16 Min Read |
You’ve put in stacks of work into launching your new product; skincare, makeup, perfume, you name it, but now you’re facing one of the biggest challenges yet – how can you secure distribution in retailers for your brand? A product is not a business until it gets sold and this next step is a vital part of the journey for many beauty entrepreneurs.
Given the popularity of makeup across the world from the latest eyelash growth serum, the new vegan products to beauty tech solutions it shouldn’t come as a surprise that finding your perfect business partner will take some research and you need to invest plenty of time in this part of your journey. Your success in finding a good distributor will depend on several things but we’re here to help make the process that little bit easier.
As a side note, you can of course avoid distributors all together, but this may come with its own challenges. Working with a distributor can take some of the pressure off and lead to great success.
Table Of Contents
- What A Distributor Can Do For You
- Do You Need A Distributor?
- Conducting Market Research
- Understand Your Industry’s Distribution Channels
- Finding A Distributor
- How To Evaluate Distributors
- How To Get Distributors To Work With You
- Reasons Why You Might Not Find A Distributor
What A Distributor Can Do For You
Distributors work with retailers to get your product into stores and the right partner can increase your sales and help you reach untapped markets. The distributor essentially stocks a large number of your products and then sells them to retailers. This also allows retailers to negotiate a single deal across a range of products – perfect for those with more than one product to sell.
If you partner with the right distributor, they can offer you easy access to a network of retailers saving you plenty of time so you can get going with other parts of your business. Instead of approaching hundreds of different stores, you can negotiate a deal with a single distributor. The distributor will then work to get your product placed in retail stores that buy from it. In addition, distributors will take over the responsibility of storing and shipping products from you. Saving you even more time!
If you care about reaching more customers and getting access to lucrative markets, you’ll want to use distributors. However, as you will read below, in some cases there is no need to a distributor.
Remember, a distributor isn’t just a company you sell your products to. It’s a partner in your business’ growth. Picking the right distributor is crucial for long-term success.
Do You Need A Distributor?
This is not something we’d be asking before the dotcom era – we know that the cosmetic industry is rife in the e-commerce world and this has only accelerated since the pandemic, however, it’s worth questioning whether you need a distributor in this part of your business journey.
When selling directly to customers is easier than ever, the need for distributors isn’t always clear. Let’s have a look at the available Sales Channels.
Outlined below are four ways to sell your product:
- Sell direct to consumer via your website: Establishing a website is a must, if only for marketing reasons, but if you can also try and drive sales on it by creating a direct to consumer business model, then this is a bonus – unless you require a separate agreement with your chosen distributor.
- Online marketplaces: Online marketplaces are e-commerce sites that offer many different products from many different sellers. For example, Amazon Marketplace is an e-commerce platform owned and operated by Amazon that enables third-party sellers to sell new or used products on a fixed-price online marketplace alongside Amazon’s regular offerings. Sellers are responsible for creating listings, setting prices, advertising the products and deciding how products are delivered to the customer. Sellers can choose to use their own warehouse and carriers or use Amazon’s fulfilment centres.
- Sell to retail stores, which then sell to customers: Selling directly to your chosen retail stores should also be high on your list, even if your goal is to work with a distributor. However, this can be very time consuming and probably why you are looking for a distributor. In addition, retailers usually prefer to work with distributors rather than several individual manufacturers.
- Sell to a distributor: This is one-stop shop for retailers. Distributors will sell to the retail that then sell to customers.
Bear in mind, the more middlemen there are between you and the customer, the lower your profit margin. You could make $50 on a $60 product if you sell directly to customers (via your website for example) but as you start adding a retailer and a distributor they will be eating into your profits.
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Conducting Market Research
Before you make any decisions on your next step, you will need to conduct extensive market research, this will help you find out all the statistics regarding your beauty product and its distribution chains. The research will also help you analyse the competition, what is the demand, which category does it fall in to, who is your target customer and how strong the online demand is.
As a result of the COVID-19 pandemic, the last few months has turned a lot on its head for the beauty industry, and consumers’ beauty priorities have changed. For example, sales of colour cosmetics such as lipstick, eyeshadow and foundation fell dramatically and according to market research NPD, sales of fragrances in the US and Europe were down by 13% in the first quarter of 2020 compared to last year. According to consulting firm McKinsey global revenue for the beauty industry could fall by up to 30% this year. It’s important to keep on top of the latest trends and research, especially now.
As part of your research, an easy way to gauge the current online demand for your product is to check the competition on a large retailer like Amazon, if there’s a large number of competitive products it usually means there is consumer demand for it. You can also use a tool such as Google’s free Keyword Planner, or more premium tools like SEMrush or Ahrefs. If the search term for your product is high, there’s a good chance the consumer interest for it is also high.
You will also need to review your manufacturing capabilities before committing to working with a distributor. Unlike selling directly to customers, distributors will expect you to have enough volume to meet the retailers’ demands. If you are unsure about your manufacturing capabilities, then it’s advisable to keep the journey via your own channels initially.
Finally, make sure you know the type of retailers you’d like to target. Large retailers often work directly with manufactures, however non-chain retailers are more likely to avoid manufacturers since it increases their administrative work. Think about your target market, if this is mostly with chain retailers, you can approach them directly as another option, if your focus is mostly on small stores then it’s best going through a distributor.
Understand Your Industry’s Distribution Channels
Once you’ve decided that a distributor is the right decision, you will now need to find the right one for you, this is a big decision and shouldn’t be taken lightly. There are several ways to get your product to the right retailer and it’s important to understand that not all distributors serve the same market, this is where further research is utmost important. Understanding your industry’s distribution channels and supply chain can help you find the right partner for your business.
Finding A Distributor
You need to view your distributor as a partner in your business’ growth and not just a company you are selling your products to. We’ve outlined some of the areas you can explore so you can start making a list of potential partners for your product.
- Trade Associations: One of the first stops in finding a distributing partner is to research beauty trade associations in your target market. Trade associations is where manufacturers, retailers, and distributors can come together. Joining relevant trade associations means you can try and find out which distributors other manufacturers are using, who are they targeting and the results from their efforts. This is also an opportunity for you to research best practices and established channels and partners.
- Trade Shows: Trade shows bring together thousands of retailers, distributors, manufacturers and beauty industry experts. Attending relevant trade shows such a, Cosmoprof, Beautycon, Beautyworld Middle East or International Beauty Show (depending on your location and target market), can give you information on the distribution landscape and the available options. It also gives you an opportunity to network with people in the industry, make connections and gain some valuable first-hand advice. If you are in a position to do so, having a booth will only increase the number of eyeballs on your brand and product but either way this is a great opportunity to collect business cards from those in the industry which you can use as a starting point. Be sure to keep an eye on the calendars as there’s been plenty of cancellations and rescheduling this year due to the pandemic.
- Google Search: This may seem like an obvious one, but this should be a vital part of your research. Searching for keywords such as [Product Category] distributors or [Product Category] distributors in [local market] will give you a great starting point. Here you will find details of distributors and wholesalers at the top of the search results for you to get in touch with. But remember, Google doesn’t have all the answers, it’s still important to do your own research!
- Social Networks: Social Media plays an important part in most businesses and this is certainly the case for the beauty industry. Search for relevant Facebook and LinkedIn groups and start a conversation with others in the industry. A simple referral can go a long way.
Talk to Retailers: If there’s a specific retailer that you’re keen to get in front of, why not set up an appointment and ask them directly. You can find out if there are any distributors who already have an established relationship with the retailer or if there are any distributors this retailer prefers working with or perhaps any they don’t like working with.
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How To Evaluate Distributors
You’ve got your list of distributors that you potentially want to work with, you now need to make sure they are the right fit for your business, capabilities and your short-term and long-term goals. Start by creating a list of your own requirements!
You can develop your ‘ideal’ distributor based on the requirements you’ve set out. We’ve highlighted some of the areas you should be reviewing here:
- Distributor Expertise: Find out if the distributor has experience in selling beauty and cosmetic products with proven expertise. You will need a distributor who understands the industry as well as the markets you want to reach.
- Distributor Size: Ideally you should be working with a distributor that can accommodate your business. If you’ve just launched your beauty product and you are fairly new to the beauty industry then you’ll need to partner with a distributor that will give the product the attention it deserves, and not partner with one where your product will get lost in the mix.
- Business Goals and Values: Work with a distributor that is aligned with your business goals. For example, if you want to sell your beauty product in smaller stores and focus on sustainable growth then it’s important to pick a distributor that prioritizes this too.
Once you’ve weighed up your requirements, it’s time to start evaluating your preferred distributors. We’ve set out some further areas to look at and questions you should be asking.
- Market Knowledge: Having a deep understanding of the local market is essential. Does your distributor know all the relevant retailers? And do they know the market conditions?
- Business Stability: It’s important to know how long your distributor has been in business and what their track record looks like. How stable are their finances and operations and does it have a history of on-time payments?
- Sales Competence: Does your distributor have a sales team? How big is the team and how do they generate leads?
- Marketing Capabilities: Marketing plays a big part in building relationships with prospective retailers. What channels does your distributor use and how much emphasis do they put on marketing?
- Inventory Management & Logistics: Knowing what goes on behind the scenes will put you in a strong position, so be sure to ask how they handle their inventory, how large are their warehouses, do they have their own transport fleet or do they use other logistic partners and if so, who?
- Management: What kind of personnel does the distributor have? Does it have professional managers and managerial practices in place? What is the founders’ background and experience?
- Passion: Look for distributors who are as passionate about the beauty industry as you are and believe in your product and the benefits of it. Don’t make do with a distributor that’s just looking to sign another product.
Finally, once you have a decent shortlist, all that’s left to do is to ask for references. Any distributor that’s serious about taking on your business will have no issue in providing references. Ask them about the professionalism of the distributor, timeliness and anything else you’d like to know to ensure they are the perfect match for you.
On meeting with potential distributors, you will have a better understanding of their profile, if your expectations match, their passion for your product and plenty of other unanswered questions. Remember, the distributor will play a vital part in the success of your business.
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How To Get Distributors To Work With You
You’ve got your list and you’ve narrowed it down but how do you get your chosen distributor to work with you. Let them test your products and schedule a meeting to take it further but be aware of the areas they will be most concerned about:
- The level of profit they can make on your product
- The cost of stocking and fulfilling your product
- Whether your product is scalable
- Whether you sell multiple products
Naturally profits and costs are paramount for a retailer and a distributor – as is the case for you so they will need to have a good understanding on the profit your product can make them. Scalability is another important point especially if your product is relatively inexpensive.
Distributors need to keep administrative costs down, so your ability to supply a product will be another deciding factor. Distributors like to sell multiple products from individual suppliers for the same reason retailers like to buy from distributors instead of from dozens of individual suppliers.
Effective distributors don’t want to work with just any supplier, they will be assessing your business as they want to partner with someone that has a proven product demand, sales, and effectiveness.
To help with the process further and to get the deal signed, here are a few things you can do to convince distributors to work with you:
- Demonstrate Knowledge: This goes without saying but be sure that you have a deep understanding of the beauty industry, your product and the market as well as your potential distributors goals. Develop your pitch along the distributor’s business goals and market approach.
- Show Customer Demand: Demonstrate that there is an actual customer demand for your product. One of the best ways to do this is to show sales figures from your online store (if you have this sales channel set up already), alternatively, from your research on the industry such as existing retailers and marketplaces.
- Develop A Brand: Your brand is not only vital for the consumer, it’s important in getting the right distributor on board. Make sure they know you are serious with a strong brand, design, copy, marketing material and customer experience.
- Show Intent: You need to prove to the distributor that you’re ready for the long game, be sure to demonstrate the investment (time and money) you’ve made to the business already.
- Get Referrals: If possible, try and get a referral from someone the distributor already trusts, this is why networking is so important. Receiving an introduction from someone they already work with will make it much easier to secure the deal.
To ensure you’re well prepared, we’ve listed some of the questions they are likely to ask you:
- How much profit can we make off the product – both per unit and in total?
- Can we make a better profit selling this particular beauty product compared to another brand?
- Have you done research into the demand for your product?
- Do you have other products to sell or do you plan to launch more?
- Have you identified a need for this product with particular retailers?
- What is your marketing plan?
- What inventory levels will we need to maintain?
Reasons Why You Might Not Find A Distributor
It’s important to know that distributors can be selective of who they work with. The brands they work with impacts their reputation and of course the need to make a profit from the deal. We’ve outlined some reasons here as to why you might not find a distributor:
- Your product is not in high demand
- Your company’s ROI is not good
- Your company requires a very high investment.
- You are a comparatively new brand even though your product is good
When pitching your beauty product to a potential distributor you need to be confident in your pitch and make sure you’ve done all your homework. This is especially the case if you’re speaking to a distributor who is new to the beauty industry but may have other qualities that you’re looking for, or a distributor who is taking a chance on a brand-new product.
Each market will have its own legislations and laws on distributing cosmetics and perfumery products.
You will need to familiarise yourself with the local regulatory bodies, especially if there’s a specific market you want to be seen in. Regulations will vary depending on location and researching this before you’ve even launched your product will help avoid any issues at this exciting stage of your business deal.
It’s likely you’ve already dedicated a lot of time, effort and investment in launching your product and finding the right distributor to sell your products and brand can be profitable and put you on your way to success. You may be eager to get your product out there, but now is not the time to rush a decision, there’s a lot to consider on both sides of the table before making such a big commitment. Enjoy this part of your journey, you’ve got this far and the best is yet to come!