How to Build a Successful Distribution Business in the USA?
Employees of our company, offering business support services for those who have decided to settle in the country, often hear quite obvious questions about what we can offer or why one should choose us. The answers to these very important questions are provided below.
How We Work and What We Offer
The essence of our company's work is to help you choose the right area of activity and avoid major mistakes, financial losses, and moral defeat. Of course, the choice is determined by several factors, among which your financial capabilities are one of the decisive ones. For us, there is no difference in the scale of assistance: whether in purchasing a large business or a small venture, but it is crucial for us to do everything correctly and competently.
The distribution business implies the presence of suppliers and buyers. The main focus is on buyers. If there are buyers, we find or provide suppliers for you. If the batches of goods and operations are small, it usually means working under a large distributor of that product. If the batches are large, it involves either direct distribution or gray schemes, meaning working through large distributors while the goods are taken outside their distribution zone. Of course, everyone wants to be direct distributors. But there are a number of problems associated with the requirement for guaranteed purchases of large batches of goods (worth millions of dollars) at not the best prices (the best prices will be offered when they see that you are genuinely purchasing, not just promising).
Like in any other country, doing business is quite a risky endeavor: there are many influencing factors at play, as well as pitfalls that are not always obvious when purchasing a business. The conditions for conducting business in this country are different from those in Kazakhstan or Ukraine. Therefore, it is very important to timely gather maximum information about the pitfalls and various forms of assistance to minimize problems.
You can buy an existing distribution business. But this immediately raises the question of why it is being sold. Our specialists have noticed an interesting trend: the lower the price of the business, the higher the risk of its failure. In reality, such a situation serves as an excellent illustration of the fact that a quality item or potentially successful business cannot be cheap. However, there are exceptions, which involve helping to purchase a business at a fair price with an already well-functioning team of professional managers, buyers, and sellers. Such situations are not uncommon and are often related to owners wanting to change the nature of their activities, step back from business, etc. However, the real price of successful businesses is still quite high – millions and millions of dollars. Therefore, such offers are often of interest to relatively large corporations that acquire such businesses.
What to Do? Start a Business from Scratch!
If you don’t have a million or two dollars in reserve, you should at least ensure you have an original idea, or even better, a fundamentally new product based on new technologies. You need to find a product that doesn't have hundreds of competitors selling similar (or the same) goods worldwide and desperately engaging in price wars. Each deal turns into a battle for customers. Such businesses not only fail to generate profits; they struggle to make ends meet. Do you need such a business?
To begin with, you need to create a business plan for yourself, understand who your customers are, and whether you can rely on them. How much money will you need to organize the company and for working capital? Then, assemble a team of executors and managers with experience in the field under consideration. Ideally, you should be an expert in this area yourself. But if not, that's not a problem. You can hire specialists. Don't forget that business development won't start immediately: for some time, you will need to invest money in organizing the business itself. These funds will be needed to launch the project, promote and support it, to open an office, purchase computers, buy or rent furniture, pay salaries, etc. Six months is a sufficient time to assess the potential for business success. Keep in mind that a serious supplier (manufacturer) will not just grab any buyer with money and declare them a distributor. A serious manufacturer will always carefully check the distributor, and all "companies" consisting of one person with a phone in their pocket will be immediately filtered out. Large companies often observe distributors for months, or even a year.
If obtaining distribution is easy and quick, that’s not a good sign. It means that others will also easily obtain distribution. One well-known Italian furniture company easily granted distribution to anyone interested. As a result, they had five distributors in just one city, San Francisco. How did that end? In complete failure. The distributors mutually destroyed each other through aggressive pricing, and customers no longer wanted to buy from that manufacturer, as that furniture was offered everywhere and to everyone...
Six months have passed, and you don't see significant progress? But you are full of confidence, intend to keep moving in the chosen direction, the difficulties do not scare you, and your financial reserves allow you to continue operating at break-even or even with losses for a while longer? Keep moving forward. But if things are not so, and you lack firm confidence, then why not choose another product? The beauty of the distribution business is that you can withdraw all or almost all of your working capital from a poorly performing product and invest it in a product that sells well.
Despite the differences between Kazakhstan and the USA in many parameters, it must be acknowledged that people who had similar businesses in Kazakhstan or Ukraine are doing well in America. For comparison, we can mention the owners of a company that had a business in Kazakhstan based on trading meat products from European countries. After sanctions were imposed in 2014, it was decided to transfer the distribution business of European meat products to the USA. And what happened? After four months of ramp-up, settling affairs, and obtaining certificates, sales surged, and the current sales volumes have significantly exceeded those in Kazakhstan. Now they say, "Thank you for how it turned out." If Kazakhstan's sanctions on the supply of meat products from Europe to Kazakhstan are lifted, great. But if they are not lifted, it no longer matters. The business in the USA is thriving.
A similar example can be drawn with furniture trade. If under severe competition in Ukraine and Kazakhstan, furniture sellers managed to survive and earn well, then in the USA, with proper business management, you are virtually destined for success because the level of competition is significantly lower, and many European furniture manufacturers are not even represented in the American market.
Finally, one more vivid example involves toys as the product. Take a look and see who the main manufacturers and suppliers are? You will be surprised to find that almost all children's products are made in China, Europe, and present in the USA, while Kazakh or Ukrainian toys are completely absent. China is often unfairly associated with low-quality products, whereas a European trade brand for an American is practically a sign of quality, much like it was for a Soviet person once. Another observation in this area: successful stores tend to combine products. For instance, children's clothing is presented alongside children's furniture, etc.
What about manufacturers? Despite the low profitability of manufacturing enterprises, they nonetheless find themselves in the spotlight. They also tend to be successful, provided all known marketing tools are employed, there is a correct combination of direct sales and a distributor system, and major online platforms such as Amazon and eBay are involved in selling the products.
Advice for Beginner Distributors.
As in any other field, distribution has many nuances that novice entrepreneurs may not even be aware of. Therefore, we decided to provide some important advice.
You should start by carefully planning your business plan. Planning should also include the potential losses that are always possible in such a business, and to minimize them, you should keep the following in mind:
- Carefully check the expiration dates and storage conditions of products and avoid taking those that are nearing their expiration. At the start of a business, don’t dream of quick sales of purchased goods, so it is necessary to choose items with a long shelf life.
- Have you decided to purchase goods from abroad? Carefully study all the rules and requirements for certification, customs clearance, and payment of duties, and find out what documents and certificates are needed. Determine whether the goods are on the list of items prohibited for import or export. Special attention should be paid to pharmaceuticals and dual-use goods in this regard.
- Avoid taking seasonal products for sale: it may happen that you misjudge the season, volumes, or timelines, and the funds spent on purchasing may just be stuck at best until the next season. For example, it's better to purchase snowmobiles in summer and swimsuits in winter.
- You should not start a business selling highly specialized, very expensive, or exclusive goods. Even if you are dealing with mass-demand products, you should be cautious and not acquire them in large volumes: high competition leads to minimal profit and difficulties with sales.
Equally important is one of the main principles of marketing: first, define your target audience and their needs, and only then choose the product. Going in the opposite direction, you are likely to incur debts and fail in your idea. You should never buy a product and then start scratching your head about where and to whom to sell it.
The combination of business planning and organization of business processes, focus on team selection, and of course, the target audience and product selection specifically for them—adhering to these rules will yield excellent results.
Additional Points
Modern rules and conditions for conducting business should not be ignored. That is why you should not avoid promoting products via the internet. The first step on this path will be a well-planned and thought-out website. By the way, a landing page or a full-fledged website can serve as a model to test how viable and successful your project will be. The technology is simple: you don’t need to make a large purchase; just collect pre-orders for the products, see the demand, and then buy and deliver them.
You should avoid saving on website development: even the best idea can be killed at the outset if its execution in terms of design, speed, and usability is of low quality.
Real Business Proposal
Observations by our specialists on the development of various types of distribution and trading companies have led to interesting conclusions. For example, one of them concerns the purchase of heavy machinery in the former USSR countries. For reasons of economy or others, the purchased machinery has primarily been and remains used. This gives rise to related problems: lack of warranty service, absence of spare parts, components, and consumables—filters, lubricants, oils, and other technical fluids. At the same time, a large part of these is produced in the USA:
- Engines for heavy-duty trucks: International®, Isuzu®, Detroit Diesel®, Komatsu®, Caterpillar®;
- Components and spare parts from Komatsu®, Cummins®, Hitachi®, Volvo®, Caterpillar®, International®.
In addition to completely new units, you can also purchase refurbished ones that have a decent lifespan for extended operation: John Caterpillar®, Komatsu®, Hitachi®, Atlas Copco®.
Consumables should also preferably be purchased in the USA from well-known and established manufacturers of high-quality products.
Have you felt the potential of a possible business based on trading spare parts and consumables for heavy machinery? Do you have questions regarding the choice of this direction and the difficulties of working in a highly competitive environment?
We respond: we offer our partners to focus on a task different from supplying new equipment, namely, on refurbishing that which was produced 10-15 years ago. Finding suitable parts, blocks, and components for repair and replacement is quite a task! It is precisely in this area—searching for spare parts and consumables, technical fluids, and filters with subsequent delivery from the USA—that we have been successfully operating for many years and are ready to share our developments and part of our achievements. What makes up the cost, you might ask? It’s because with high demand, there exists only a small market of offers, the participants of which spend time and money searching for and purchasing the necessary components. Demand is quite high; consequently, the price of services and goods is also elevated.
In other words, we suggest you develop in a niche that is underdeveloped in Kazakhstan, Ukraine, and other countries. Demand is still not being satisfied at a sufficient level, as only a few companies are working in this area. Their combined efforts are unable to saturate the market with deficit products for machinery that can still operate, but some components need replacement or repair. For owners of used vehicles and specialized equipment, it is more profitable to maintain operational status by purchasing spare parts than to invest in buying new units, which distributors impose at several times higher prices.
Do you feel that such a business, if you decide to engage in it, can meet your expectations? If so, let's work together on sourcing and distributing products that are in demand in Kazakhstan, Ukraine, and other territories.
In addition to such a serious proposal, it should be mentioned that our company has built numerous partnerships, reliable suppliers, and established contacts with well-known manufacturers over the years:
Advanced Fiber Solutions, Texas Instruments, AccuTrak, FLIR Systems, Gigahertz-Optik, Monarch, AV Toolbox, Magnum Pro Calibration Pumps, Megger, Scienscope, NK Technologies, Agilent, B&W International, Tektronix, Rigol, Martel Electronics, Seaward, Cal Test, Auburn, Graphtec, Marshall Electronics, Adaptive Power Systems, B&K Precision, Global Specialties, Meriam, Amprobe, P3 International, MicroTemp, Time Electronics, Minolta Storage Battery Systems Inc., ACR Systems, GME Technology, Robinair, Applied Instruments, Hioki, Hammond Mfg., Fluke, Summit Technology, Hart Scientific, Mannix, Fluke Networks, Shimpo, OC White, BestScope, Byte Brothers, Unisource, Compuvideo, Pelican, Bacharach, Field Controls, IETLabsOWL, Panavise, Janatek, Leaptronix, Idealtesto, Clare, PHABRIX, Dranetz, Kestrel, Innoventions, Luxo, Retrotec, Iwatsu, BW Technologies, Simpson, Anaheim Scientific, Mark-10, Paladin Tools, Kanomax, Leaptronix, Compliance West, Steinel, Milwaukee, Palmer, Winchester Engineering, Ramsey Electronics, Test-Um, Kenwood, Wahl Soldering, Elenco, Instek, TIF, Link Instruments, Cooke, Raytek, Field Controls, Extech, TVOne, AEMC, Wahl, ee Tools, IWH, TPI, Xeltek, Fieldpiece Yokogawa, HoverCam, Wilcom, EZ Digital, PlatinumTools, JDSU (Test-Um), Lascar, Wavetek, Ericson, Sadelco, Pomona, Techne, Cropico, Velleman, Dranetz, Phenix, Sperry, Hakko, General Tools, Kestrel, Emerson, Sterling, Remcon, LeCroy, and many others.
Such resources allow one to feel confident in the U.S. business space, which we wish for you as well. We are ready to share all our experiences in conducting trade and procurement businesses in the USA.
