Finding Distribution in the USA

By Ed Benjamin
 

The world has many makers of electric bikes, motor scooters, scooters, and motorcycles, as well as the components and of course, larger vehicles. These companies may be in Europe, India, China, Korea, Taiwan, Japan, Israel, Russia, or elsewhere. They often look at the USA market, and believe that it is very large, quite affluent, and feel that they must find a way to sell into the USA. At eCycleElectric, we hear from such folks nearly every week. 

Most of these companies are inexperienced at doing business in the USA, as well as having insufficient capital to create a USA office. So they look for a USA partner as the solution to both problems. 

Since many of these companies have experience in Europe, where the many countries, languages, and cultures result in a need for many, relatively small, distributors, they often believe that the USA must be full of small classic importers / jobbers, who are looking for product to buy (paying up front) and distribute - handling all the details of conforming to USA business, and making no changes to the product. And hopefully speaking the language of the exporter as well. 

These exporters / manufacturers know that the real success for them is if the USA distributor can establish their company name as a successful brand name in the USA market. 

So they look for their ideal distributor - a major retail chain, a bike brand, a motorcycle brand, a jobber, or maybe a start up that will focus on their product. One that will pay for all inventory up front, and handle all details of USA business, such as owners manual, insurance, returns and regulatory issues. And one that will not ask for changes in product, absorb currency fluctuations, and have other attractive attributes. 

But there are some problems. Most USA distributors believe that they can serve the entire USA, and fear that any other distributors will lead to margin killing price competition - so they demand an exclusive for the entire USA.( In fact, it is a very big task to serve the entire USA, maybe too big for most distributors in the early days.) The USA is much larger in geography and sales volume than any other consumer market, and it is in fact one country, with one language for business, and one set of laws - making it both a big opportunity, and a big challenge. 

Additionally, most USA distributors believe that for them to make the big effort to establish a new product in the USA, they must be the owners of the brand name - requiring them to insist that the product will be distributed under their brand name, not the manufacturer's. And they also worry that a new product from a new supplier may bring problems that will tarnish their brand name. 

As for money, most established distribution in the USA has learned that they can reduce their risk and capital requirements by shifting costs and inventory financing onto their supplier - requiring long payment terms, and insisting that the exporter / manufacturer be responsible for unsold inventory, quality problems, and many of the costs of distribution. Chargebacks, service fees, and 180 days payment terms - after the goods are sold - are ideas that surprise and dismay the exporters, but are common among USA retail chains and distributors. 

Since many, or most of the electric bike / scooter / motor scooter / motor cycle / DIY Kit makers at this time are relatively small and straining their capital base already, these conflicting requirements and wants of the potential product maker, and the potential USA distributor usually result in an impasse. 

Rarely, a special connection, such as family or passion for a product, or luck will lead to a distribution relationship that suits both parties. When this happens, it can be great. 

The place to find such special connections is with young companies, often start ups, that are lightly capitalized, and have not yet established extensive reach into channels of distribution. The exporters / manufacturers that can be successful in the USA need to have a truly special product, the ability to finance some or all of the inventory, and a willingness (in both directions) to adapt and communicate. 

And this is never easy for either company. But as one successful exporter to the USA once observed: "It took us a long time and a lot of money. But now we have more business in the USA than we will ever have in Europe. And in Europe we had to do the same work, but many times for the many countries." 

Sometimes, companies like eCycleElectric (www.eCycleElectric.com) can help find the special connection. Many times it takes a bit of luck.

 

This article was published on China E-Vehicle, click here to view.  

Posted on August 2, 2013 .