Distribution deals in overseas markets can be a real boon for growth – if they go well. Two UK businesses reflect on their varying partnership experiences, and the lessons they’ve learnt
Having a partnership plan should be a key consideration for manufacturing businesses with export growth on their minds.
Exporting gives companies access to and profile in new markets, new revenue streams and spreads the risks to that business. It is also likely that as a result of exporting, a business can become more nimble, with a more responsive and innovative culture.
Paul Strike, CEO of Fourth Element, a diving equipment and clothing business, started his company in 1999 after seeing a gap in the market for diving kit with better designs and high performance fabrics.
“We didn’t have a huge budget or major investors – we were running it on our own shoe string. Our dive t-shirt and lifestyle collection increased our brand awareness but our core product line is our high performance thermal protection systems for divers,” says Strike.
In the UK, Fourth Element quickly became respected as specialists in thermal protection for dry suit diving.
“Having a strong brand identity is an essential part of our proposition when competing in overseas markets.”
Edward Naylor, CEO of Naylor Industries the building materials supplier, accelerated his company’s overseas activities in the early 1990s when the UK was in a downturn.
“When you’re in the middle of a crash, no-one wants to buy your products,” says Naylor matter-of-factly.
Fortunately, the Gulf and Far East economies were booming. Reacting to the infrastructure demand in those regions, Naylor Industries developed a specialism in chemical drainage. Targeting the Gulf and Far East allowed Naylor to reduce the company’s UK exposure.
“The UK already has a chemical industry, so most of the infrastructure is already in place. But the demand for our piping products overseas was and is significant,” Naylor says.
Researching your partner
Find the right partner and all of sudden the right doors start opening. “For example, Brunei is one of smallest countries we deal with in terms of size and population and yet it’s a terrific market for us. We’ve got an extremely good partner out there who’s our agent and distributor,” says Naylor.
Conversely, a market which on paper sounds fantastic can stall and stagnate if the distribution channels aren’t firing properly.
First in Scandinavia and then in the US, Fourth Element found it challenging to find the right distributors: partners who would commit seriously enough in the product and the brand in order to do a good job in the given territory.
Strike partnered with a US distributor and initially gained traction in the market. Sales were increasing but the distributor failed to meet the demands of stock and investment in the product line. As a result, dealers in the region were underserviced. Strike parted ways with his distributor.
“Knowing exactly who you are dealing with –what their resources are, what their capabilities are, what infrastructure they have that enables them to provide a value-added service – can’t be overestimated,” says Strike.
In the UK, Fourth Element had direct access to the consumer. But in the US they had to put that responsibility into the hands of a distributor.
“Because our suits are on the expensive end of the spectrum the stockist needs to be convinced they’re investing in something that will sell. And they need to communicate that to their end-user,” says Strike.
From their experience in different sectors, Strike and Naylor are keen to stress the usefulness of partnerships in helping to give their growth plans real momentum.
But they warn to sign distribution deals only after conducting background checks into the partner’s performance history.
“Inevitably they always talk a good game but doing your market research is critical,” says Strike.
Naylor concurs. “It’s really all about people – and you might argue that all business is about people.”
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