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Hi Matt, and welcome to the forum,

Exciting times! Congratulations on your progress with this so far. :)

When I’m not hanging out here on the forum I’m a marketing consultant and copywriter specialising in natural health (and from next week I’ll also be offering coaching to natural health businesses) – so I may be able to give you some insight on this.

Firstly, have you already found a distributor(s) that wants to work with you? Or is all of this hypothetical? If you know who you’ll be dealing with, you should be able to find out some info about their standard operating procedures, which will help to clarify some of your questions.

I’ll give you some initial insight below, but have changed the order of your questions to make things easier to for you to follow.

bodhi, post: 204568 wrote:
… Do they expect me to warehouse and send product direct to the retailers?

Part of the distributor’s role is to ship the product into store, so the cost of doing that is usually something they incorporate into their fee/commission. If they also stock lots of other ranges, you product will usually be shipped out along with products from other brands, so the cost will be spread across all the products in a delivery, rather than just attributed to yours. In many instances they’ll offer their customers free delivery for orders over a certain amount as shipping larger orders is much more profitable for them than shipping small ones.

If they are expecting you to warehouse and ship the products, you are effectively giving them a commission just for selling the products to their client base, and while I haven’t heard of such an arrangement with a ‘distributor’ before, I would expect that their fees would be substantially reduced in those circumstances, because you’d be the one doing a lot of the work and paying for the warehousing space. I’d be looking to avoid this situation if I were you.

bodhi, post: 204568 wrote:
My question is, is there anyone with experience working with distributors to know whether the distributor holds the stock on hand or simply places orders with me once they receive orders?

They’ll usually keep stock on hand so that they’re able to quickly fulfil any orders for it, but the amount they carry will likely depend on the amount of volume they expect to turnover over what period, and the shelf-life of your product. (If it has a short shelf-life, they’ll want to keep minimal quantities, especially in the early days when they’re not sure how popular it will be). If your product is bulky (e.g. protein powder in big buckets) they may also have space limitations that they’ll take into account.

Also bear in mind that they’re not going to commit to ordering and paying you for a large amount of product that will take them a long time to sell – that would be disastrous for their cash flow.

bodhi, post: 204568 wrote:
Do they warehouse stock in which case there’s a shipping price from my manufacturer to them to deal with.

From the way you’ve phrased this question, it sounds like you’re expecting this to be an exclusive distribution arrangement (i.e. the only way anyone can purchase the product is through them), and that you’re therefore planning on them taking a full production batch of stock at a time.

As mentioned above, I think they would probably balk at that for financial reasons, but other things to think about are that while giving them exclusivity might be good for you in some ways (e.g. you might be able to negotiate a better fee with them by giving them exclusive distribution rights), on the other hand, if they don’t turn out to be very proactive you might end up being stuck without other any way to sell your product due to your contract with them.

That aside, I think that the normal process would be for your contract manufacturer to ship the batch of stock to your premises (or somewhere else you have stipulated) where it would be quarantined while you inspect it and take samples from it etc before you release it for sale. So in the normal scheme of things I wouldn’t expect product to move straight from manufacturer to distributor without going through you first. Talk to your contract manufacturer or regulatory consultant for clarification on this though as it’s not my area of expertise.

Re the costs of transport, I would expect that the transportation from factory to you (or to the distributor if I’m wrong about what I said above) would normally be either built into the contractor’s unit pricing or added to each batch as a surcharge (this may be volume, weight or distance dependent). Either way, you will be the one paying for it. If you have access to appropriate equipment, you may be able to save some money by going to the factory to collect it yourself.

Shipping from your premises to the distributors is not necessarily as cut and dried, and is somewhat dependent on the type of costs you’re talking about (again, volume, weight and distance may be factors). One option would be to start from a similar basis to the one they use themselves and stipulate an order value amount above which you’re prepared to offer them free delivery. (You want to discourage them from placing lots of small orders if possible as they’ll end up costing you time and money).

However it may be politic to waive the delivery fee (like the contract manufacturer, build it into your pricing) rather than adding it as a surcharge.

I hope all that helps, Matt. Launching your own products is really complex, especially if you’re not familiar with the industry, so I’m really impressed with the amount of progress you’ve made.

Feel free to ask more questions if you’d like, and as I mentioned above, I’ll have mentoring packages available for start-up health businesses from next week, so please get in touch behind the scenes if you’d like any more info about my services.

Best of luck to you, and I’ll look forward to hearing more about it all in due course.