Exportia Lab: Setting-up European Sales channels in 2022

A strong European distribution network is crucial for success in the region, especially for high-growth businesses that may not have an established local presence. European distributors serve as accelerators for sales, extending market reach and helping businesses gain traction. The key challenge, however, is setting up the right partnerships and ensuring distributors stay motivated.

Introduction to the Exportia LAB Session

Welcome to the March 2022 Exportia LAB. My name is Christelle, and I will be your host. In this session, we will discuss how to set up European sales channels and distribution networks in 2022. Given the recent surge in businesses seeking to expand their sales in Europe, understanding how to build and maintain strong distribution partnerships is more relevant than ever.

Since January 2022, we have seen an increase in micro to medium-sized companies, including listed and privately owned businesses, approaching us for guidance. Their primary objective is to generate sales quickly, and many are looking to achieve this through European distribution networks. This trend highlights the critical role distributors play in a company’s expansion strategy.

Why a European Distribution Network Matters

A well-structured European distribution network can:

• Accelerate sales growth by providing immediate access to a larger customer base
• Expand market coverage through an extensive sales force
• Enhance local credibility by leveraging a distributor’s established reputation and relationships

However, many small to medium-sized businesses lack the knowledge needed to structure distributor agreements effectively. This knowledge gap can lead to poor negotiation outcomes, unrealistic expectations, and partnerships that do not deliver results. Many businesses are also unaware of standard European distribution practices, which can put them at a disadvantage.

Several companies that have approached us recently have already signed unfavorable distributor agreements, making it difficult to regain market control. Getting out of a bad agreement can be time-consuming and costly, reinforcing the importance of setting up the right partnerships from the start.

A Five-Step Framework for Building a Strong Distribution Network

To ensure success, we follow a five-step framework for selecting and managing European distributors. This method has been refined over years of working with high-growth businesses and ensures a structured and strategic approach.

1. Profiling the Ideal Distributor
2. Selection and Due Diligence
3. Engagement and Negotiation
4. Activation and Performance Monitoring
5. Ongoing Management and Support

This framework ensures that businesses work with the right partners and avoid common pitfalls.

Step 1: Profiling the Ideal Distributor

Before selecting a distributor, businesses need to define what an ideal partner looks like. This process includes:

• Understanding distributor characteristics based on top-performing partners in existing markets
• Assessing agility and adaptability to ensure they can handle market disruptions
• Defining key capabilities such as salesforce expertise, product knowledge, and after-sales support

The best distributors in 2022 have transitioned to hybrid sales models that combine face-to-face interactions with digital engagement. Additionally, successful distributors have integrated e-commerce strategies to complement their traditional sales channels.

If your company is new to distribution, start by identifying key market segments and sales channels. Consider:

• The industries your distributors should serve
• The level of technical expertise required
• Complementary products they should carry
• The size and structure of their sales team

By outlining these characteristics, businesses can ensure they are targeting the right distribution partners.

Step 2: Selecting and Evaluating Distributors

With a distributor profile in hand, the next step is to conduct thorough market research to identify potential partners. Sources of information include:

• Competitor distribution networks
• Trade shows and industry events
• Local market directories and associations

When evaluating a distributor, check:

• Their ability to align with your target customer base
• Their experience in selling products similar to yours
• Their financial stability and resilience in the face of market disruptions

Be selective and strategic. Instead of casting a wide net, focus on 10-20 potential distributors per market and evaluate them based on predefined criteria.

Step 3: Engagement and Negotiation

Once you have shortlisted potential partners, start the engagement process. Consider the following:

• How many distributors per country? Ideally, work with at least two to maintain flexibility.
• Size of the distributor: A mix of large and small distributors can create a dynamic market presence.
• Distribution agreements: Many distributors in 2022 are more willing to sign agreements due to supply chain disruptions.

Avoid exclusivity whenever possible, especially at the start. Exclusivity agreements can lead to long-term issues if a distributor underperforms. If an exclusivity request is made, ensure it is tied to clear performance benchmarks that can be reviewed regularly.

When negotiating, be prepared with:

• A clear pricing structure and payment terms (e.g., 30-day terms)
• A company profile and product value proposition
• Compliance documentation (including environmental impact policies, which are increasingly requested by large distributors)

Step 4: Activation and Performance Monitoring

Signing a distribution agreement is only the beginning. The real work begins with activating the distributor’s sales team.

Key activation strategies include:

• Training sessions in the distributor’s local language to improve engagement
• Identifying key sales champions within the distributor’s team
• Providing sales tools such as brochures, case studies, and product samples
• Joint sales visits and lead generation support to build momentum

The goal is to make it easy for distributors to sell your product. If they struggle to close their first sale, engagement will drop, and results will be slow.

Step 5: Ongoing Management and Support

Many companies fail at this stage because they assume distributors will drive sales independently. The reality is that distributors need ongoing support and performance monitoring.

To effectively manage distributors:

• Set clear annual and quarterly sales targets
• Regularly review performance and market conditions
• Provide incentives to keep the distributor’s sales team motivated
• Collaborate on marketing efforts through joint campaigns and promotions

If a distributor underperforms, conduct a structured performance review and provide corrective actions. If necessary, exit the agreement strategically to minimize disruptions.

Key Takeaways

A well-managed European distribution network can significantly accelerate sales, but only if structured correctly. The five-step framework provides a strategic approach to selecting, engaging, and managing distributors to maximize success.

To get started:

1. If you are new to distribution, define your ideal distributor profile.
2. If you already have distributors, create a structured management plan to keep them accountable.

By following these principles, businesses can build strong distribution partnerships that drive sustainable growth in Europe.