It’s becoming increasingly common for manufacturers to turn to distributors to sell their products to reduce the overhead costs of processing orders, logistics, and more. The manufacturer sells the product to the distributor, which then resells the product at a profit. The distributor ostensibly has the infrastructure to process these sales and a keen understanding of the market in which they operate. Instead of taking on the overhead of distribution themselves, they can hire experts who operate within this market on a daily basis and have the infrastructure to meet demand. From the distributor’s point of view, they get access to the product without the overhead of manufacturing. Distributors and manufacturers can thus operate on a symbiotic basis, each making the other more profitable by staying in their lane of expertise.
Problems arise, however, on the distributor side. Distributors may spend years cultivating a relationship with a manufacturer only to find that the manufacturer now wants to handle distribution in-house. In Europe, you cannot fire a distributor without a severance package. In California, distributors have no such protection.
In this article, a Silicon Valley business litigation attorney will discuss how distributors can protect themselves with strong distribution agreements that protect their interest in a market.