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Quick Guides

Distribution models: an overview

Article Date:  Oct 22 2008
Distribution decisions can be difficult
Distribution decisions can be difficult

When distributing your products overseas, it's important to get the model right. Here are four to choose from.

Straight distribution deals
An independent third party buys your products to sell on. It's illegal for you to fix prices (though you can specify a maximum price under UK law). Distributors may be granted exclusivity over a certain territory. This approach is well-suited to straightforward, high-volume products, and the benefits include financial risk being passed on the distributor. The downside is that you'll lose direct contact with your customers.

Agency agreements
Agents receive commission on products rather than buying them to sell on. Unlike with straight distribution deals, you can set prices and build a direct relationship with the customer. The downsides are that you retain liability and risk, and you may have to pay compensation on terminating the agreement.

Franchises
A good way to build your business rapidly if you have a model that can be readily replicated, franchising allows you to retain control without taking on financial liability. However, it’s illegal to set prices and you may need to provide extensive support and training.

Licensing
Similar to franchising, except the rights you give away are more limited. This is common when valuable intellectual property is held by the principal company, for example a technical process or a strong brand.

Andrew Johnston, an associate at Eversheds, is happy to be contacted with queries about overseas distribution agreements. He can be reached on
0845 497 4649 or by email.

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