Questions to Ask Distributors
Questions for a brand or supplier evaluating a distributor, covering which accounts they already reach, who will actually sell your product, margin and terms, minimums and inventory, promotional costs, exclusivity, and what happens when the agreement ends.
20 questions, each with the reason to ask it · includes a conversation guide
The questions
Open any question to see why it works.
- 1
Which accounts do you already serve in the territory I care about?
Ask for named accounts rather than a region or a store count. The whole reason to use a distributor is the relationships they already have, and a list of buyers they can call this week is the only version of that claim you can check.
- 2
What categories do you carry, and roughly what share of your revenue is my category?
A distributor whose business is ninety percent something else will treat your line as a favor. The share number also tells you whether their reps know how to talk about your product or are learning on your account.
- 3
Do you carry anything that competes with us directly?
Some overlap is normal and can even help, since buyers want a range. What you are listening for is whether a competing line is a house brand or a top-selling item, because your product will lose that comparison inside their own catalog.
- 4
Who at your company would actually sell this: a dedicated person, or every rep with a full book?
This is the question most brands skip. If your product joins a book of two hundred items, it will be mentioned when a buyer asks, and never otherwise, unless something specific makes reps want to lead with it.
- 5
How many lines does a typical rep carry, and how are they compensated?
Compensation predicts behavior more reliably than enthusiasm. Reps paid on gross margin will push whatever pays best, so ask where your product would sit in that ranking rather than whether they like it.
- 6
What do you need from us to get this into a sales conversation?
Real answers include samples, sell sheets, pricing tiers, training, and a reason the buyer should replace something already on the shelf. A distributor who asks for nothing has not thought about how they would actually sell it.
- 7
What margin do you need, and is that calculated on cost or on selling price?
The same number means very different things depending on the base, and the confusion is common enough to be worth stating explicitly. Work out the full chain to the end customer before agreeing to anything, because a healthy distributor margin can leave your retail price uncompetitive.
- 8
What are the minimum order quantity and the reorder cycle?
Order size determines your production planning and your cash flow. Ask how often they actually reorder for a comparable line rather than what the contract allows, since a large minimum ordered twice a year is a different business from a small one ordered monthly.
- 9
Where does the product physically sit, and what are the storage conditions?
Relevant for anything with temperature sensitivity, fragility, or an expiry date. Ask how many facilities they run and whether stock moves between them, because transfers are where damage and lost inventory tend to happen.
- 10
How do you forecast, and how often would we see those numbers?
Without a forecast you are producing on guesswork and they are protected from the consequences. Ask whether the forecast is binding in any way, since a non-binding forecast that swings by half is not a planning tool.
- 11
What sell-through data would we get, and is it broken down by account?
The difference between sell-in and sell-through decides whether you can tell if your product is moving or just sitting in a warehouse. Many distributors treat account-level data as proprietary, so establish this before signing rather than after.
- 12
What are your payment terms, and when do we actually get paid?
Ask for both the stated terms and their real average, because those diverge. Long terms are a financing decision on your part, and if their payment history is poor, a strong margin can still leave you short of cash.
- 13
Who carries the cost of returns, damages, and stock that passes its date?
This one line has ended more distribution relationships than pricing. Get the categories separated, since damage in their warehouse, damage in transit, and unsold product coming back are three different arguments.
- 14
What promotional, listing, or slotting fees would apply, and who funds them?
Ask for a list of every deduction that could appear on a remittance. Brands routinely discover advertising contributions and discount programs only when the first payment arrives lighter than the invoice.
- 15
Who arranges and pays for freight in and out?
Freight terms can move several points of margin between you. Also ask who bears the risk while goods are in transit, since that decides who files the claim when a pallet arrives crushed.
- 16
Would this be exclusive to a territory or a channel, and for how long?
Exclusivity is the largest thing you can give and it should be paid for with volume commitments and a defined term. Be specific about whether it excludes your own direct sales and online sales, which is the clause that causes disputes later.
- 17
What performance minimum would you be willing to put in writing?
The willingness to commit at all is the real answer. A distributor confident in the product will accept a floor tied to keeping exclusivity, and one who refuses any number is asking you to take all the risk.
- 18
If either of us ends the agreement, what happens to remaining inventory and open orders?
Exit terms are negotiated best at the start, when everyone is friendly. Cover buy-back price, how long they can keep selling stock, and what happens to the accounts they opened using your product.
- 19
Which brands have left you in the past couple of years, and why?
Every distributor has losses and a candid answer is a good sign. Vague answers about brands going direct are worth probing, because going direct is often what a brand does when distribution stopped growing.
- 20
Can I speak to two brands about your size that you carry now?
Ask for references at your scale rather than their largest account, since a large brand gets attention you will not get. When you call, ask about payment timing and data sharing, which are the two things nobody volunteers.
Choosing and negotiating with a distributor
Practical guidance for the conversation itself.
Before the first meeting
Before the first meeting
- Know your landed cost per unit and the lowest price you can accept. Distributors negotiate from your price down, and a number you have not calculated will be agreed to in the room.
- Map the full chain: your price, their margin, the retailer's margin, and the shelf price. If the end price is not competitive, the deal cannot be fixed later with volume.
- Decide which accounts or channels you want to keep for yourself, and write them down before exclusivity is discussed.
- Have your capacity number ready. Winning distribution you cannot supply damages the relationship faster than losing the deal would have.
- Bring a sample and a one-page sell sheet. A distributor evaluates how easy you are to sell partly by how ready your material is.
Terms people forget to negotiate
Terms people forget to negotiate
- Data: account-level sell-through, at a stated frequency, in a usable format. This is easier to get before signing than after.
- Price protection, which decides who absorbs the loss on their inventory when you change list prices.
- Deduction rules, including what they may take off an invoice without asking and what requires your approval.
- Minimum advertised price, if you sell through any channel where discounting damages your other accounts.
- Term length and renewal. An automatically renewing multi-year agreement removes your leverage entirely.
- What happens if their key salesperson or owner leaves, which is often the person the relationship was actually built on.
Warning signs
Warning signs
- Cannot name specific buyers or accounts, only regions and totals.
- Wants exclusivity with no volume commitment and no term limit.
- Refuses to share any sell-through information, or shares it only in aggregate.
- Payment terms far longer than the industry norm, or references who hesitate when asked about getting paid.
- Asks for a very large first order at a deep discount to open accounts, without commitments attached to it.
- Cannot explain how your product differs from the competing line already in their book.