Distributor Dialog – Published in APPMA Advisor
September/October 2002

Distributor Relations 101: Setting Up a Distributor Network

The Pet Industry Distributors Association (PIDA) is very excited about the opportunity to build stronger relationships between distributors and manufacturers through the APPMA Advisor. We’re looking forward to an interactive relationship between the Advisor readership and our distributor members, and we want to place a special emphasis on helping APPMA’s newer manufacturer members join together with the extensive distributor network that PIDA offers. Establishing a widespread distribution network is the short track to success, and the first order of business for manufacturers new to the pet industry.

So put on your distributor caps and we’ll get firing on all cylinders. Our introductory column will be presented in a Q & A format, in which we will reveal everything you’ve wanted to know about distributors, but may have been afraid to ask.

How are distributors getting information about new lines?
Distributors primarily use trade magazine advertising and trade shows to identify new products. Direct contact from manufacturers is the third major source of new product information. Many manufacturers are also using e-mail to make the initial contact with distributors, followed up by providing relevant product samples. A request for a face-to-face meeting usually follows. If a new company can afford it, they use independent sales reps to call on the distributor.

Some manufacturers have the perception that distributors are not looking for any new products. Is this true?
All distributors are hunting for truly new items to add to their lines. New items are the fuel for growth for every segment of the industry. The problem is, so many “new” products are “new to you,” but to the distributor, just another knock off of the latest trendy item. Examples most often cited by our distributor members include tennis ball dog toys, shampoo lines or nylon dog collars. Distributors are looking for products that grow their businesses, not just the individual manufacturer’s business. "Metoo” and “new to you” knock offs and line extensions don’t do that; they only shift dollars from one supplier to another. According to one distributor, “Out of 100 samples we see, only 2-4% are truly new.”

How do you evaluate new products?
We’ll turn to Gary Duclos of American Distributing & Manufacturing for the definitive word on that issue.

“First, we ask ourselves, ‘Are we going to make any money on this product if we carry it?’ Considerations that go into this analysis are; what is our margin; is it a niche product that’s unique; are other distributors carrying the line; are our competitors carrying it; will the manufacturer be competing with us in our market by selling direct to larger retail accounts?”

Another distributor added that they do a complete cost:benefit analysis on new products that considers the product’s margin, warehouse space needed to stock it and potential sales to retail accounts. “We have determined that if a line doesn’t have the potential to generate at least $50,000 in sales annually for us, we can’t take it on. In making that determination, we look at the type of product line it is, the number of SKUs in the line and whether we can sell it into different markets, like pet, vet and ag.”

How do you evaluate manufacturers?
Bob Merar of General Pet Supply in Milwaukee, Wisconsin noted that manufacturers must stand behind the distributor with a comprehensive game plan that helps move the product all the way through the chain, especially a plan that promotes sell-through at retail.

“A manufacturer who wants distributors to carry his product line must have good items that are competitively priced. But just as importantly, you have to have a complete marketing plan for the line that reaches down to the retail level. Distributor sales people can only focus on so many items. New lines, if they are going to be successful, have to be something that retailers are going to want to buy. That’s where a complete marketing plan is essential,” Merar stated.

Service is also an extremely important factor in determining which suppliers distributors do business with, and how much they will buy. A manufacturer that maintains good fill rates and ships product promptly is naturally easier to work with than one that always back orders and ships a week after the order is placed. Shipping orders complete allows the distributor to keep inventory levels lower while facilitating more desirable inventory turns, both of which add dollars to the distributor’s bottom line. As a result, that manufacturer is going to get more lines into the distributor than the less reliable supplier.

One distributor commented that they draw a distinction between suppliers based on the level of marketing support they provide. Such “focused accounts” are those that offer monthly specials, purchase space in the distributor’s retailer fliers and participate in the distributor’s trade show or open house specials program. These suppliers are going to get most of the distributor sales force’s attention, because it means more money in the salesperson’s pocket. Non-focused accounts, on the other hand, typically do not participate in the programs mentioned above, often because they are not large enough or their lines are not broad enough to spend the money on these key relationship-building marketing efforts. Understandably, distributors’ outside salespeople are not going to spend much time promoting these unsupported or under-supported products. Orders for these products will likely only come through the distributor’s inside sales or customer service reps.

We really need to establish a distributor network, as quickly as possible. What’s our best approach?
For manufacturers looking to find purchase with a distributor network, Fred Schober of Super Dog Pet Food Co., Leola, Pennsylvania suggests that manufacturers walk a mile in the distributor’s shoes.

“Get to know distributor issues and how distributors function. The more you can work with your distributors to make your relationship more efficient – through proper packaging, reliable shipping and good fill rates – the more you will drive cost out of the channel and get your products to market faster,” Schober advised.

Super Dog has established an “Integral Supplier” program that helps them create a strong bond with their key suppliers. They seek to establish a key supplier for each product segment, which allows their sales team to focus on that company’s products and drive more sales volume to that supplier. To help keep relations with their Integral Suppliers strong, they have a vendor grading system that regularly rates suppliers on key service components and provides the vendor with constructive feedback.

“We see it as a joint effort with our vendors,” commented Schober. “Our best suppliers are those that work with us to find common sense solutions to problems.”

We hope that you found the premier edition of our column informative and thought provoking, and we invite your comments and questions. Please contact PIDA via e-mail at steve@ksgroup.org, and visit PIDA on the Internet at www.pida.org. And let APPMA know what you think of our column, too!