A Quora question in retail distribution category that I was asked and my answer.

Question:  What do suppliers look for in their distribution partners?

My answer: Here’s how I evaluate distribution partners:

1. Reputation/history.  Do they have a good reputation?  Ask for referrals to other suppliers in your size range that you can contact for references.

2. Financial health/credit history.  Will you require payment upfront before product is delivered?  Or, is the company’s reputation/history such that standard payment terms (2% net 30 is standard) will suffice? Or, the company is large and established and they will only agree to payment terms?

3. Markup. What is their margin/markup on resell of product? Does this leave enough margin for the end retailer/end seller to earn on the product such that the retail price is not too high?

4. Sales and marketing. Do they already sell into the channel or specific retailers/end sellers that you wish to reach?  How do they sell in: a catalog for their customers to buy from; direct sales calls/visits? What kind of promotional programs do they offer with end-retailers to help move product?  Ask specific questions about how they intend to sell your product so you can understand the process and check the logic behind it.

5. Performance.  What kind of product movement can you expect, or should expect? Does this meet your performance requirements?

6. Fees. Are there setup fees with them? Do they require free product on opening order or a discount on the opening order? Do they have requirements that you participate in tradeshows they put on? Do they have requirements that you participate in ads in their catalog?  Do they need samples to sell? Are there annual fees? Be sure to understand all the costs to doing business with them so you can determine your ROI from doing business with them. Your profit can be seriously reduced and even eliminated through all these fees if you are not careful to analyze the relationship before you commit.

7. Reporting. How do they report sales to you via end-customers, if at all?  Can you get weekly movement numbers? In what format?

8. Shipping. What are their shipping and routing policies and can you comply with them? What are their product case/packaging guidelines and freight terms. Do they require EDI for order transmittal/receipt?

9. Is product guaranteed sales?  That is, if they do not sell it, they can return it for a full refund.  Would this put undue financial burden on you if product is returned?

10. Orders. Can you impose a minimum order quantity on them?

11. Insurance. Do they require that they be named/covered under your insurance policy?  If so, what are they amounts and can you provide that?