Expanding Your Sales: Distribution vs. OEM
Jan 15, 2013
Absolute Antibody (AbAb) is an Oxfordshire based start-up developing high quality biologics for the research sector. They will soon be looking to sell their products globally and before them stands two excellent opportunities for growth: Distribution and OEM.
Distribution tends to be a more cooperative relationship where companies work together to promote new brands and products in different territories. Time needs to be spent nurturing the relationship such that the distributor will have an in depth knowledge of AbAb’s products and their strengths. A summary of the advantages and disadvantages of using distributors includes:
+ Products are sold under your brand
+ The best distributors will help to promote your products and brand as you want
– The most labor intensive of the two options: it will probably take AbAb a year to get distribution contracts signed and their distributors up and running globally
– Distributors require a discount
– Not all distributors undertake their own marketing activities so most of the expense & efforts will have to come from AbAb on a global level
OEM is a relatively new phenomenon whereby one company sells their product to another (generally larger) company to relabel and sell as their own. This has allowed antibody companies in particular to build up vast ranges of products and has flooded the marketplace with a huge number of “me-too” products (quite literally in this case). There tends to be bigger advantages and disadvantages to Distribution which is why it’s such a difficult decision to go for one other the other:
+ Quick access to market
+ Quick revenue
+ Sustained growth
– 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 if you are not to rely solely on the OEM supplier for your revenue = additional cost
So, which route should AbAb choose? PSL would tend to recommend that if AbAb has the finances they should retain their brand identity and use distributors; PSL has contacts with the best distributors across the globe so will help to set up and manage the AbAb distribution network quickly and effectively. Our other Sales & Marketing services will further allow
AbAb to outsource this side of the business so they can focus on what they do best which is developing new products. In the long term AbAb could then set up a logistics hub in North America or Asia and sell into these biggest markets directly.
If the management team does decide to OEM their products then PSL can introduce them to the key decision makers in some of the best biologics suppliers around the globe. In the end, the choice between OEM and Distribution is something that only the AbAb management team can decide.
Have I been unfair on OEM suppliers? Perhaps I’ve missed some key disadvantages for using distributors? If you want to argue the case either way please leave a comment by filling out the boxes below.