MidwestLandlord
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- Dec 6, 2016
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Thanks for the thoughtful reply!
What I want to do is distributing my own products. I am thinking the entry would be targeting e-commerce companies, especially those that haven't been around for too long.
Alibaba: What I was thinking was that it has become a big supplier for e-commerce companies to get products from and that it, therefore, could be standing in the way of a distribution company wanting to enter the market.
But also, I don't necessarily want to distribute 'the same products' as some random guy in China. I want to make it better in some way to add more value to the end customer or to create a brand.
Example: If I were to start to distribute Phone Cases, what I feel would work the best would be to make a brand out of it so to speak, and/or make some improvements to the product, to differentiate these products from what the retailers already can get from Alibaba (without going through the process of improving a products or creating a brand themselves).
Now, I am guessing that won't be the case for every product (thinking Hot products etc) But in many cases at least. What are your thoughts on this?
I think there is some confusion here.
If I understand correctly, what you describe is producing your own branded products and selling them wholesale to retailers.
That's not really being a "distributor"
A distributor takes other people's products, including branded products, and sells them to retailers.
The value a distributor gives is by allowing brand owners (or manufacturers) to leverage someone else's infrastructure to fulfill large orders, drum up new retail customers, and provide customer service. It allows them to grow while reducing overhead expenses (compared to self-distribution)
The downsides: 1) Distributors run on very thin margins, usually around 20%-30%. 2) Allow any one brand to be a large percentage of your sales and you lack control.
The upsides: 1) You skip the product development phase and related risk. 2) You can piggyback off of the brand's advertising spend. 3) retailers are easier to deal with than consumers
Source: I own a distribution company.