Every country seems to have at least one of these. These are wholesalers who sell exclusively to the trade (normally dealers), but never to end users, at least that's the theory. Large end users, corporations, and government departments frequently place significantly larger orders than many dealers, so distributors frequently suppress their ethical objections. The increase in electronic delivery and software activation makes this shortcut particularly tempting. Where distributors won't play ball, it is not unknown for large organizations to create trade fronts to enable them to purchase goods at trade discounts.
The main distributors may have literally thousands of dealers on their books, giving you an instant multiplier effect. Through their brochures, catalogs, and Web site, your product is available at a stroke to a vast array of potential purchasers. However, such opportunities come at a cost. Distributors will hardly ever take on a new product from an unknown source unless you can demonstrate the product and convince them of the need for it in advance. A common way of measuring this is for the distributor to demand that the manufacturer provide them with a sizeable initial order in advance to prime the pump.
Distributors do simplify things. You ship to a single address, submit one invoice, and deal with one set of procedures. They process the orders from all their dealers, collect the money, deliver the goods, handle the returns, and so on.
With software, distributors typically take around 60 percent of the end price to cover their own costs and reward their retailers. They run on surprisingly narrow net margins, often 4-10 percent. Such margins can only be viable where there is serious volume. They also have to insist that you simplify their lives by working to a strict set of procedures and remain responsible for quality and after-sales support. But they will pay you promptly as agreed.
Note Unless you are a big player, never even seek to change a major distributor's rules or ways of working. Apart from anything else, their systems are not equipped to cope with idiosyncratic variations.
Although large distributors have consolidated and grown larger since the late 1980s, some have recently introduced a hybrid service whereby they'll stock and distribute your products but not promote them. This limits their function to warehousing. In this case, they act as a shipping agent. The only tasks they perform are storage and delivery. Invoicing their dealers is normally left to you.
Once buyers know that a new product has been accepted for distribution by one of the big names, the credibility of a program is considerably enhanced. Apart from software that practically walks itself out of their door, distributors like products that continue to bring them money through periodic re-licensing for updates.
The trend is for domestic consumers to be provided with electronic editions of software. At present, distributors have to stock both. If and when electronic delivery spreads to the commercial sector, there appears to be little to stop software manufacturers from selling directly to the end user.
Pure distribution has always been available from small, specialized distributors who concentrate on niches such as leisure or graphic design. Distribution comes into its own with physical hardware and the software that is habitually sold with it.
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