Distribution rights on a brand are the ultimate game-changer in any business. Be it a wholesaler, importer, or regional reseller, being the owner of exclusive distribution rights for a specific market means you are the sole individual or company permitted to sell that brand’s products in that market. It does not happen instantly through a handshake; it must be planned, prepared well, and there must be an actual understanding as to what each side of the deal wants out of it.

Distribution Rights: What Are They?

Distribution rights refer to legal rights conferred on a brand or manufacturer to a distributor to enable them sell and distribute products in a certain territory or channel. By having exclusive rights, there is no other distributor that can be working in the same area, and that is where your true competitive advantage is found.

These rights are normally agreed upon in a Distribution Agreement of territory, time period of contract, performance standard, price terms, and renewal standard. Before you ever get the table, you will want to familiarize yourself with the way these agreements operate.

Do Your Homework First

Any negotiation that is successful begins with preparation. Brand research – see how they are distributing, where they are in the market and the areas of weakness. Then truthfully answer yourself: why do you feel like you are the most suitable person to fill those gaps?

Know your own strengths, too. What is the sales volume you can commit to? Are you connected to the retailers or end customers in the target territory? By bringing in data, case studies, and a defined market strategy, you indicate to the brand that you are no fly by wire and not a person with a good offer.

Key Terms to Negotiate

These are the factors that will or will not add value to your distribution rights when you get down to the details:

Territory Definition – Be specific about the area of geographic coverage you will be having as exclusive distributors. Unclear language in terms of territory brings about conflict; thus, this should be nailed down early.

Duration and Renewal Terms – The shorter initial terms of one to two years with in-built renewal terms are effective for both parties. Automatic renewal on meeting your performance goals, as opposed to being at the mercy of the brand.

Minimum Purchase Commitments – A majority of the brands demand that minimum order quantities be made as a condition of receiving exclusive rights to distribute. Make goals that will push you but not destroy you, and shoot to have a grace period in your first year.

Performance Benchmarks – These are the same as purchase commitments. It could be sales revenue, market coverage and marketing activities, but ensure that targets are clearly set and measurable; there must be no grey areas.

Pricing, Margins and Terms of Payments – Your margin is your light. Whether it be wholesale prices, volume discounts and buying terms, negotiate to get you the cash flow to operate. Understand how flexible you can be when it comes to pricing with retailers or end consumers.

Termination Clauses – understand what might terminate the agreement. Demand notice periods and cure, such that you get an opportunity to rectify problems before the brand leaves.

Negotiation Strategies That Work.

Treat all distribution negotiations as collaborations, but not battles. Brands would like someone who will invest seriously in building their presence and demonstrate it to them. Bring in with you a go-to-market strategy that will see you launch and maintain the brand in your country.

In the event that the brand is reluctant to grant total exclusivity, pilot it. Begin with a smaller territory or a smaller time period, demonstrate what you are capable of and then take your track record and demand more distribution rights at the renewal.

Competitive interest can also be leveraged – in case other distributors are considering the same opportunity, it is right to mention it. Just make sure it’s true. False emergency backfires.

And have a lawyer, who is acquainted with commercial contracts, brought in, before you put your hand to anything. Distribution agreements are not empty talk in terms of money, and you may end up making an expensive mistake by not reviewing them properly.

Protecting Your Rights After the Deal.

The closing of the deal is not the end. Meet your targets regularly, invest in brand building and maintain communication with them. Record your performance and market activities – that paper trail is important when the time of renewal comes.

Monitor illegal resellers or grey market in your area, as well. The exclusibility can be effective only when it is enforced. Eliminate problems promptly and refer back to the brand to make them realise that you are serious when it comes to safeguarding your rights of distribution.

Final Thoughts

The ones who negotiate exclusivity grant the negotiator rewards that are long-term rewards; they need to be prepared to negotiate, remain professional and think long-term. Once you understand what distribution rights are, what terms of the contract are the most important and how to position yourself as the right partner, you may be in a good position to sign a deal that will pay off over the years.

And in case you need a smarter way to meet brands that are actively searching to be distributed, MatchValley was created with that in mind. MatchValley unites brands and qualified distributors and allows finding the right opportunities and negotiating distribution rights with the brands that are actually willing to develop. Go to MatchValley and make your next negotiation the beginning of something good.