Distributorships are popular Business Opportunities across various business sectors in the UK.
But how do these Distribution deals work?
Distributorships – Reliable Business Models
The common perception towards businesses in the UK is that of exclusivity. It is also widely believed that one can ‘make it big’ in a business only when their efforts are backed by creative, game-changing ideas. A wide range of business opportunities , however belie this notion – as to Distributorships.
It is indeed possible to achieve financial success by working with other successful businesses. Franchising is one of the most popular exponents of this idea of synergistic partnerships. Distributorships, working more or less on similar principles, also offer great benefits to those who know how to best use the available opportunities.
What is a Distributorship?
A Distributorship / “Distributor” is the exclusive authority granted to a business to store, distribute and sell products or services provided by another business. In essence, distributorships allow one business to act as a local sales-point for another business.
The most common example of distributorships is that of electronic gadgets. For example, a smartphone manufacturer in South Korea can appoint a local UK business as their sole distributor in a particular UK district. This allows the distributor to purchase, store and sell for profit the smartphones manufactured by the parent business. This business model works to the benefit of both the parties, especially when the manufacturing operations are housed abroad to minimise the overheads.
A distributor can sell the products directly to the end consumer or to another business that acts as a ‘dealer’ for the distributor. The dealer may or may not operate as the franchise of the manufacturer. This networking of businesses is aimed at maximising the profits and balancing the logistics.
Distributorships vs Franchises
On the surface, a Distributor business appears to be exactly the same as franchise businesses – especially the retail franchise businesses. That, however, is not the case. Distributorships differ from franchising business models in the most important business metric – the ownership of the operations.
Franchise businesses hold a minimal level of control over the business strategies. Much of the operational details are monitored and controlled by the franchisor. Distributorships, on the other hand, allow the distributor to act and manage their business operations independently.
In addition, the franchisees have the licensing agreement to use the franchisor’s brand name and operate under the same. Distributorships do not enjoy that luxury. Distributors essentially operate as standalone businesses that possess the distribution rights for certain products, in certain geographical regions.
Which One Should You Choose?
There’s no definitive answer to this question. Distributorships are often preferred by established businesses that have a reliable logistics network to efficiently distribute products. Needless to say, such businesses are usually backed by deeper pockets.
Buying and running a franchise, unlike distributorships, requires much less initial working capital . Even inexperienced franchises have a fair chance of attaining profitability with support from the franchisor. The success in franchising businesses largely depends upon choosing the right franchise and securing financing.
Based on these parameters and specific to your requirements, you can compare what distributorships and franchising have to offer.