Selling Your


Product to


China through


a distributor.


Just The Basics.

Yes we can help you to make your import story to a sucess:

- negotiation in Chinese, explaning, missunderstundings (understand your distributors target)
- be your company delegate: check your imported products in the market, check your product in  
  your Chinese distributors inventory, check for fake products from your product
- due diligence
- registred your Trademark in Englisch & in Chinese
- discuss the right strategy
- marketing research

There are only positive effects in joining our services.

Well there is no discussion China’s increasing wealth (despite the slowdown) directly translates to increasing demand for quality foreign product.  With the right product and the right strategy China will become your Cashcow. Second, we are dealing with a “second wave” of foreign companies, not the first wave which went into China years ago as Wholly Foreign Owned Entities (WFOEs). So what is involved in successfully having product distributed in China?  There are essentially three keys.  One, a good distributor. And two, a good contract with your distributor.  A Person which can trust, who is located in China and very importand he should have knowlege in Chinese and Culture.

What does it take to secure a good China-based distributor for your products?  It is like just about everything else in China: due diligence, due diligence, due diligence.

I give the following ten examples for your distributor contract for free ;-):

As for the deal itself and the contract you will use to reflect that deal, the issues are really quite similar to what you would face in Europe or in the US, but with additional legal issues relating to the legality of your product and the duties that will need to be paid to bring it into China.

The typical issues we see in Chinese distribution contracts are the following:

• Will your Chinese distributor be your agent? Do you want to structure your deal so that your Chinese distributor essentially becomes your agent in China and you pay it by commissions, with the actual sales transactions being between you and the end user (as opposed to between the end user and your distributor)?  We virtually always suggest that the deal be done with you simply selling your product to your Chinese distribute and your Chinese distributor, in turn, selling your product on to the end users. This distribution method usually makes sense for a whole slew of reasons.
• Will your distribution arrangement constitute a franchise arrangement? Generally, you want to be be careful not to inadvertently create a franchise arrangement because franchise arrangements in China (just as in the United States or Europe) must comply with a whole host of regulations. Speaking very generally, the more your distribution agreement mandates that your China distributor follow your marketing plan or business system and spotlight your brand/trademark, the greater the likelihood that you are tipping into a franchise arrangement.

• Will you grant your Chinese distributor an exclusive?  Will your Chinese distributor have an exclusive territory, customer type or product range? If so, for how long? Generally, if you grant an exclusive, you should be sure to set sales quotas/performance targets that will allow you to terminate the contract if not met.  We know in China has been contacted by far too many Western companies that granted their Chinese distributors long term exclusive distributorships only to have the Chinese company do absolutely nothing to try to sell the Westerner companies’ products in China. Beware the Chinese company that wants exclusive distribution rights to your product not to sell it, but to mothball your products so they do not compete with their own products or with the products of other companies for whom it is a distributor.  Setting adequately high minimum sales quotas will protect you from getting stuck with an under-performing or non-performing distributor.  Clearly defining the sales quotas/performance targets is essential. The typical provision mandates a certain minimum Euro value of sales or a minimum number of units sold.  Your Chinese distributor’s failure to meet the minimum for a certain period might result in termination or, alternatively, it might just lead to it losing exclusivity.

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• Who is responsible for what on sales and marketing?  The key here is clarity.  Chinese distributors oftentimes expect their foreign product supplier to engage and pay for at least some of the China sales and marketing costs.  There is no right way to handle this other than being sure that both sides of the distribution deal understand who is responsible for what.

• about your trademark(s)? If you are going to sell your product into China (whether through a distributor or otherwise), you absolutely must register your trademark in China before doing so and you absolutely must register that trademark in your name, not that of your distributor.  To be sure that your trademark remains yours in China, your distribution agreement should license the limited use of your trademark to your China distributor.  Your distribution agreement should make clear that the use of your trademark is subject to compliance with the contract by your distributor and compliance with the limitations on the use of your trademark.
• What happens if the relationship terminates?  A good distribution contract makes clear what happens upon termination because doing so greatly improves your chances of smoothly transitioning to a new distributor.  Is your distributor allowed to sell down its remaining inventory of your product or must it cease sales immediately?  Are you required to buy back the inventory and, if so, at what price?  You want to put in your contract that the distributor must inform you of any pending and future sales.  Where will your disputes with your distributor be resolved, and by whom?

Distribution agreements with Chinese companies can be an excellent way to get your product into China relatively quickly and inexpensively, so long as you follow the basics.

Talk to us, please feel free to contact us ;-)

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