There are a multitude of possible options for the sale of products abroad. “The distribution model is often chosen when entering new markets,” explains Daniel Bont, consultant at Switzerland Global Enterprise (S-GE), who is jointly responsible for the latest survey carried out by S-GE in collaboration with the University of Applied Sciences of the Grisons (Prof. Ralph Lehmann) and Bern University of Applied Sciences (Dr. Paul Ammann) on the subject “International Distributors 2021.”
Why are distribution partners so popular?
The survey confirms the huge significance of business partners abroad – but there are regional differences. According to the survey, 73% of the companies surveyed in Western European markets rely on a distribution partner, in China, Japan, and Korea this figure is 63%, while in Eastern European countries it is 57%.
“The percentage of companies that work with a distribution partner is relatively high, because they benefit significantly from them,” says Daniel Bont, commenting on the results of the survey. “Firms can take advantage of their range of customers, their expertise, and their network in the target market. This enables companies to get their products into the respective market more quickly.” According to Bont, it is, however, crucial for an SME to select its business partner carefully.
Distribution partners not only make it easier to enter new markets; they also take on important tasks locally following market entry, including carrying out conversations with customers, establishing contact with customers, concluding sales, or delivering products, as a large proportion of those surveyed attest.
A shortage of expertise
But collaboration with a distribution partner does have its challenges. For 82% of the companies surveyed, it is difficult to find a distributor with appropriate specialized expertise. 71% say that a lot of work is required to manage the selected partner. For 65%, distributors are not committed enough, while 62% of those surveyed state that distributors demand exclusive rights for the respective market. Collaboration with a partner in East Asia (China, Japan, Korea) (42%), South Asia (India, Pakistan, Bangladesh) (32%), the Middle East (29%), Russia and Central Asia (24%), and the ASEAN states (22%) is particularly challenging.
Personal contacts as a success factor
“Finding the right business partner is one of the greatest challenges in international business,” says Daniel Bont. “That’s why we support Swiss SMEs with their search.” And once the right partner has been found, “contact must be cultivated very deliberately.” The companies surveyed are very aware of this: 100% state that regular personal contact leads to success with the distribution partner. Fast support with technical questions (94%), joint visits to important customers (76%), and training on location (72%) are also critical for success.
COVID-19 impairs the quality of collaboration
However, the situation has been made more difficult by the pandemic and the almost exclusive switch to digital channels. Due to the lack of personal contact, 72% of the companies surveyed have found it difficult to establish a trustworthy relationship with the distributor. Exclusively digital contact has also impaired the quality and effectiveness of collaboration according to 63% of participants.
Smoothing the way to international business
Yet despite all these challenges, a distribution partner can definitely smooth the way to international business. 92% of survey participants state that distributors establish good customer relationships in the markets, 89% say that they offer important support in the sale of products, 87% report that relationships are stable, and 62% indicate that they support customers in the use of products.
About the survey
Around 150 Swiss companies took part in the survey by Switzerland Global Enterprise, the University of Applied Sciences of the Grisons, and Bern University of Applied Sciences between March and April 2021. The detailed results of the survey are available for download at the end of this article.
On the basis of this survey, the universities of applied sciences referred to, Switzerland Global Enterprise, and participating companies will jointly develop models to improve collaboration with foreign distribution partners. This collaboration will be promoted and financially supported by Innosuisse, the Swiss agency for promoting innovation. The aim is to develop scientifically founded solutions for practical problems. Would you, as an entrepreneur, like to be involved in this project and to benefit directly from the findings and approaches developed? If so, contact Dr. Paul Ammann, Head of Research Area International Management at Bern University of Applied Sciences. Email