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Distributor Due Diligence – How to Get This Right?

Nov 19, 2019

India’s retail industry has grown considerably over the last decade. In fact, AT Kearney, a global management consulting firm in the U.S has ranked the country as the 4th most attractive – among thirty other top markets – when it comes to retail investments. This welcome growth also comes with not just the rising need for distributors, but a systematic due diligence process for distributors as well. A distributor is like a middleman between a producer and customers or retailers. So, it is safe to say that a huge portion of any business’ relationship with its customers is reliant on the distributors. They are your business partners who carry your brand to the public and in many ways, they affect your brand reputation.

As such, it is crucial that you only work with diligent, responsible and trustworthy distributors, who share the same values and visions as your business, no matter which field of business you are in. And what is the best way to make sure that you partner with reliable distributors with a good reputation? A thorough distributor due diligence. This is a critical process before partnering with any distributor. Distributor due diligence should never be overlooked or compromised.

Before, companies faced various challenges in verifying the capability of distributors before they decided to work with them. After all, without the tech-driven platforms that we have today, distributor due diligence was a lot of work. However, today, with easy access to all kinds of data thanks to technological innovations, it is much easier to verify a distributor’s reliability and reputation through a thorough distributor due diligence process. For example, here at AuthBridge, we can conduct a comprehensive process of distributor due diligence with quick turnaround and detailed reporting.

Critical points to consider for distributor due diligence

Do you want to make sure that your customers continue to trust you? Do you wish to be a company that is respected and valued in the industry? If so, it is imperative that you choose to partner with distributors only after conducting an exhaustive distributor onbarding diligence process. Such a process will not only help to uphold your brand reputation, but can save you thousands of dollars by mitigating business risks. Trust is the most important factor when it comes to any business partnership. So, here are some critical points to consider while conducting distributor due diligence to make sure they are someone you can trust.

Verify business registrations and other public documents

One way to know that your potential distributor is trustworthy is by verifying their registration details such as their registered office and registration date. If possible, go ahead and verify their latest round of accounts too. If the information you find does not match with what they themselves have provided, you may want to conduct more distributor due diligence tests.

Find out how long they have been functioning for

Another way to ensure their reliability is by finding out how long your potential distributor has been in business for. Usually, they themselves should be able to tell you from their sales literature. However, if they are a fairly new company, this point may not be applicable. In such cases, distributor due diligence can be conducted by contacting their previous clients or customers.

Verify registration details of domain name

Another method of testing distributor due diligence is by verifying if the domain name of their website is registered to their business. Check the registration details, and if it is registered to a different address than the one on their documents or website, or to an individual, it is a smart move to approach with caution.

Reviewing financials is one option

Especially for a huge deal, reviewing financials by an accountant is not uncommon. This will let you know just how fiscally responsible they are in their business. But for smaller deals, this test of distributor due diligence is less common.