With so many different ways to sell your products globally, it begs the question, “which one is best for me?” One answer is through a master distributor. We all see the term distributor advertised, however, it’s important to note that not all distributors qualify as a master distributor.

What is a Master Distributor?

A master distributor is a distributor that sells only to resellers. Traditionally, a master distributor requires a verified business license and resale license in order to buy from them.

Some businesses that call themselves a distributor also sell to the general public. Master distributors will sell only to resellers. Their agreement with their vendors is that they will not sell to end users. Because of that, they get the lowest prices from their vendors. In exchange for these prices, they sell and distribute on behalf of the manufacturer.

A Turnkey Solution

One solution for global distribution is to use a master distributor. A master distributor traditionally buys products at a net/net price. That means that all costs are taken off of invoice, including such expenses as advertising accruals, cash discounts, and volume incentives.

The master distributor takes shipment of the goods at the net/net price, and arranges for them to be exported to the designated country. Once landed in the destination country, they warehouse and distribute the goods to resellers in that country. They pay all of the costs associated with the export process, including a Value Added Tax (VAT). They mark up the product to include all costs, which also includes their profit margin. Then they sell to resellers, such as ecommerce.

The Bonded Warehouse

This process is easy for the vendor, because all they have to do is ship the products to a bonded warehouse.

Once the products enter the warehouse, the vendor is no longer responsible for them. Their safety is guaranteed by the bond. The master distributor who is buying and receiving the goods arranges all of the import activities from the bonded warehouse.

Payment Terms

Many vendors require a cash-in-advance payment for the goods before they are shipped. Credit can be issued for the goods, but generally payment is cash-in-advance to eliminate the chances of nonpayment from the importer.

The master distributor offers economies of scale by consolidating multiple brands into one container, thus eliminating the need for a full container of one brand. They also handle all of the shipping processes once the product enters the bonded warehouse. That is why the process is considered a turnkey solution for the vendor.

Cost/Benefit Ratio

When deciding whether or not to use a master distributor, a company has to decide if they want to try and save costs by doing everything themselves, or to simply sell the product through the master distributor, and take a lower margin. Each circumstance has its advantages and disadvantages.

Conclusion

A master distributor solves many problems for a business, but there are also many challenges when using them. For example, unless the product has a built-in demand, a distributor may not even be interested in carrying the product. As in all cases, there is no perfect solution, and using a master distributor is just one of many available options.

About the Author

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Perry Goldstein has spent over 40 years in the electronics industry, in both the Consumer and Pro A/V sides of the industry. He is a pioneer of the ecommerce industry, working with ecommerce platforms since the advent of the channel in the mid 1990s. He has extensive experience working with Amazon since their entry into the electronics industry, as well as many of the biggest online retailers.