubt, I wrote a letter to the head office of the brand - in the Netherlands. They, in turn, redirected me to a representative office in Moscow. I talked with the management and found out all the terms of cooperation. They also took a closer look at me and realized that I understood what I needed to do, what kind of product it was and what its target audience was.
I was endlessly inspired and confident that this was my calling and I would succeed. I made the decision to launch my first business after receiving the approval and support of other members of my family. My husband was happy that I would be able to combine business with raising children, expand my horizons, make new acquaintances, and my daily life would go far beyond housekeeping. I still thank my family for this.
The Moscow representative office received my consent and began collecting the parcel with the first order.
Interview. Womenbz journalist Daria Sharkova and entrepreneur Elena Lapko
They gave me the box and allowed me to transfer money when possible
»Start of cooperation
We agreed with representatives of the brand in Russia to meet at Moscow Sheremetyevo airport, where I had a transfer: they were supposed to give me a box with my first purchase. My husband and I wanted to withdraw money from an ATM at the airport, but everything didn’t go according to plan: the first plane was delayed, we arrived late and didn’t dare run to the ATM so as not to miss the next flight.
The representative of NOOSA-Amsterdam without hesitation gave me the box with the words: “This is not a problem, take it, transfer the money when you have the opportunity.” I felt that this was another good sign when starting a business is associated with such total trust.
First sales. Going out to shops
First, my friends started coming for bracelets, then friends of friends. Then word of mouth worked well, because in my environment there were always interesting personalities who liked unusual things. In a matter of days, the Nusa brand was on everyone’s lips and began to sell “on its own.” I had to be constantly in touch to select bracelets and buttons every day for those people who wanted to be part of the NOOSA world.
There was a great excitement, buyers wanted to purchase new items, to have products that I did not have in stock at that time, and the first purchase was immediately followed by a second. American marketer John Trout once formulated a law according to which regular expansion of the assortment will inevitably lead to an increase in sales in a short time. In my case it worked too.
I decided not to limit myself only to my circle of acquaintances. I wanted more people to know about the brand. The next step was a cooperation agreement with the CosmoStore chain of accessory stores, which, by the way, did not work under a commission agreement with third-party suppliers for many years. But for me they made an exception, because as experienced buyers they understood that unique products would attract a large number of new buyers. At first, I placed the accessories on sale terms, that is, I received money after the sale. Then, when the company's owners saw the commercial success of the brand, the network began purchasing collections. Today, like almost six years ago, the NOOSA-Amsterdam collections are widely represented in the CosmoStore flagship store in Krasnodar.
Events developed really quickly, and I asked the Moscow representative office for permission to expand the geography of sales. I began to enter into contracts with stores in Novorossiysk, Gelendzhik, Vladikavkaz, Rostov-on-Don. I found retail outlets through the Internet and through the recommendations of mutual friends. During that period, for about a year and a half, I worked without assistants.
I personally visited official representatives in different cities of the Southern Federal District, made presentations for sellers, demonstrated photo and video materials, shared inspiring stories and told how to work correctly with customers, offering store visitors not only a high-quality and beautiful accessory, but also a unique amulet, and a good gift for those closest to you.
It is difficult for the Dutch to understand that in Russian cities located 300 kilometers from each other, people have different mentalities, lifestyles, incomes, priorities, interests
» 
My favorite thing was about to disappear, and, of course, I simply could not come to terms with this. I took a breath, made up my mind and wrote a letter to the head office in the Netherlands. She introduced herself, told about herself, her successes and asked to set up a meeting. A couple of months later I flew to Amsterdam.
I prepared a business plan to convince them not only with my emotions, but also with the commercial component. She talked about what has already been implemented and what is planned. She focused on the mentality of different regions - something that people in Holland cannot know. It is difficult for them to understand that in Russian cities located 300 kilometers from each other, people have different mentalities, lifestyles, incomes, priorities, and interests. The founders of the brand were convinced not only by the indicators of my business plan, but also by the fact that I want to introduce people to good taste and knowledge of the symbols of world cultures.
They asked me one question then: “What is the difference between you and our former partners, a company from Moscow?” Without thinking, I said: “They liked it and I love it.” Literally: “They liked it, and I love it.” And it was absolutely true. I have always treated the project primarily as a hobby, and not as a business. Until now, all this is at the same level of love for me.
The result of our meeting with the Dutch was the signing of a contract for a year. We looked closely at each other, I made regular orders for collections according to the purchasing budget, while simultaneously developing a network of distributors throughout Russia. A year later, I confirmed my status as the exclusive representative of NOOSA-Amsterdam in the country and still maintain it.
I continue to please them with numbers: for example, in 2017 our turnover increased by another 20% compared to 2016.
How to become a distributor - brand partner in Russia
Today I am creating a network throughout the country. I work with distributors in different regions. Those who want to cooperate with us, to be a representative of NOOSA, choose which method of implementation and development is closer to them. There are two such options.
- Store or showroom. In this case, you need a platform on which the entire range of brand products will be presented. Partners buy collections and sell them locally. The retail price of products is the same in all regions of the country, while the brand has a high margin. In this format, we cooperate with boutique owners in Volgograd, Kaliningrad, Kirov and Simferopol.
- Regional office. That is, work the same way as I started: make regular purchases of each new collection. Today, when a potential distributor comes to us who is in love with our jewelry and wants to make money with NOOSA, we tell us what promotion mechanisms can be used, share secrets, and help. In this case, accessories are sold, as in the first option, at the retail price recommended by the head office in Krasnodar. Official representatives work in 18 cities and regions of the country, as well as in Ukraine and Kazakhstan.
It is convenient for our partners in stores and regions: the entire range is available for order at any time, since our main warehouse in Krasnodar has all items, including products from the regular collection, as well as new items from limited collections.
Often distributors become people who are already familiar with our product. It is important for us to cooperate with those who value every customer and know that coincidences are not accidental. You should have intuition, believe in buttons and share positive emotions with others. The effect of symbols is not magic. This is the power of a person's faith in himself.
We do not charge the distributor upfront for future collections. We take these risks upon ourselves
»Purchase of collections
I get acquainted with new collections 9 months before the start of retail sales. After the presentation of new products in Amsterdam, I pre-order accessories several months in advance and make an advance payment. For example, product orders for August and November of this year have already been placed.
My task is to predict how many bracelets, buttons, bags of one type or another we can sell in Russia, and what design options our customers will like. At the very beginning of the work, the forecast was more based on intuition, and it was also important to listen to personal taste, present the widest possible range of products and also provide the opportunity to purchase accessories from the classic collection, which is currently always available to each representative. Now, when ordering, the preferences of customers from different regions are taken into account.
It’s interesting that in Krasnodar the audience, which traditionally prefers bright colors in clothes, chooses more conceptual bracelets, bags and wallets from our brand and builds a look around them. The image is based on black, gray and blue products. And, say, ocher and wine-colored creations sell better in Siberia than in the south. St. Petersburg residents, on the contrary, often wear colored bracelets and buttons, further creating a joyful mood. “Nusamans” in Ukraine, Crimea and Kazakhstan are at the initial stage of getting to know the brand, so they prefer universal accessories that are suitable for both casual and evening wear.
While the accessories are making their way from Amsterdam to us, Russian distributors receive a new order form and form a purchase. After the appearance of the next limited collection in our warehouse in Krasnodar, we immediately send the products to representatives in the regions.
We make life easier for our distributors: we do not take advance payment for future collections. Thus, partners do not “freeze” 30–50% of the order value for several months - our company takes on these risks.
The advantage of the brand's products is NOOSA-Amsterdam accessories outside the season and time. In other words, all products are popular throughout the year and do not go out of style.
Specifics of purchasing in euros
In our country it is difficult to plan a strategy for several years in advance. Especially when the business directly depends on the euro exchange rate, like mine. Our company has already successfully survived three financial crises in the Russian economy. When the ruble weakened against the European currency, I did not make drastic decisions: for example, to stop business, immediately raise prices and thereby scare off buyers and distributors. Therefore, I kept prices at the same level for a long time. Then the increase ranged from 5 to 12% for various categories of goods. However, as soon as the situation in the economy stabilized, the ruble “created” and the sudden jumps in the exchange rate stopped, we again reduced prices.
Interview. Womenbz journalist Daria Sharkova and entrepreneur Elena Lapko
Preparing new collections for sale in Russia
New limited collections appear 4 times a year. Each of them produces an average of two dozen new products. We independently prepare detailed descriptions of the buttons, immersing ourselves in the culture, myths and beliefs of those countries and peoples where the signs depicted on the buttons originated. Information about all the symbol buttons released by the brand throughout its history can be found on the official website. Our company also publishes its own booklet, in which the lookbook is combined with interesting information about the philosophy of NOOSA-Amsterdam.
Retail sales and promotion
We continue to work with retail customers. They can purchase jewelry in our online store. This is a partnership project associated with our central warehouse in Krasnodar, and online prices match retail prices throughout Russia. We are currently finalizing it to create a unified retail sales platform for distributors in different regions. It is important for us to launch a portal that has a unified visual style, a system of relationships with customers and accounting for products in the warehouse.
We pay a lot of attention to social networks. In 2015 I created a full-fledged Instagram profile. Today it is a working mechanism for increasing brand awareness and retail sales. Each regional representative also has his own Instagram account, in which our partner publishes both author’s photographs and image photographs provided by us. In addition to the materials received from the Dutch, we ourselves constantly initiate professional photo sessions that convey the beauty of accessories and the philosophy of the brand.
Participation in specialized exhibitions is also important. We are convinced that such events help make the brand more recognizable. We took part in Collection Premiere Moscow (CPM), opened a corner as part of Moscow Fashion Week with the support of Mercedes-Benz. Official representatives of NOOSA-Amsterdam can be found at major regional and Moscow exhibitions, fashion markets and among partners of social events.
About buyers
Our customers are strong, special individuals. There was an opinion that the majority of “nusamans” or, as we also call them, noosapeople, are representatives of creative professions. But our accessories are also purchased with pleasure by young mothers, doctors, employees of financial organizations - in fact, everything goes deeper and more diverse.
In other words, the main thing for a person is to find a reflection of his inner world in our unusual products and choose signs that are close to his heart. Our people appreciate things with strong energy, created with soul and from natural materials, and are aware of their individual style. Having once purchased a bracelet, after a while the buyer strives to become the owner of a wallet and bag, and having attached a set of buttons to the accessory, he returns for new symbols.
Employees
At the moment, in addition to me, our team includes a PR and Marketing Director, a Development Director, and a Client Relations Manager. An accountant and an IT specialist are outsourced.
I try to motivate and encourage my colleagues. For example, for the results of their work over the past two years, two employees were awarded a trip to Amsterdam. In general, I am lucky: there is harmony and mutual understanding in our team. This is logical, because we are united by a love for such beauty.
In business, as in driving a car, the rules are the same for everyone: both men and women
»Competition
In fact, all modular accessories can be our competitors. But still, our customers do not like things presented in the mass market. In addition, Nusamans will never buy a Chinese fake Noosa bracelet made of leatherette and with a plastic button.
We occupy a “niche of unusualness.” We are often compared to other stacked bracelets, such as charm jewelry, but we are very different, even in appearance. This is a completely different style and, in my opinion, a different philosophy and meaning. If you buy a charm when you want to remember something, then by choosing a button, you “write” your future.
I feel pleasure that the product we offer people brings them joy. Increasingly, bracelets are purchased as a talisman or a universal gift that carries a positive message, and to a lesser extent - as simply a fashionable item.
About women in business
I believe that in business, as in, say, driving a car, the rules are the same for everyone, both men and women. The gender of a successful businessman does not matter. In my opinion, it is wrong to believe that if you are a woman, you will be given a head start.
Owning my own business helped develop my business qualities and negotiation skills. It is important for a businessman to have a balance between the energies of Yin and Yang, because if the balance is upset, then the head of the company will not be able to use analytical thinking and intuition equally. Also, success largely depends on personal charisma.
1. Find a balance between work and family life, devote enough time and attention to those you love. Make people around you happy to get that warmth back.
2. As for risk, it is always justified! There is not a single business that does not have certain difficulties. My business, as I have already said, depends on the euro exchange rate, and I take upon myself all temporary difficulties caused by the increase in the exchange rate. There is no such thing as a smooth and sweet business. If you are not willing to take risks, owning your own business is not for you.
3. It is very important to have a safety net in the form of a reserve of financial resources and support from loved ones, to have the willingness and fearlessness to stay afloat, no matter how stormy the environment is.
Our Russian consumers have long been accustomed to imported goods and they are always in good demand. Therefore, the profession of a distributor is actually in great demand.
Today we decided to talk about how Russian distributors actually work with foreign manufacturers. This area is not often talked about, but this activity is very profitable and the Russian market needs such professionals. Today we will talk in detail about the intricacies of this profession and how to start working in this field.
Main functions of a distributor
In general, the primary task of a distributor is to maximize the expansion of sales regions for any product. Typically, a distributor is an intermediary between the manufacturer and dealers, who are engaged in the direct sale of goods to end customers. Therefore, the functions of a distributor usually also include creating a dealer network. One or more distributors can work simultaneously in the market of the importing country, this depends on the demand for this specific product among our customers.
Thus, the distributor creates a sales market for the products of a foreign manufacturer in our country, and the greater the capacity of this market, the larger the regional dealer network, the higher the distributor’s income.
The distributor himself, after creating a dealer network, may no longer be involved in direct sales at all; his main function becomes only maintaining the functioning of the sales chain he has created and receiving income from the total trade turnover of goods sold.
Depending on its intentions and the agreement with the product manufacturer, the distributor can become the general importer for a given foreign manufacturer, develop additional services or, for example, arrange the supply of components. In this case, the distributor’s responsibilities will include a guaranteed exchange of low-quality goods, components and spare parts.
Typically, manufacturers have standard distribution agreements that contain a set of specific conditions, often with specific requirements related to the legal practice of a given exporting country and the characteristics of the product. Often, the contract with the manufacturer also contains an indication of the volume of products that the distributor needs to sell over a certain period of time. All this must be clarified in advance and carefully study all the terms of future contracts.
When creating a dealer network, the distributor must understand that in the future a lot will depend on the dealer partners he has selected, because in the future it will be they who will represent the foreign manufacturing company to the end buyer.
Therefore, the distributor must take care of conducting the necessary advertising and marketing campaigns in order to create the image of the product manufacturer and promote it in the domestic market.
How and where to start - step-by-step instructions
Where to begin:
- First you need to decide in which industry and what product you would like to work with;
- Study the current situation with supply and demand for these products on the Russian market;
- Select a foreign manufacturer of these products;
- Then you need to carefully study the terms of work of this manufacturer with distributors, perhaps request a standard contract to be sent by e-mail;
- If at first glance your project looks profitable and realistic, then you can start drawing up your business plan;
- When drawing up a business plan, you need to calculate as accurately and in detail all the main financial components of your future project, calculate the main income and expense items, and take into account possible risks;
- If the business plan has shown that your project is profitable, then you can safely begin its practical implementation - your official registration as a businessman (opening an LLC or individual entrepreneur), concluding agreements with partners, organizing an office and dealer network.
Some subtleties of organizing the work of a distributor
First you need to find a suitable foreign manufacturer. First of all, choose your field of activity, determine an approximate list of goods, the sale of which is in demand by the market and can bring good profits. Then, on the Internet, look at sales data and manufacturers on business sites (for example, the international site all.biz, the European site eurolots.com, the Chinese site aliexpress.com), and also find contacts of suppliers on the sites.
Additional information about a potential foreign partner can be found on various websites, for example: www.ved.gov.ru, creditreform.com, europages.com.ru.
Then you need to study the preliminary general conditions of the supplier, compose and send him an email - your preliminary commercial offer “in the most general terms.”
Typically, the working conditions of a distributor are determined by its status (general, exclusive) and the terms of the agreement concluded with a foreign manufacturing company. The key responsibility of the distributor under such standard contracts is to organize a distribution and sales scheme for the manufacturer’s products and provide related services.
There is a generally accepted organizational scheme: foreign manufacturer - distributor - dealer - buyer.
There are two generally accepted options:
- general distributor is when the importer sells goods in his country according to his own scheme, independently or by organizing a dealer network;
- exclusive distributor, in this case the transfer of rights to distribute imported products occurs only within the region specified in the agreement with the manufacturer and without the involvement of third parties. In this case, the distributor can usually already work with only one supplier, a foreign manufacturer.
As a rule, the sale of goods and services to retail outlets and specific retail customers, as well as all necessary interaction with them, is carried out by a dealer hired by the distributor.
It is the responsibility of the dealer to direct sales, not the distributor; it is important to always remember this when organizing and ensuring the effectiveness of the sales scheme. Only a clear delineation of all responsibilities and functions allows you to create and maintain effective business projects.
Based on the specifics of the product and the current situation on the market, a foreign manufacturer may have one distributor or several; this determines the main terms of the contract between the manufacturer and the distributor. The current market situation and the specifics of the goods also determine the conditions for organizing the dealer network and the intensity of the distributor’s work.
Some foreign manufacturers already have some kind of representative office or simply an office in the importing country, then establishing interaction with the manufacturer-supplier is quite simple, since company representatives are already well acquainted with the peculiarities of Russian business and it will be easier and faster for you to agree on everything with them .
If a foreign company does not have any representatives in our country, then establishing contacts will require much more time and good command of a foreign language. First of all, it will be necessary to study the specifics and basic conditions of work of a foreign company with distributors, as well as familiarize them with the peculiarities of Russian conditions. In this case, you will also need to make several foreign business trips and conduct presentations in a foreign language. Such negotiations and approvals require significant time and additional effort - you will have to independently study a lot of additional information, be prepared to explain a lot and convince partners of the economic profitability of the project, and negotiations will have to be conducted at the international level and according to international business standards.
Here it is very important to competently prepare and conduct negotiations and presentations to foreign potential partners. It is very important to study all the nuances of cooperation, prepare a competent business plan and presentation, and present a forecast plan for procurement and sales.
But the complexity of direct preliminary international negotiations with a foreign manufacturer that does not yet have its representative office in our country will then pay off; this will allow you to subsequently speak on its behalf at all events held in our country and exclusively represent its brand.
It is necessary to say a few words about the organizational and legal form of the distributor; foreign partners, partners and buyers in our country are always more willing to interact with legal entities than with individuals.
To engage in distribution activities, it is better to choose the legal form of a legal entity "LLC" rather than an individual entrepreneur; this is more familiar to partners and inspires more trust. For dealers, both the “LLC” and “IP” forms are quite acceptable.
The legal form of a dealer rather depends on the business personal qualities of the businessman, and the regional specifics where he operates.
It is important to know that some foreign companies already have their own list of requirements for potential partners, as well as approximate schedules and volumes of deliveries of their products through export channels, requirements for financial indicators, volume of consignments, minimum supplies and sales.
Sometimes foreign manufacturing companies put forward requirements for distributors based on their regional location, the availability of warehouse and retail space, technical equipment, and even make some requirements for personnel.
Some foreign partners make their own forecast plans for product sales, use Russian statistics on economic activity in a specific selected region, demographic situation, and demand for similar products.
Foreign companies always use well-calculated business models, and therefore, it is necessary to be prepared to competently justify their position in negotiations, provide various additional data, give explanations, and convince of the mutual benefit of the upcoming partnership. During negotiations, it is also important to show that you can organize an effective dealer network, organize sales of products in the required volumes, and maintain and develop the regional network in the future.
The distributor, being the official representative of the manufacturer, can usually count on his commercial support. We also note that international nonsense is often interesting to consumers in itself, it may already be known and has proven itself well, and perhaps many consumers would like to purchase such products.
Possible schemes for working with foreign manufacturers
Sometimes an agreement with a manufacturer can impose rather strict conditions on the distributor and limit the freedom to make independent decisions; it is also possible to impose penalties on the part of the supplier if the terms of the contract and the minimum sales level are not met. This must always be taken into account. And sometimes, on the contrary, the distributor is given the broadest powers.
As already noted, sometimes foreign manufacturers prefer to work with only one Russian partner-distributor, and sometimes large manufacturing companies choose distributors for each specific group of their products or regional segments.
Some distribution agreements stipulate that the responsibilities of the importer-distributor include organizing brand representative offices in his country, as well as service centers and regional sales points. But usually, distributors work through dealer networks and do not engage in direct sales. In this case, the main functions of the distributor are organizing a dealer network, regional expansion, advertising promotion of products, organizing presentations and other events related to attracting new consumers. All these conditions are negotiated with the foreign partner in advance, even before the contract is concluded.
The conclusion of a contract is a very important and responsible event for the distributor, since international contracts usually provide for the setting out in the contract the smallest details of cooperation between business partners. International treaties are usually drawn up in two languages, usually English and Russian.
When various disputes arise, foreign partners usually rely on the text written in English. In addition, they immediately stipulate in the contract the consideration of all disputes in a foreign jurisdiction. You need to know this and be prepared for it.
Some domestic entrepreneurs choose to cooperate with a foreign manufacturer under a dealer agreement. That is, they are ready to combine both dealer and distribution functions, but enter into a “dealer” agreement, which is usually more “flexible” and gives more freedom of independent action to the entrepreneur. But we note that usually under this scheme, more attention will need to be paid to direct sales, and there will be less opportunities for advertising and service support from a foreign manufacturer. It is also important to note that such contracts provide for the supply of goods on an advance payment basis. There may also be some additional conditions regarding the timing of the return of defective or non-marketable products and other restrictions. In some cases, such a work scheme may not be very acceptable.
In any case, whatever work scheme you choose for yourself, it is necessary to study in advance, negotiate and clearly state in the contract all the terms of the partnership.
How much money do you need to invest and is it possible to do without capital investment?
In general, organizing any business requires at least minimal investment. If you do not have the opportunity or desire to make the necessary start-up expenses, then in this case, then offer your foreign partner to distribute the upcoming financial expenses between the parties or postpone them over time. For example, you can ask to make a trial delivery of goods with a deferred payment or with payment upon sale, that is, after receiving proceeds from the sale.
This option is quite acceptable if the contract is concluded with the provision of bank guarantees or additional insurance for the delivery of goods.
If you correctly prepare all the necessary papers, then foreign partners may well agree to work according to such a scheme.
There is also the option of concluding an agency agreement. If such an interaction scheme is implemented, the ownership of the goods remains with the manufacturer, and the distributor receives only his agent’s remuneration (commissions). Perhaps the agency fee is less than the distributor’s expected income, but it allows you to do without “start-up” costs.
“Start-up” costs usually include the following costs:
- costs of preparing a business plan;
- expenses for presentation preparation and advertising;
- travel expenses;
- purchase of a trial batch of goods;
- fare;
- office rental expenses;
- warehouse rental costs;
- other organizational expenses.
The size of the required “start-up” costs depends largely on the products you choose and the expected scale of your activity.
You can reduce initial costs if you do most of the work yourself, without hiring additional personnel, and also carry out sales through your own website or online store sites, negotiate direct deliveries from the manufacturer at the time you need and self-delivery.
Business plan
A business plan is a very important document that allows you to clearly calculate the main financial indicators of a future project. In addition, another important task of the business plan is the presentation of the business project to potential partners of the distributor. A well-drafted and accurately calculated business plan is largely the key to the successful implementation of any project.
Any business plan should include the following sections:
- Project Summary - here you need to give a general description of the project;
- Marketing plan - this section should include an assessment of the current market situation for this product, an analysis of supply and demand, it is advisable to provide an analysis with data on specific regions and target audiences. At the initial stage, analytical and statistical information for this section can be taken from the Internet;
- Organizational plan - in this section you need to outline and calculate the scheme of your upcoming distribution activities;
- Risk assessment - in this section of the plan, it is necessary to indicate and evaluate possible potential risks for this type of activity, as well as propose ways to minimize them (for example, risk insurance);
- Conclusion - here it is necessary to give a general assessment of the economic feasibility of this project and show its profitability.
In fact, for distribution activities the main cost section is the “Organizational Plan” section.
This is explained by the fact that the costs of Marketing, namely marketing analysis, can be done independently using the Internet, and the costs of online advertising are minimal (set yourself any amount acceptable to you).
Risk assessment is, as a rule, only approximate calculated amounts. Bank guarantees can be issued. You can enter into insurance contracts with insurance companies, but this will require some costs.
- Purchase of a consignment of goods 1 million rubles;
- Office rent - 100 thousand rubles;
- Payment of utility bills and communications - 12 thousand rubles;
- Warehouse rental - 100 thousand rubles;
- Transport costs - 30 thousand rubles;
- Employees' salary is 150 thousand rubles. (3-5 people);
- Payment of taxes and fees 40 thousand rubles;
- General organizational and business expenses - 20 thousand rubles;
Thus, we received a very approximate amount of total costs - 2,352 thousand rubles.
Conclusion
As can be seen from our brief business plan, the bulk of the costs are for the purchase of a trial batch of goods. This expense item completely depends on the type of goods and can vary greatly. In addition, as we said above, there are quite acceptable options for agreeing with the manufacturer on supplies without making an advance payment.
The next item is the cost of renting an office, but now most of the work can be done on a home computer or renting an office of a minimum area - this will significantly reduce costs for this cost item.
Warehouse rental costs can be eliminated or at least reduced by organizing direct deliveries to retail outlets or dealerships. Transport costs can also be greatly reduced if these costs are transferred to dealers and the schedule of import deliveries is more carefully planned. Additionally, you can save a lot on operating costs if you do not inflate your staff and effectively build the entire organizational structure and sales chains.
Distribution activity is just such a type of activity where the initial capital investments and operating costs are largely determined by the businessman himself.
The concept of distribution came to us from the English language and became familiar to our ears quite a long time ago. In the most general understanding, distribution is a type of activity in which a business entity purchases a product from a direct manufacturer and undertakes an obligation to him for the retail or wholesale sale of these products. However, this activity also includes other areas of work related to the development and implementation of logistics processes, the organization of distribution networks and the distribution of goods.
Two main views on this small business prevail:
- On the part of the product manufacturer, distribution consists of organizing channels for selling goods and effectively managing their movement from the manufacturer to the end consumer.
- From the side of the distributor himself, this activity is considered as a process starting from the placement of goods on the territory belonging to him and up to bringing the products to the consumer.
Thus, both directions complement each other, and, in accordance with which of them is accepted as dominant, different types of distribution can be distinguished. Legally, even an individual entrepreneur can act as a distributor. But, as practice shows, the most effective way to conduct this activity is by creating a distribution company.
General operating principles
As stated above, in distribution the interests of the manufacturer and supplier ultimately practically coincide. Consequently, the distributor can act both on his own behalf and on behalf of the manufacturer, indicating himself only as a supplier. As a rule, these approaches are combined.
Between the two main business entities - the manufacturer of the product and its seller - a corresponding agreement is concluded, which clearly defines and defines the principles and conditions of cooperation. They can also be considered as step-by-step instructions for creating a company from scratch. This:
- Product cost.
- The amount of surcharges applied for goods sold.
- Conditions for conducting wholesale trade.
- Policy of discounts and preferences.
- General description of the market and its regional distribution.
- Target audience of consumers.
- Procedure and conditions for settlements.
- Timing for the sale of commercial products transferred by the manufacturer to the supplier.
The amount of a distributor’s income depends mainly on how competently he calculates the profitability of the business, what equipment he will use to run it, and whether he will select premises, transport, and staff for it. Most often, the income of an entrepreneur-distributor has a variable value, because it is determined by seasonal factors of consumption, volumes of goods supplied from the manufacturer, and the time of settlement with customers on specific terms for each sale.
Legal regulation
It may seem strange, but Russian legislation does not in any way regulate the distribution agreement. There are no regulations about it contained either in the Civil Code or in other laws and instructions. However, since clause 2 of Art. 1 and paragraph 1 of Art. 421 of the Civil Code of the Russian Federation determines that legal entities and individual entrepreneurs are free to choose the terms of the agreement (except for cases when these agreements contradict existing legislation), then they act as a legitimate legal act that has no restrictions on the territory of our country.
Some features of the legal registration of a distribution company exist in the case when it is engaged in the sale of goods from foreign manufacturers. However, here too, the terms of the contract and other documents require additional elaboration only in connection with the nature of the products being sold.
Distribution pitfalls
As practice shows, this business idea has its pros and cons. According to experts, the main problems that you need to know about even before creating a company and entering the markets are:
- Where to start searching for an intermediary market, and how to organize access to it.
- How to hedge risks associated with distribution activities.
- How to independently assess the prospects of supplied technologies and products.
Opening a company in Russia should be accompanied by an understanding that the domestic distribution market is quite well developed. This is also evidenced by the fact that many product niches have already been distributed and occupied, and stable and long-term relationships have developed between manufacturers and suppliers. However, in the system of these relations there is often a rather low level of professionalism.
The main problem both for novice entrepreneurs who are just thinking about opening a distribution company, and for existing entities, remains the price of the product. This factor creates objective obstacles when working with quality products.
To overcome them, many distributors open parallel training centers where, at their own expense, they help customers understand the advantages of the product offered. It goes without saying that this entails additional costs, and therefore requires a very prudent attitude from the beginning entrepreneur when choosing a brand that he intends to promote in the retail or wholesale markets.
Another common mistake when starting a business is incorrectly assessing the volume of these markets. Among the new challenges for distributors, one cannot fail to mention the high level of competition in certain groups of goods and the lack of freedom in their promotion. This problem can only be solved by a high reputation - that intangible part of a business that is formed over a very long process, but begins from the very beginning of the company’s functioning.
Eventually
Before you open a distribution company from scratch, you should understand that our country represents a huge market for this activity. Therefore, at the initial stage, it is necessary to direct all efforts to developing your data portfolio for effective cooperation and developing competent tactics for interaction with both manufacturers and end consumers.