Distribution Cheat Sheet: Pros and Cons of Signing with a Distributor PLUS What to Ask Your Retailers
Hubba is home to some of the best brands on the planet and we’re lucky enough to encounter some incredible brands taking the world by storm. As part of our Methods of Distribution series we are bringing Hubba readers the inside scoop on what it takes to do distribution the right way. This week, we speak with the founder of Vintage TeaWorks, Brandon Ford, to learn how Vintage TeaWorks got its start and the pros and cons you rarely hear about when it comes to the age old ‘retailer vs distributor’ question.
Because he wasn’t interested in building quickly, Brandon initially chose small retailers who were willing to take the time to learn about his products and chat with their customers about the tea. A family-run specialty tea business based in Akron, Ohio, Vintage TeaWorks offers a unique line of all natural premium loose leaf teas that are inspired by wine and spirits. “To me, good tea means good times,” Brandon proffers. “It’s where we can express our true personalities by exploring the infinities possibilities that are sparked when hot water hits tea. Tea is such a versatile beverage. You can cook, collect and appreciate it with all the same passion as a fine wine.”
As Brandon says, “[In our experience] large retailers don’t often have that type of engagement in the ‘tea aisle’ with customers.” That said, growth was always a priority. “We currently sell through a host of independent retailers across the U.S., Canada and Asia. These are small mom and pop shops that either sell tea, coffee or gifts. Our tea is either sold shelf ready or in bulk for food service. We do have plans to expand in the future to a few regional specialty grocers. It’s something we think about each year. We also sell through our own website.”
For Brandon, how retailers are portrayed to end customers is important. He urges brands to ask, “Does their brand and message match yours? Does their customer demographic match yours? You could do both, with the ultimate goal of going direct with those retailers once you’ve established a record of success, have good distribution across the country (or the territory you define) and have the logistic resources to manage it all.”
As per Brandon, “Once we make the plunge into the big box retail channel, we will likely work with a distributor. For us and our small team, it would be easier to manage.”
Make no mistake: while Vintage TeaWorks is thriving on their relationships with their retailers and has yet to make the plunge with a distributor, Brandon is fully aware of the stakes that come with either choice. He goes on to give us the top five pros and cons that brands should take into full consideration:
“#1 – You can generally get better margins when working directly with a retailer versus going through a distributor. A distributor is going to resale to retailer who will resale to customer – everyone has got to get paid all while maintaining somewhere near your suggested retail price.
#2 – It takes a lot of time to work with retailers directly, especially large retailers. Their policies and procedures can be quite onerous for a small business with a limited team to manage.
Failing to adhere to those policies can often lead to fines and additional costs from those retailers. The alternative is to work with a distributor who likely already has a relationship with the retailer and will handle logistics. If you do what we did and work only with independent small retailers, it will take a lot of leg work to sell on your own, but because you often deal directly with the decision maker, a good meeting can end with a purchase.
#3 – Landing a big retailer is not easy. Likewise, landing a good distributor is also difficult. Both groups are picky. Plan on months of unanswered emails, but be persistent. If you’ve got a knock out product and good luck, they’ll find you.
#4 – Fees, returned product and in-store demos will come out of your pocket. I’ve heard (though haven’t experienced) some retailers ask for free product in the beginning. You have to be prepared financially.
#5 – Volume and your ability to scale quickly should also be considered. Since we have limited capacity right now, it was important to understand what the distributor or retailer was forecasting for our business – is it realistic and can we supply it.”