When I managed the stylus profiler product line, our biggest sales channel was our long time distributor in Japan. Their contract was originally inked in 1974, and it was hand typed. Yikes, I had never seen anything like that.
Anyhow, my top channel was in Japan, and they probably knew more about our product than we did. They were nearly 20% of our worldwide sales. To say they were important is a huge understatement.
That meant that I paid a lot of attention to them. I flew to Tokyo at least once a quarter to visit with them. We made some customizations to the product to address their needs. I made them feel very special. And they were special.
All that to set the stage for this story.
The Business Call
One day, our Japanese distributor wanted to talk about terms. My boss, the Senior Director of Marketing, wanted to sit in on the call. Being that we were in the US, and our disty was in Japan, the call was at 5:00PM. We used my boss’ office (he had a Polycom), and for almost two and a half hours, we talked terms. There was a LOT of teeth sucking, awkward stretches of silence, and ultimately, we made some really minor concessions in our terms in exchange for an increased forecast.
If you have ever worked with the Japanese, this is fairly common. Lots of formality. Feigned disappointment, and finally consensus.
Had we had this discussion with our agents in Europe, it would have been a 20 minute call, and some followup with signatories.
As we got off the call, my boss looked at me and said “I do not pay you enough money to do that.”
Of course, I didn't get a raise.
A second bite at the Apple
Years later (same company) I was traveling through Asia with our regional sales director. Mike had never visited our Japanese distributor, and we had a couple of small items (commercial) to discuss. Since he had never been there, I escorted him to the meeting. As we were on the JR train, he looked at the agenda and figured that we had maybe 90 minutes of discussion. We should be done and then we could meet for lunch.
Oh, how naive he was.
We arrived about 9:30, at 1:30 we broke for lunch (in their Cafeteria - yummy) and finally out 8:30 that evening, we were finally done.
My regional sales director was astounded that it took almost 11 hours. I was neither surprised, nor disappointed (he had planned on doing some shopping in Ginza that afternoon before we flew out the next day. That didn’t happen 😁.)
I left that company in 2009, and a couple years later I learned that the company had terminated the distributor agreement with their long time partner, deciding to go direct in Japan1. I am sure that the sales plummeted, and never recovered, but that was no longer my problem.
Most companies hire reps and distributors as they grow, but almost universally they look at the ~ 35% of discount needed, and decide to get greedy and go direct. They learn that a good agent or distributor offers a LOT of value for that 35% of margin, and going direct will often cost you more than that disty discount.