---
title: "3 Key Approaches and 6 Criteria for Selecting Distributors"
description: "For distributors, the external market is where the manufacturer's direct sales policy cannot reach, making it the easiest place to retain exclusive distribution rights. When developing external markets, distributors and sub-distributors become closely linked. Since most distributors lack the resources to bypass sub-distributors for channel refinement and external market development, all sales plans and strategies rely on sub-distributors for execution. Thus, the success or failure of selecting sub-distributors often determines the success or failure of market development. Key approaches include viewing sub-distributors as employees, adopting a global perspective, and taking a long-term view."
author: "New Distribution"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2016-03-14"
language: "en"
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---

# 3 Key Approaches and 6 Criteria for Selecting Distributors

> For distributors, the external market is where the manufacturer's direct sales policy cannot reach, making it the easiest place to retain exclusive distribution rights. When developing external markets, distributors and sub-distributors become closely linked. Since most distributors lack the resources to bypass sub-distributors for channel refinement and external market development, all sales plans and strategies rely on sub-distributors for execution. Thus, the success or failure of selecting sub-distributors often determines the success or failure of market development. Key approaches include viewing sub-distributors as employees, adopting a global perspective, and taking a long-term view.

For distributors, the external market is where the manufacturer's direct sales policy "cannot reach," making it the easiest place to retain "exclusive distribution rights." When developing external markets, distributors and sub-distributors become closely linked.

Most distributors lack the resources to bypass sub-distributors for "channel refinement" and external market development. All sales plans and strategies rely on sub-distributors for execution. Sub-distributors are the distributor's local sales representatives and business partners. Therefore, **the success or failure of selecting sub-distributors often determines the success or failure of market development.**

**Approach: A Global and Long-Term Perspective is Key**

The basic **approach** and **key points** for selecting sub-distributors are as follows:

## 1. Treat Sub-Distributors as Your Own Employees

View sub-distributors as part of your marketing team and network. Consider all factors when selecting them. Once chosen, provide care, support, and guidance. Use your service and reputation to build strong customer relationships.

## 2. Selection Criteria Should Have a Global Perspective

Do not evaluate solely from a purely commercial or trade perspective. Choosing a business partner is like marriage—wealth and power are not necessarily suitable. The key is whether they love you (i.e., have the willingness to cooperate). Additionally, their business qualities (including business ethics, reputation, credibility, industry awareness, and service to offline customers) determine whether your "marriage" will be happy.

## 3. Selection Criteria Should Have a Long-Term Perspective

  * **Customer network must match the designated area.** The purpose of selecting a sub-distributor is to incorporate their sales network (group purchase networks, key customer networks, etc.) into your sales system, thereby widely distributing products in the target area, making it convenient for users who need your products to purchase nearby.
  * **Pay attention to the peripheral environment of the county/city.** If the surrounding counties/townships are affluent and commercially valuable, the sub-distributor there must have sufficient strength (especially manpower and transportation capacity), because you will rely on them to further develop and maintain these surrounding areas.
  * **Try not to choose overly large customers.** Consider the size of your designated area and choose a customer whose network strength matches the area. Avoid overly large customers for two reasons: first, they may not focus on your product; second, their strong sales network can become a tool for "holding the market to control the upstream" and for dumping goods and disrupting prices.
  * **Consider the richness of the customer's channels.** The sub-distributor's sales network should ideally be "compatible" with all your main brands, including your current main products and any new product categories you plan to add.

**Criteria: Detailed Multi-Criteria Assessment Must Be Implemented**

Distributors must establish their own sub-distributor selection criteria and refine them into specific indicators and actions to guide their sales staff effectively. Sub-distributor selection criteria vary by industry and region but generally include strength, management capability, marketing awareness, willingness to cooperate, and reputation.

## 1. Strength Verification

Mainly need to understand warehouse area, inventory levels, financial status, transportation capacity, and visibility.

## 2. Marketing Awareness

The future of wholesalers is largely determined by their current business awareness. Marketing awareness determines the fate of a wholesale operation. Decomposing marketing awareness includes the following aspects:

  * **Familiarity with their own situation.** Including turnover and profit margins by item, accounts receivable ratio, etc.
  * **Familiarity with the local market.** Including city population, wealth distribution, locations of large enterprises and large residential areas, market size, administrative divisions, market characteristics, etc.
  * **Attitude toward delivery and distribution, and level of service to downstream customers.** Do they merely deliver goods to downstream customers, or do they provide a full range of services including ordering, delivery, display, inventory management, promotional materials placement, and complaint handling? The importance they place on distribution, network building, periodic visits to sales points, and customer service directly reflects a wholesaler's marketing awareness.

## 3. Market Capability Assessment

  * **Wholesale tiers.** Does the customer have direct control over terminal sales points? Does their product sales go through multiple tiers (first, second, third) before reaching retail points? The ideal sales network is one that has a fixed customer network in the wholesale market to expand product coverage, while also having direct sales teams for supermarkets, hotels, retail stores, and other channels to control terminals directly.
  * **Area covered by stable service capability.** How many fixed downstream customers does the wholesaler have? How large is their sales network? How many customers can their staff, vehicles, and management capabilities serve stably?
  * **Market performance of current brands.** Just as you would check a new employee's performance at previous companies, assess the market performance of the brands the wholesaler currently handles: distribution rate, display and merchandising effectiveness, price system rationality, customer service quality, and logistics coverage (product penetration in urban and surrounding areas).
  * **Reason for parting with previous manufacturer/distributor.** Why did they part ways? Whose fault was it? Was it due to dissatisfaction with their market capabilities, or were there negative behaviors (malicious price cutting, cross-region dumping, embezzling promotional items, defaulting on payments, etc.)?
  * **Transactions with key customers.** For consumer goods markets, supermarkets have become a major distribution channel that cannot be ignored. How many fixed business relationships does the wholesaler have in this channel?

## 4. Management Capability

  * **Logistics management level.** Do they have warehouse management, warehouse management systems, inbound/outbound procedures? Do they have inventory weekly reports, damage reports, expiration/damage/stockout warning tables? Are stockouts, expirations, damages, and losses severe?
  * **Financial management.** Do they have financial systems, accountants, cashiers? Do they have cash books, weekly/monthly sales reports, and profitability analysis?
  * **Sales staff situation.** Do they have sales personnel? What proportion are novices? Are there personnel management systems? Do sales staff comply with management? Are job responsibilities clearly defined? Do sales staff work by finding places to sell goods and earning sales commissions, or do they follow routes for periodic customer visits and receive bonuses based on comprehensive indicators (distribution rate, merchandising, information feedback, new customer development, active customer count, sales volume, etc.)?

## 5. Reputation

  * **Peer or upstream reputation.** How do other customers in the market evaluate this customer? Are there any negative records such as malicious cross-region dumping, price cutting, selling counterfeit products, or defaulting on payments? How do other manufacturers' sales reps and upstream distributor sales reps evaluate them? Any negative records?
  * **Are there "villains beside the ruler"?** Are the co-owners or key participants (e.g., the owner's spouse) easy to deal with? Any character flaws?

## 6. Strong Willingness to Cooperate

Specifically, assess whether the customer is enthusiastic about you and whether they are concerned about and seriously discuss specific cooperation matters (cooperation terms, supply prices, breach liability, market support, market development plans, etc.).

In practice, it is difficult to find a "perfect" customer. During the selection process, consider all factors comprehensively and compare horizontally to find the best candidate. If you cannot find a suitable customer, do not force it. It is better to temporarily shelve the matter than to lower your selection principles due to eagerness to develop. If you find early in the cooperation that the customer is indeed unsuitable, make a decision to adjust as soon as possible.

****-END-****

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