4 Ways to Get the Best Foreign Distribution Deal

4 Ways to Get the Best Foreign Distribution Deal

The best way to ensure your product’s delivery overseas is to choose the right distributor. Here’s how.

If you want to sell snowmobile gear in Scandinavia, you have to know a thing or two about getting the product to market. Milt Reimer, founder of FXR Racing points out that in Norway, where people take their winter sports very seriously, it’s not uncommon to find a well-stocked, sophisticated snowmobile dealership in tiny hamlets in the northern-most reaches of a country whose southernmost point is well north of Fort McMurray, Alta.

In other words, on-the-ball logistics—in the form of a third-party warehouse, distribution operation—is critical. The company today has a very strong presence in Scandinavia and northern Europe, thanks to a strong logistics partner. But Reimer says the company’s current arrangement took some trial-and-error, and included one distribution deal that ended badly. His advice on finding a strong third-party partnership.

  1. Get references. It sounds simple and seems to be the most straightforward sort of advice. But for a company hustling to break in to a market, it’s possible to overlook that kind of double-checking. Reimer says the company’s first distributor talked a great game but routinely botched shipments, something he would have learned had he talked to the firm’s other customers. “Our dealers were getting fined by the government because the distributor wasn’t doing the [customs clearance] paperwork. It was an ugly, ugly mess.”
  2. Create on-the-ground safeguards. After scrapping that first distribution deal, FXR found a more capable partner, located in central Sweden. But Reimer decided to build in a bit of extra protection by hiring a local firm that specialized in processing customs paperwork. This “two-party” system, he says, helps “ensure that things are being done correctly. That has worked well for us.”
  3. Take tax implications into account when devising distribution arrangements. Reimer asked his lawyers to probe the tax implications of various structures and discovered that trade treaties between Canada and the Scandinavian nations allow FXR to use third-party distributors as a means of ensuring that profits from those markets are taxed in Canada, which has a significantly lower corporate rate than Norway or Sweden.
  4. Remember that one viable distribution model may not work everywhere. Besides Scandinavia and northern Europe, FXR also has plenty of customers in Russia. But Reimer says he decided not to try to partner with a Russian distributor, given corruption issues. Instead, the company told snowmobile gear dealers in Russia that they’ll receive his merchandise FOB, shipped directly from FXR’s manufacturer in Asia.

Originally published by PROFITguide.com. Advice and tactics from Canada’s fastest-growing exporters and the editors of PROFIT Magazine.

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