An Exclusive Distributor vs. A Fulfillment Agent in China

February 25, 2020
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The assumption that China is akin to any other market in the world is wrong, especially when it comes to sales in China. Common and widely used sales channels in the West, such as working with a single distributor, are sometimes ineffective in China, and even doomed to failure. Instead, relying on a fulfillment agent is a better choice for you, simply because fulfillment in China enables your involvement in management of sales and distributors. From now on, the power is yours.

The distributor’s myth

The easiest way to sell in China is to find a reliable and capable distributor who buys your products and immediately pays revenues. Here is why the easiest way is not always the most favorable one:

  • Mainland China markets are divided and separated into many small units (distribution networks sometimes involve 6 or 7 tiers), rather than a huge integrated market place.
  • A well-connected distributor in Southern China would have very limited or even no presence in Northern China.
  • The attribute of “Guanxi” (relationships) in Chinese society also reduces a distributor’s access to all channels.
  • The supplier-distributor relationship is dynamic, dependent on market conditions, and long-term contracts are not always a binding factor. The Chinese distributor seeks to maximize commercial success and profits every single day, and once the market conditions change, the behavior will change as well. You should not be surprised if your distributor all of a sudden chooses to promote a product that sells easier or with a higher markup.
  • The distributor might not freely share reliable information about its operations in China. There is a slight chance the distributor will allow you to meet the end customers, and it is less probable that you will get to meet the real decision-makers. Even if it happens, you might find yourself struggling with confusion and misunderstanding, when the conversation, most probably, will be held in Chinese.
  • Distributors might not be loyal solely to you, for instance, by selling products of multiple other brands.

Sharing the cake

In order to spread presence throughout the country and diversify marketing channels, foreign companies often choose several distributors rather than an exclusive one. The challenge in this case is aligning all the distributors’ interests. Sharing the cake might get distributors to look for short-term benefits rather than long-term growth. Either way, companies choosing the exclusive distributor’s path to sell in China, might be predicted to lose the opportunity to increase sales in China and end up completely losing market share.

Still debating whether an exclusive distributor is the best choice?
Read more about distributors and fulfillment agents in China.

China fulfillment

Trusting single or multiple distributors doesn’t have to be the only option. Instead of letting your distributor choose your partners and control them, you can choose and control distributors yourself.

The 2 magic words that are crucial for success in China are flexibility and independence, and that is what China fulfillment companies, or a fulfillment agent can help you to achieve. By outsourced fulfillment operation and by using China fulfillment services, you enjoy full control of your business development and sales. You are not subject to the work and whims of a local distributor, but rather, thanks to this hands-on operation approach, you are more involved in the sales and distributors management.

In summary, the advantages of a fulfillment agent are:

  • Fulfillment Agents are willing to cooperate with other distributors because they don’t have their own sales channel and they don’t have “ambitions” to grab other distributors’ customers and squeeze other distributors’ market share.
  • Fulfillment Agents are in a neutral position (unlike a distributor) and this solution limits distributors’ conflicts of interest.
  • Agreements with fulfillment agents can include any and every service the agent should provide and on a clear fee standard.
  • Selling through a fulfillment agent allows you to offer RMB prices, and thus win many new sales channels, in which payments in foreign currency is more complicated.

In a complex and challenging market, fostering one distributor is pointless. Alternatively, fulfillment services in China would be a more strategic and effective solution, enabling you to manage your own network of distributors; to take up the reins of your sales channels; and to conduct your China business in complete flexibility and a peace of mind.

Read more about our logistics fulfillment and distribution services, or contact us.

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