| Consideration | Term in the proposal | Supplier work or exposure to examine |
|---|---|---|
| Stock | The distributor holds a local range. | Who owns it, finances it and carries slow-moving or obsolete products? |
| Customer support | The distributor provides first-line assistance. | Which requests still go to the supplier, and what training, systems or specialist cover are required? |
| Returns | Products can be returned under agreed conditions. | Who approves the credit, pays freight and determines whether the goods can be sold again? |
| Sales development | The distributor covers a territory or customer segment. | Which accounts will receive attention, how are opportunities recorded and which competing lines use the same sales capacity? |
A distributor’s requested margin describes only part of the cost of a channel. The supplier may still fund inventory, train salespeople, handle technical questions or accept returned stock. Compare proposals against the same customer offer and service requirement before deciding which terms are commercially preferable.
Scroll sideways to compare all columns.
Compare the same basket of sales
Use a consistent product mix, order pattern and customer segment when examining the proposals. A distributor serving large scheduled orders has a different task from one supplying small quantities to dispersed buyers. The quoted margin may reflect that difference. Show it explicitly rather than treating every proposal as a price for identical work.
Include rebates, promotional contributions and other commercial deductions according to the conditions that trigger them. Keep a rebate tied to achieved sales separate from an upfront payment that the supplier owes regardless of results. Record any minimum purchase commitment and the evidence behind the assumed sell-through to end customers.
Establish what customer coverage means
A territory grant alone says little about the attention the product will receive. Examine the distributor’s relevant account relationships, sales responsibilities and ability to demonstrate or support the offer. Introductions, active selling and after-sales service are separate contributions.
Ask what information the supplier will receive about demand. Stock sold into the distributor can rise while sales to customers remain weak. Access to appropriate inventory and sell-through information affects production planning, replenishment and the assessment of further promotional spending. Commercial confidentiality and customer-data obligations need to be addressed in the agreement.
Price the work that stays with the supplier
List the activities the supplier must continue to perform under each proposal. Technical demonstrations, product training and escalated service requests consume different resources. Use the expected activity to estimate the support burden, then identify which estimates still depend on untested customer demand.
Consider the work involved in maintaining the channel itself. A supplier may need to keep product information current, review stock, resolve credits and support new distributor staff. If several distributors require the same specialist, assess the combined demand on that person. The plan should explain how current customers will be supported while the channel is introduced.
Check the inventory and exit exposure
Stock ownership, payment timing and return rights determine who funds the period before a customer buys. Compare the position when demand is slower than planned, including freight, storage and stock that can no longer be sold at the original price. A replenishment policy can matter as much as the opening order.
Read termination arrangements alongside the initial commercial offer. Identify who continues to support customers, what happens to stock and which information is required to transfer the activity. Qualified legal and tax advisers should examine the agreement and relevant jurisdictional requirements. The commercial assessment supplies the operating assumptions they need to consider.
Keep the proposal’s assumptions with the comparison. If customer coverage, retained support or stock obligations remain unspecified, the apparent difference in distributor margin cannot yet be read as a difference in total channel cost.
General commercial information. Advice on a particular business, transaction or jurisdiction requires a separate assessment.
Related serviceMarket entry & commercial growth