Products are Sold Through Distribution, Not To Distribution

A product is not truly sold until an end customer consumes or uses it. Treating a distributor or retailer as the end customer is a fundamental and dangerous error in judgment.

Distributors do not purchase products to use them; they obtain products to pass them along to the real customers.

The Folly of "Channel Stuffing":

• False Prosperity: Booking revenue on sales to a distributor creates a false sense of success. This is often called "channel stuffing."
• The Inevitable Reversal: This unsold inventory eventually comes back to haunt the supplier in the form of:
  • Returns: Unsold products are returned.
  • Price Protection: When prices fall, the manufacturer must issue large credits to distributors for the unsold inventory they hold. This often happens just as the market collapses, creating a double hit to revenue.
  • Loss of Trust: The practice destroys the relationship with the distribution channel.

The Correct Approach:

A manufacturer must view the distributor as a partner, not a customer. The goal is to help the distributor succeed in selling the product through to the end user. This means providing them with the education, promotional tools, and effective policies they need to be successful.

A distributor is only as effective as the support it receives from the manufacturer.