HOW NOT TO CHANGE A DISTRIBUTOR A Case Study

All of my case studies are taken from practical experience and have, to date, been concerned with taking positive approaches to developing international business. I thought it might be useful to discuss a negative situation that occurred due to my poor judgment and management skills. Something for others to avoid. The problem occurred over the change of a distributor. For a number of years my company had tolerated the moderate, but never poor, performance of our contracted distributor.  If we wanted to change there were no obvious choices as he worked in a small island country. Whilst exhibiting at a regional Trade Show I was approached by a distributor from the same country. Whilst he expressed interest in handling our products and was aware of our current distributor, he was not set up to handle our type of products. He indicated he was about to expand and develop his operation and would be soon handling similar but non-competing products to our own. After some useful discussions I expressed a possible future interest but would like to assess his business potential once the new operation was up and running. We agreed to keep an open contact. A number of years later it was clear the second distributor had set up a good operation acquiring a number of prestigious principals though none competed directly with our business. At the same time our existing distributor worked in his traditional way and we now believed it was necessary to change if we were ever going to increase our presence in that country. I set up an exploratory meeting with second distributor out of market to establish his interest and agree, in principle, trading terms and requirements. The subsequent meeting was very positive and there were good reasons for both parties to proceed. For a number of operational reasons it was critical I physically visited his premises to ascertain his capability to handle effectively our product range. Changing any distributor is an important decision and I needed to make sure it was the right one. I also wanted to ensure, from the outset, the new distributor was fully aware of our requirements and the attention we paid to getting the business right. I also wanted to ensure that in a relatively small business community both distributors were handled correctly in this matter. I agreed an outline transfer plan with the new distributor. Following a satisfactory visit to his premises, I would commence the process of terminating the current distributor’s contract. It was at this point things went very wrong. Having agreed a date for a short one day visit, I asked my secretary, who was aware of the situation, to book flights and confirm details to him. On the day in question, I landed early at their local airport and passed quickly through immigration & customs. On entering the arrivals area I was met directly by the smiling face of my existing distributor and over his shoulder I could see the concerned look of my potential new distributor. It was one of those moments when you literally wish the ground to swallow you up. I approached my existing distributor and carried out as normal a greeting as possible trying to ensure he was unaware of any possible problem. I mentioned that I had seen the other distributor in the background and said I would like a quick word with him. I approached the ‘potential’ distributor and pointed out there had been a mix-up but could I see him later in the day to pick up on matters. He kindly agreed. On returning to my existing distributor we then drove to his premises to commence a normal market visit programme. It became clear that the situation had been caused by my secretary confirming the visit to the wrong distributor. It was not her fault as I then realised I had not specified to whom the confirmation should be made. I asked my distributor if I could take a little time off later in the day to visit the market on my own to familiarise with some local business. I later met with the ‘potential’ distributor, explained what had occurred and though it was now an abbreviated meeting I did view his facilities. The visit did confirm that change would be for the better. We agreed that due to the circumstances in the morning that we should let the dust settle for a few months but start to quietly prepare for a changeover. I then continued with the visit to my existing distributor and completed the day accordingly. Whilst I do not believe that I had fooled my distributor, the matter of my arrival earlier that day was never discussed. A number of months later, during a personal visit, I did formally notify the distributor of our decision to conclude his contract with us. He expressed no surprise at this decision nor to the fact we would be changing to the other distributor. His greatest concerns were to avoid loss of face and seek suitable recompense. We were able to accommodate his wishes. Looking back at the incident I consider myself to be lucky. The existing distributor, regardless of his business performance, was a very pleasant, passive individual who would not normally seek issues or confrontations. Someone else, less affable, could have made that particular day very difficult for me. So are there any learning points or is it just a matter of ensuring better communication with a secretary? I believe there is more. The process of changing a distributor is not to be taken lightly. There have to be very sound reasons to do this bearing in mind potential negative impact on your business and, in particular, on your local relations with the local trade. The whole process needs to be fully planned and serious consideration given to how much time should or could be spent in-market visiting a potential distributor. In any market it will be surprising if someone is not aware of what was happening which could lead to uncontrolled rumours. In the main I have enjoyed good and long business relationships with my distributors but when a change is required much care has to be taken.