Expanding Your Sales: Distribution vs. OEM
Dec 3, 2019
Shall I Distribute or OEM?
One of the most common questions we are asked by manufacturers is whether it is better to expand sales through own brand distribution or OEM. This question is particularly relevant when stating out or expanding into new global territories.
Distribution tends to be a more cooperative relationship where companies work together to promote your brand and products in different territories. Time needs to be spent nurturing these relationships so that the distributors will have an in-depth knowledge of your products and their strengths. A summary of the advantages and disadvantages of using distributors includes:
Advantages to Distributors:
+ Products are sold under your brand
+ The best distributors will help to promote your products and brand as you want
+ Expand presence in global markts without having to set up infrastructure
+ Typically demand less discount than OEM
Disadvantages to Distributors:
– The more labour intensive of the two options, typically it can take a year to get distribution contracts signed and distributors up and running globally
– Not all distributors undertake their own marketing activities, so you retain most of the expense & efforts on a global level
– You may need to manage many more relationships for global coverage compared with the OEM route
OEM agreements allow one company to sell their product to another (generally larger) company to relabel and sell as their own. This enables a manufacturer to quickly leverage existing sales and marketing infrastructure without having to build their own.
Advantages to OEM:
+ Quick access to market and global distribution channels
+ Quick revenue
+ Sustained growth
+ Revenue stream without having to build own sales and marketing teams
Disadvantages to OEM:
– Lose control of your brand
– Create a new competitor which has a bigger marketing budget and products that are as good as yours!
– Generally demand a bigger discount than distributors
– Marketing of your own brand is still required unless you choose to rely solely on the OEM supplier for your revenue.
If you prefer to retain brand identity and establish a distributor network then PSL has contacts with the best distributors across the globe. We can help to set up and manage the distribution network quickly and effectively. We offer distributor training to allow you to focus on what you do best – developing new products.
If you decide to OEM your products, then PSL can introduce you to the key decision makers in some of the best suppliers around the globe. These decisions do not need to be all or nothing, a subset of products may lend themselves to being OEM while more unique products could be retained under own brand.
In the end, the choice between OEM and Distribution should fit into your overall business strategy encompassing both a sales and marketing plan and with due consideration to any planned exit strategy.
If you have a sales expansion dilemma or would just like to discuss best routes to market whether distribution, OEM or a blended model then please contact us.