Usually, "reseller" implies solely the right to sell (license) to end users, and "distributors" only sell (license) to other resellers (dealers, VARs, etc.) (who get the right to sub-license directly to end users).
However, this can vary. Actually, what may happen is a function of (a) the parties' agreement (contract specifics), (b) how well it's administered, and (c) national law (in some nations and regions, age-old legal rules can "trump" certain provisions of such contracts, as naive American tech. company managers have sometimes learned
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Categories: International Focus
First let me congratulate everyone on this great source of information!
I represent Neuxpower a software vendor from the UK selling NXPowerLite "intelligent compression for Microsoft PowerPoint files". at the moment
28% of our sales originate from the US. we are looking to improve that to 50% over the coming year (simply because 50% of the worlds PowerPoint users are based in the US)
Would you guys be able to point out the differences between a reseller and a distributer? (till now we partnered only with resellers)
Note: our software is only sold as downloadable media and therefore there's no need to stock boxes of NXPowerLite.
You should ask this question also in the Sales and Distribution forum. Your question has come up a few times before.
Some quick points.
The world of resellers/distributors is very different between the US and Europe. Because of language and country issues, resellers do more in Europe.
The world of resellers/distributors is also different within the context of hardware vs. software products. Software is very portable, so the value-add of a distributor lies in logistics - which usually means boxes and physical things.
There are few real software distributors, but those that are a big and basically a mechanism for distributing "boxed" software through a channel, usually retail stores.
Resellers could be anyone really: retailers, other software companies, consultants, VARs (those that sell your software bundled with services), online web sites.
Software vendor's look to resellers to basically "put feet on the street" where they cannot - maybe because they don't have the resources to put sales people all over the place.
In the US, many resellers are basicallly "order takers", they do not actively market products. I'm generalizing, but that is a common theme you will see and hear. They tend to be small themsleves, and the only reason they pick up a product is because they can make some money with it through other means (via consulting or bundling with other products they sell).
For the type of product your offer which can easily sold via the web, I am not sure what a reseller or distributor will give you.
Hello Ran, and welcome to SoftwareCEO.
Prior to responding I took a few minutes to review your site and noted your impressive testimonials along with current distribution (reseller) information.
Upon review of your U.S. Distribution Channel it appears that you're on the right track. Your choice of online retailers would seem to be the best course, especially in light of your "download only" delivery model.
The classic U.S. Reseller is generally disinterested in representing vendor downloadable products as they are so easily shopped by purchasing agents and left out of the buying cycle. This is a very painful experience to the sales person who gave of his/her time to recommend and demonstrate the product. With a $41.00 list price, even at 90% margins (profits) there isn't much appeal without extremely high volume...back to the online retailer.
If the product can be purchased direct from the vendor, why would anybody want to resell it against the ultimate competition? Also, resellers, even casual partner relationships can be demanding on your time and margins - are you sure that this is a route you would want to take?
The online retailers you've aligned with are in a better position to distribute (distribute a download?) your product to a large corporate market than the classic reseller, but as has been noted here many times, they're not going to generate new sales without substantial incentives - they'll simply fill orders.
The larger online retailers use banks of inside sales people to take orders, and (depending on the retailer) they can get excited about bonus and spiff programs. For example, a discount "for download only" coupon that could be handed out by the online retailer's inside sales team with each order of PowerPoint they take; or, maybe a (time sensitive) POS coupon printed with the receipt at a number of the larger walk in retailers? Or, maybe an online coupon (posted on your site) that could only be applied with one of your current U.S. partners following their agreement to enter into a co-opt'd marketing campaign?
In addition to the testimonials it would be helpful to your reseller efforts to have a number of favourable articles, perhaps some analysts reviews and an expansive product awareness program.
Hope this is helpful, good luck with your U.S. efforts!
Ken Beam, The VAR-City -- "Channel Start-Up Specialists since 1995" Phone: 972.240.8793 or email@example.com
I see you've spoken to Ken Beam ... you are in very good hands.
It also depends on the market segment and geography you target.
- In the "Enterprise" market, there is no rules. Ie: In Asia, every company selling software is called "Reseller". In Europe they are called "distributors".
- And for the "mass market" products like yours, or products targeting consumers or SOHO, Robert Dubicki gave you a good definition.
Are you targeting specific country or region?
I think you can also consider talking to Laptop and Desktop manufactureres to bundle your software. This might work very well for products like yours, with small price tag. I am quoting this from a previous thread I read from this site. Hope this helps, even tough slightly tangent to your original question.
Traditionally, in the computer business, resellers sell directly to end users, and distributors sell to resellers. This has been the case pretty rigidly in the US, although that is starting to change. Some of the big distributors (Tech Data notably) have begun to sell direct because it is so tough to make money anymore as a traditional distributor.
There actually are many, many small, vertically oriented software distributors around the world, although that is a very rare animal in North America(and the UK). North America and the UK are the most "evolved" markets from a distribution standpoint. Outside the US, these small distributors typically do some direct selling as well as to resellers. The big ones that service retailers as well as VARs are the ones that often are more pure distributors and don't sell direct.
But in enterprise software, it is very possible to find a small vertical distributor outside of the North America (and outside the UK, typically as well)that will provide huge value add for a small software company--they can essentially act as the software company in that marketplace. Develop the market, advertise, provide local sales & support, etc. This type of relationship demands a lot of trust on both parties, and often an exclusive or near-exclusive relationship in the country or region.
I took the liberty of making this all into one thread. Hope I didn't confuse anyone. I left it in International even though it is about distribution because (1) that's where it started, (2) that's where it got the most replies, and (3) it's fundamentally about International distribution.
I am entering the discussion somewhat late. I can see from the replies that have been posted that you have received a lot of very good and useful information relative to distribution options for your products in the U.S. I am not going to add to that, rather I just want to direct you to a particular white paper that addresses the differences between the various channel options, even though it does not get into the nuances of how the channels differ from Europe to the U.S. Here is the link: http://www.theyorkgroup.com/channel.pdf. Please let me know if you have any additional questions.
You you are right to assume Euro Resellers need different strokes compared to the USA. In fact they vary greatly from one country to another. For example tax laws in Italy, there are 40 codes compared to to is other European countries points to one of the many small differences that make life complex. What works in one place may not work another. It is also very easy when coming from outside to see things from your experience as opposed to trusting the partner. This in turn leads to many of the difficulties in communication.
You may believe its language and culture but it is also more important to understand how resellers are viewed in their own environment. What is the structure for getting things done and how relationships developed. They one always very different
The local regional investment authorities can help. They want to attract outside companies and are more than willing to give insights no matter how big you one as a company.
I am going to put a little different spin on the entire thread.
A distributor is not much more than a financial intermediary. That is, he pays you an time (60 days per their contract) and they assume the risk of dealing with the reseller channel.
For the resellers, they usually "sell" the notion of not carrying any inventory. "Order by 3 and you will have your item by 10AM the next day." They also offer very stringent credit terms for the reseller.
They may also offer you a variety of marketing vehicles to communicate with their resellers.
Primarily, they are a bank.
There are two kinds of resellers. Those who help you make a market and those who only serve your market. You need to understand the difference between those two roles.
As for your particular situation, I would continue with the online ordering mode and skip the channels altogether. Take that margin that you would give to the channel and use those bucks for marketing. We can't buy something that we know nothing about.
Stop keeping your product a secret.