From Easy Orders to Disorder
It's not impossible for even the smallest companies to find, through trade shows, distributors willing to help sell in foreignmarkets. But if a deal sounds too good to be true, it could be.
Scott Montgomery, marketing chief at Cannondale, a bicycle manufacturer, in Georgetown, Conn., reports that back in 1989when he started Cannondale Europe, distribution control became his biggest problem. Sales reached $1.5 million the first year,but margins slipped. The same distributors who placed large orders and paid with letters of credit began resorting todiscounting. "When your products are being dumped," says Montgomery, "you lose control of pricing and positioning." In1992, to reestablish his authority, he took the costly step of buying out the contracts of his European distributors and agents, foran "embarrassingly expensive" price of about 5% of the reps' annual commissions.
What he would have done differently, he now says, is sign only a short-term agreement. "You can do OK with agentsand distributors if you protect yourself," he says. And he has: Cannondale Europe's annual sales are now about $32 million.