All Change

How to Replace a Distributor Without Tears

Very few things, in life or in business, are permanent. In particular, the relations that an exporting business has with its representatives and allies can sometimes lead to a necessary parting of the ways. Such a situation often emerges very gradually and it can be difficult to recognise the signs. It can be equally difficult to enforce the change when one party doesn’t see the need.

A good distributor can be worth their weight in gold. They understand you, your products and your plans and aspirations. Better still, they understand their customers, and the customers know and respect the distributor. It is, simply, a match made in heaven.

Until something goes wrong, that is. It can often be when a crucially important individual leaves. You have done everything you can to help their replacement, support them, train them and motivate them but it just isn’t working. Or it could be that the direction of business has changed over time, and the two organisations just aren’t pursuing the same goals any more.

Replacing one distributor with another is typically a high risk action, and exporters often seek to avoid it, hoping that things will take a turn for the better. That’s understandable. For one thing, a scorned ex-distributor can do your business a lot of damage. For another, there can be legal repercussions if the separation is not handled well.

The challenge for the manager responsible is firstly to notice when things start to go wrong. It could be a deterioration in business, a spike in complaints, or a problem in communication. An effective manager will act on the problem as soon as it’s apparent. Informal action will let your distributor know that you have noticed, and regular performance management is the best way to ensure this happens.

Often, the first thing we notice is that sales performance has declined. If it is, it’s unfortunate as this may occur only well after things started to go wrong. Earlier signs that we ought to be looking out for might be a noticeable reduction in contact, such as not replying to emails, not returning calls. Time can pass quickly in business, and a distributor manager should strive to ensure that they have regular contact with every distributor.

When an issue is perceived, don’t ignore it. Initially, we can raise it informally and in a friendly way. Talk to the distributor by the media you normally use (it’s crucial to know how a distributor is most comfortable in communicating, it may be phone, email, Skype, or even Facebook Messenger or FaceTime.)  Keep the conversation friendly, but let him know that you’ve noticed. The aim is to have a non-threatening discussion to get to the root of the problem. Perhaps the distributor feels you have let him down in some way? Don’t leave it to supposition, have the conversation. You are seeking to agree that there is a problem, what’s causing it, and what you can both do to put it right.

Follow up the conversation in writing. Agree who’s going to do what and when, and then monitor it more strictly than usual. Have a target for when improvements will be achieved.

If the problem persists, it’s time to start thinking about a plan B. Terminating the agreement is a big step, but it’s not too early to discreetly give some attention to appointing an alternative distributor, or even adopting a different route to market. When the relationship is faltering, it’s time to visit more often, not less. Find a way to spend time in the market without your distributor, and use it to check out end users or others in the supply chain. If you have a retail product, visit some stockists. Keep it informal, because there is every chance that anything you say will get back to your distributor. So tell them you are just killing time because your flight was delayed, or you just happened to be passing by. Don’t give anyone an idea that you have doubts about the distributor.

If all attempts to improve the performance fail, it’s time to make a change. Raising this issue is never easy, but very often the break can be an amicable one. When you have decided to terminate the agreement, think ahead about the details and consequences. Check the terms of the contract (you do have one, don’t you?!) and also think about the impact on the market, particularly from the end-user’s point of view.

Always explain your decision face to face if at all possible. Arrange to meet, and let the distributor know in advance what the meeting is about. In explaining your decision, keep the conversation objective and calm. Give your reasons clearly and listen carefully to the response. It may be an unpleasant meeting, and it may be short, but if you have thought about some possible “carrots” you can offer, the conversation may still end amicably. For example, you may want to offer the distributor a generous period of notice, or you may be able to offer an extended period where he can operate on a non-exclusive basis, for the sake of the end users. If the distributor has a genuine case for financial compensation, consider it carefully, and try to reach a friendly agreement.

If the contract is terminated amicably, you may still have an ally in your former distributor. He may actually prefer to concentrate on other products or opportunities, in which case, perhaps he will co-operate by referring customers to the new distributor, or even help to train the staff. It does happen. Just as in the early days of a contract, it can pay dividends to be magnanimous when it ends.

Above all, look at the consequences for the end user. The last thing you want to do is inconvenience them, after all they always have a choice.

Changing a distributor seamlessly and without recrimination may be one of the greatest challenges an export manager can ever face. Get it right, and you will reap the benefits, without making enemies.

Written by Tim Hiscock, Export Development and International Trade Advisor, Strong and Herd LLP.

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