Exclusivity can be a precious commodity to both a supplier
and their chosen selling partner. In Tale #34, I recounted an experience where
exclusivity was granted and led to some excellent business in Spain. But
because it can be such a precious commodity, it is folly for a supplier to
offer it too readily. The following Tale is one of exclusivity being granted to
the wrong distributors, the mistakes that were made along the way, and the
resulting difficulty in extricating myself from a poorly negotiated deal!
I had sold products into the Republic of Ireland for several
years before I took up a new Export Manager role in the late ‘90s that led me
right back there. I loved working in Ireland, and I still do, and not just
because of the Guinness and the Tullamore Dew! My maternal grandmother hailed
from a Wexford family, so it frequently felt like I was going back to my roots,
and generally my experiences of working through distributors there had been
extremely positive.
On joining the new company I inherited a situation where our
largest export account was in Ireland, and where that largest export account
was not paying their bills! They had effectively ridden roughshod over my
predecessor, and had assumed the role of ‘exclusive distributor’ without any
formal agreement being in place. They were the only show in town, and as our
largest export account it fell to me to try and stop the rot. They had exceeded
their payment terms. They had exceeded the terms of our credit insurance cover.
I had a number of options: allow them to continue to abuse the spirit of the
verbal agreement that existed between us, taking more stock and amassing more
debt; play hardball with their account; find an alternative distributor. In the
end I went for a combination of the last two, first refusing to let them take
any more stock, and second starting the process of finding an alternative
distributor in case their performance failed to improve.
Stopping shipments to them until their account was back in
order was absolutely the right move because I could not risk their debt
spiralling further out of control. In the short term it meant two things: they
paid their bills and returned below the threshold where our insurers might have
refused to pay up in the event of serious default; and my further meetings with
them seemed to indicate that future business prospects were good. In reality,
their cash flow dive bombed because they no longer had the money they had not
been paying us to pay some of their other suppliers, and they eventually went into
administration. So our biggest export account was suddenly no more!
Two of their former employees set up a business to try and
maintain their own incomes and to hold on to some of the business they had been
working on, and hopefully to have the opportunity to prove themselves as our
new distributor. However, it was clear they neither had the resource nor
finance to handle some of the larger projects we were involved with, so I
trawled the country for a suitable alternative who were not already selling for
one of our numerous competitors. And I drew a blank until I was introduced by a
non-competitive company in the same industry sector to a soundly financed and
long standing distributor, more involved with the fixings and fittings for our
products than the product themselves. Guess what they wanted? You guessed right!
– exclusivity for our products in Ireland.
As our previous exclusive distributors had proven so
unreliable, I was determined to agree a formal distribution contract for this
new opportunity, and draft contracts were exchanged and amended for the best
part of six months (between me and the most pedantic company accountant I think
I will ever deal with!) until we had a form of words, targets and conditions
that was acceptable to both parties. During this process there were visits to
each other’s premises, and regular and positive communications. However, my
initial enthusiasm started to wain as I realised that the company did not
really have the right experience in specification selling to be able to compete
properly in the market. So I introduced them to the two guys who had lost their
jobs with our previous distributor, on the basis that they had the experience
that the new company lacked.
To cut a very long story short, hard though we all tried, the
new arrangement cast in stone as it was, simply didn’t work. I persisted for
nearly two years but sales remained poor and nowhere near on the scale that our
former distributor provided. I was boxed in because I had agreed an exclusive
contract with them, and they did not perform. In truth, it would probably have
been better to walk away from the market in Ireland altogether and focus my
efforts elsewhere, or maybe I should have persisted with our previous
distributor and just managed their account with a mix of flexibility and tight
control. So really the message from the whole experience is that if it doesn’t
feel altogether right, it is probably never going to be!
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