Securing a distributor at an attractive margin may seem like a commercial win, but the real impact of that agreement goes beyond the percentage negotiated.
A distributor's margin does not exist in isolation. It sits within a wider value chain that may already include freight, insurance, import duties, warehousing and local transportation. Once the distributor adds their margin, retailers apply their own margin before local taxes are included in the final consumer price.
The challenge is that every additional margin layer pushes the selling price higher. A distributor agreement that looks profitable on paper can therefore create a product that struggles to compete at retail.
For example, a brand may accept a distributor's proposed margin believing the arrangement leaves sufficient room for everyone to earn. However, when the retailer's margin and other market costs are included, the resulting shelf price may exceed what consumers are willing to pay or what competing products command.
A distributor agreement should not be judged by its margin alone. What matters is whether the entire commercial structure leaves enough room for the brand, its partners and the consumer price to remain viable.
The Distributor Margin Trap: Why a Good Deal Can Become an Expensive Product
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