5 Steps for Finding Distributors in Europe

When a North American company strives for European business presence, the option of allying with a European distributor should be taken into consideration. An EU distributor has the ability to deal with the numerous cultural, economic, political and legal differences between the continents. And, they probably already have the network and access to distribution channels in place. Finding distributors in Europe is easier with a trusted partner.

However, many companies overlook the importance of thorough research and screening of possible distributors. This paper serves to guide companies through the process of finding and evaluating distributors in Europe. Additionally, this whitepaper answers questions on how to:

• Handle payments for distribution;
• Safely ship products to and within Europe;
• Deal with goods returns from Europe.
  

Bonus read: How to Qualify Distributors

1. RESEARCH THE MARKET POTENTIAL

The first step for U.S. companies is to identify the following: Current competitors in Europe; where these competitors are concentrated, how its product compares with their competitors’ in, among others, quality and cost; whether or not reimbursement is of significance; how well served each of the European markets is already, and what is the future potential in these markets.

When having trouble identifying the previous, one could look into the five forces that shape industry competition as defined by Porter. Thereby should be noted that there are a lot of differences within the European market as well. Europe is both a lucrative and challenging market. U.S. products are well respected, and innovative products are in high demand.

For the last several years, the exchange rate has favoured U.S. companies, making U.S. products much more attractive to European buyers. In addition, Europe’s population of over 490 million people is 60% larger than the United States. There are approximately 67 million people over age 65 in Europe compared with 36 million in the U.S. All of the abovementioned factors contribute to the appeal of the European market, particularly for U.S. companies.

2. PENETRATE SPECIFIC COUNTRIES

Upon entering the European market, most companies gravitate towards Germany, France and the UK because of their size. In fact, these three countries account for nearly half of the combined population of the European Union. The disadvantage to selecting these markets, however, is that they are very competitive and have fairly stagnant population growth.

Depending on the product and the market dynamics, it may be beneficial to look at smaller, second-tier markets (e.g. Spain, Poland, Czech Republic). Often, these countries are not as well served and have good growth potential due to rising incomes and other factors. It is of utmost importance to keep in mind the uniqueness of the European market. The European Union comprises 27 different countries (plus Switzerland, Norway, Liechtenstein and Iceland, which are not part of the EU) and 20+ official languages.

Although the EU has come a long way in harmonizing regulations among member states, and the movement of goods among EU countries is unfettered, each has its own laws, languages, and cultural values. Many people do not fully appreciate these differences and sometimes leave the market in frustration.

3 SELECT A TYPE OF DISTRIBUTOR

After the U.S. company has determined which countries make the most sense for their company, the next step is to determine which type of distributor is best suited to meet their needs. For instance: Is the product relatively simple or complex? Will the product need servicing? Does the company want initially to market in one or two countries? Or is it imperative to have widespread distribution from the outset? Is the product new and unique to the European market, or is it a high volume, low margin item?

Often, companies feel pressured because of time constraints, skip due diligence, and enter into an agreement with the first opportunity that presents itself (e.g. meet a distributor at a trade show). Determining which industrial distributor would best serve the U.S. company, however, depends on the answers to the questions above. For example, if the goal is to focus on one to three countries and manufacture a fairly simple product, smaller distributors may make the most sense because they may better cater to the company’s needs.

4. PREPARE AND MAKE INITIAL CONTACT

Once the type of distributor and which countries the U.S. company wants to target have been determined, the U.S. company will need to make an initial introduction to the selected distributor. Thereby the goal is to introduce the company, outline what goals the company is looking to accomplish and what the benefits of the product are.

In addition, the U.S. company should take this opportunity to request a time to speak in more detail. If the device‐related literature is not already translated, it should be done at this time by a specialized professional firm. However, it might also be the case that the contacted distributer not requires a translation (especially in Western-Europe most people are able to communicate in English).

5. ENSURE THE DISTRIBUTOR IS INTERESTED

Once a dialogue has been established and the distributor has expressed interest, the U.S. company should ask the distributor what types of similar products they sell already, how long they have been selling in the market(s), what are the percent of their sales from the U.S. company’s target market, and how they would promote the product.

This is a crucial step because it will help the U.S. company ensure that the distributor is interested and excited about their product, and also that the distributor is the best fit for the U.S. company’s company and culture. As an example, an important factor to keep in mind during this informal evaluation is the branding image that the company portrays, and how this distributor will maintain that image.

The U.S. company should also be prepared to answer a series of questions by the distributor, who will want to assess that they, too, are conducting business with a reputable company that makes a quality product and will be able to deliver a reliable supply on time. Finally, customer references should be checked to assess the satisfaction level of their current clients.

About EuroDev

EuroDev, established in 1996 with offices in The Netherlands, has a single, defined purpose to help mid-sized North American companies expand their business in Europe. We have created a proven, successful business development model and since our founding, have partnered with over 300 companies to help them define and meet their European business goals. Services provided include Sales Outsourcing, HR Outsourcing and Digital Marketing.