Let’s look at some of the reasons for why it’s hard to find a distributor in Germany, and at some alternative routes to selling your product.
Most of my clients had a simple international strategy: „I’ll just get a distributor.“
Their distributor for Germany was going to take care of everything. They were going to collect the product from the place of manufacture, import it into the EU, warehouse it, place it with the best retailers at top prices, build their brand, take care of any admin and logistics, and, most importantly, pay promptly.
How many of my clients were able to implement this strategy and achieve the desired results?
Most clients never even found a distributor. Two clients who did have distributors were unhappy with them.
What was going on here?
Before we start: this article is based on my experience as a Trade Commissioner for consumer goods. My suggestions may not be applicable to other industries. For instance, if you are in the food & beverage industry, you must have an EU-based distributor.
Why Is It So Hard to Find a Distributor in Germany?
Distributors are increasingly leaving the business. Why? Because it’s more and more work for less and less money.
Regulatory requirements for products sold in the European Union (EU) are rising – and the distributor is liable for violations. This results in a lot of admin work, the cost of which must be included in your product’s price.
Meanwhile, retailers are under pressure to keep retail prices low, because German shoppers are very price-sensitive. This is getting increasingly difficult at a time when labor and real estate costs are rising.
So what is going to happen? The retailer is going to try to get a better price from the distributor. The distributor will either squeeze you for a better price, or will decide to stop distributing at all.
Moreover, many retailers will purchase directly from the manufacturer if they can get a better price in this way. This, too, means less business for the distributor.
Advantages and Disadvantages of Having a Distributor
Having a distributor has some clear advantages:
- You have an in-market contact who has an interest in seeing your product succeed.
- You sell your product in bulk to one account.
- You don’t have to worry about how to get your product into the EU – your distributor will (should) act as your Importer of Record.
- You don’t have to worry about the language barrier, local tax rules etc.
But let’s also be aware of the disadvantages of working with a distributor:
- You generate lower revenue due to having a middleman.
- You have no control over which sales channels are used in your target country.
- You have no direct contact to retailers in your target country. If you lose your distributor, you’re most likely out.
- You don’t always know what your distributor is doing. One client’s distributor stole the client’s designs for their own products. (The client did not know that it is possible to register a Design as an IP right in the EU. Visit the EU Intellectual Property Office for further information. This is an agency of the European Union.)
What Your Distributor Will Not Do for You
My clients often seemed to think a distributor would basically run their business for them. That is not going to happen. Distributors have clear business goals of their own. Where these goals do not align with yours, they will give their own goals priority.
Some of the things my clients thought a distributor should do for them were:
- Brand building
- Implementing their strategy
- Ensuring regulatory compliance
Distributors wants to sell inventory. They are not in the brand-building business. Also consider this: are you really ready to give up control of your brand in a foreign market?
A distributor will only take on a brand and products that they are reasonably sure will sell in the market. The German market is going to be different from your home market. This means that maybe your domestic best-seller will not find buyers abroad.
You need to have a functioning brand before a distributor will even consider you. This is especially true if your product is not just cheap junk. Germans don’t like to shell out money for a brand they haven’t heard of.
So if you think your job is done once you have found a distributor, you are quite wrong. It’s just the start.
Implementing Your Strategy
A distributor buys your products to sell them on at a profit. They are predominantly interested in their own bottom line, not in your strategy or in how you think they should approach the market. After all, if you know better, why don’t you go it alone?
One of my clients had a clear sales strategy: she wanted her specialized product to be sold in small, independent speciality shops. End users should purchase in a retail environment where they received personal advice and customer service.
Her distributor had other ideas. He sold her product in bulk to a specialized, large online retailer. My client was very upset: she could very well do that on her own, she said, no distributor needed.
This is, of course, entirely correct. Obviously, it is a lot less work for a distributor to manage just one large retailer (who buys lots of stock) than to manage hundreds of small shops (who each buy just a few items). For the distributor, focusing on one large account constitutes a smart business decision.
However, consider the actual commercial situation here. My client’s product was selling. That’s why this large retailer was buying it. This was a working sales channel! So maybe my client had her end-customer analysis wrong. Maybe consumers were less concerned about where they shopped, as long as they got the solution they were looking for. Maybe they went online to research products, found hers on that website, and clicked the Buy button.
Or maybe my client had never analysed her end customers – maybe she had just decided that she wanted her product placed in small shops.
Whether you sell through a distributor or any other channel, remember: it’s not about what you want. It’s about what your customers want.
If a distributor functions as the Importer of Record, they assume regulatory responsibility for your product. Once they sign the customs papers, they are liable for your product.
Are they going to import product that does not meet regulatory requirements because „oh, it’s ok, I’ll fix it“? Absolutely not.
(It is illegal to place products on the EU market that do not meet regulatory requirements. Items purchased on AliExpress, Temu etc. may easily slip through the net, but no professional distributor will risk their name and their business with non-compliant products.)
They will work with you to ensure you are familiar with the requirements. But ultimately, it is YOU who must ensure your product meets those requirements. And yes, this may well raise costs for you, either reducing your margin or making your product less attractive.
Alternatives to Finding a Distributor
There are several options for companies who cannot or do not want to find a distributor for their product in Germany.
Work with an Agency
In many sectors, such as fashion, it may be a easier to find an agency to represent you in the market. Agencies are on the ground, they have existing relations with corporate buyers and will do the legwork for you.
Just like a distributor, however, an agency may be hesitant to take on a new, unknown brand. Moreover, they merely showcase your product to potential buyers and take a cut from any order they generate. It is then up to you to fulfill the order. The agency will not be your Importer of Record, and most likely, your new buyer will not, either. This means you have to make arrangements beforehand for importing your product into the EU.
Also note that the really, really well-connected agencies with high-profile brands and buyers are usually fully booked and do not accept new brands easily. Or at all. So you are back to square one: you need to build a desirable brand.
Exhibit at a Trade Show
Trade shows are an important component of German business life. There are lots of important trade shows for consumer goods in Germany, such as
- ISPO and Outdoor by ISPO for sports,
- FIBO for fitness,
- Kind + Jugend for kids and baby products,
- Inhorgenta for high-end jewelry, watches and gemstones,
- Eurobike for bicycles,
- Ambiente for home items and decorations.
Check the AUMA database for basically any show that takes place in German
A trade show, if properly prepared, can be a great opportunity to gain visiblity in your target market as well as other international markets. German trade shows are large industry events that draw visitors from around the world.
Moreover, in Germany, there are still lots of individually-owned shops that are too small to buy from a distributor – because they cannot meet the distributor’s minimum purchase threshold. The owners of these small shops like to go to trade shows to find new products and brands. This can be an opportunity for you to gain traction in the market. The obvious downside is that you may end up with lots of small orders. But that is still better than going home with no orders at all, because you focus only on the big retailers who won’t work with you.
For further information, see my articles on What to Expect at a German Trade Show, What are the Costs of Exhibiting at a German Trade Show?, Exhibiting at or Walking a Germany Trade Show? and How to Do Business at a German Trade Show.
Approach Retailers Directly
As mentioned above, many retailers will happily circumvent the distributor if they can get a better price from you directly. But unless your product is exceptionally innovative and just what the market is screaming for, prepare for a contact marathon. Also familiarize yourself with German business culture.
The bigger and better-known the retailer is, the more they get approached by brands just like yours. The more picky they can be. The more leverage they have in their T&Cs (within legal boundaries, of course). And so on.
Most of my clients had just one target retailer: Berlin luxury store KaDeWe. I approached my KaDeWe contacts (it took me ages to even get a contact there) about numerous brands. They said no every time.
Also make sure your marketing materials are appropriate for the German market. Contact me if you would like me to review them and suggest edits.
Sell D2C via E-Commerce
Let’s be clear, this is not an easy route. It requires a substantial time and money investment in operational and bureaucratic processes. But if done properly, you will take home more revenue and will be able to better build your brand with end customers.
There are two routes, each of which comes with its own challenges. In a nutshell, you can build your own D2C website, or you can sell through a marketplace such as Amazon. For many years, the advice for Germany was to have your own website, but the pendulum has recently swung towards marketplaces.
Whichever route you choose, you will most likely have to take care of a variety of things including but not limited to regulatory compliance including tax issues such as VAT, language barriers, marketing, logistics (importing goods, warehousing etc.).
I will publish more detailed articles on e-commerce as soon as possible. If you would like to discuss this in the meantime, contact me to schedule a call.
Germany is a hugely competitive market and notoriously difficult to enter.
If you want to tackle it, you cannot rely on (quickly) finding a distributor who will then do all the work for you so you just collect a monthly check. You will need at least a Plan B, if not Plan C.
You will also need to prepare for investing time and money into your international expansion, especially regulatory and administrative issues. If you cannot afford to do that, this may not be the right time for you to go international.