The network of distributors and wholesalers is like the extension arm of a business, helping its products reach widely all areas. However, when the goods are sold to the distributors, the ownership and price determination of products have been transferred to hands of distributors. It is not easy to guide and control all activities of the distributors well, especially in Vietnam where foreign companies are not yet well aware of the working culture and business environment. Therefore, brands need to carefully consider the following 9 factors to choose the most appropriate and effective distributors in Vietnam.
NO CONFLICT OF RIGHTS
It is ideal if companies can partner with a distributor who will only focus on selling their products in a certain category. If that kind of distribution partnership cannot be established, the companies may accept the distributor to sell products from other suppliers as long as they are not from direct competitors.
FINANCIAL CAPABILITY
Distributors need to have sufficient financial capacity to meet the investment needs for goods such as warehouses, means of transport, machinery, sales and marketing…
DISTRIBUTION EXPERIENCE
Ideally, businesses should choose distributors who have experience in trading or distributing goods in the same field as themselves. Knowledge and relationships regarding the distribution system, local management system are the strengths of the distributors that foreign brands need to take advantage of and rely on.
INDEPENDENT DISTRIBUTION
If the brand supports with salary and bonus for the sales staff of distributors, it is necessary for the distributors to have a separate sales department, serving only the interests of the brand. The management and use of the warehouse may be shared with the products of other companies, but the distribution team must be separate. This distribution team must be monitored with its own management and reporting system.
LOGISTICS CAPABILITIES
Distributors must be able to set up a delivery system from their warehouses to all stores in the designated area. Goods must be delivered on time. Some manufacturers may also require a distributor to be able to transport goods from the manufacturer’s warehouse.
WAREHOUSES
Distributors must have enough space to store goods, ensuring that there is no shortage or loss of goods in any case. The investment for the warehouses depends on the inventory velocity, the frequency of orders placed by the distributors with the brands, and the delivery time from brands to distributors and from distributors to their buyers.
MANAGEMENT CAPABILITIES
The distributor must operate and manage the supporting functions for distribution such as accounting, logistics, informatics, etc. in a rhythmic and synchronous manner. Distributors also need to have a strong information management system to meet the manufacturer’s requirements in terms of ordering methods, sales and inventory reports.
LEGAL STATUS
Distributor must be a legal entity under the Law of Vietnam, having the function of distributing goods. For special items, which are managed under separate regulations of the State, the distributor must also fully meet these requirements or regulations.
A COOPERATIVE SPIRIT
The enthusiasm and spirit of cooperation of distributors in implementing all distribution policies of the brands is also an important selection criterion that brands should consider in the process of building their distribution system in Vietnam.