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Direct to Trade w/ distributor

Posted on January 31st, 2008 by Jake

Current laws allow wines to be shipped direct-to-trade IF a distributor is involved in the transaction. The distributor is responsible to pay the taxes, and…well, thats it. A virtual inventory portfolio is – all of the wines, that a distributor represents, in the direct-to-trade markets.

Supplier’s take their inventory, and place it in a fulfillment/distribution warehouse, where it is kept on consignment basis. (technically, this could be the distributor’s warehouse) The supplier is responsible for shipping it to the warehouse, and is responsible for all the costs of warehousing the wine. When a trade order is placed for the wine, it ships directly from this fullfillment center to the restaurant/specialty shop/retailer. Once the wine is delivered, the monies to cover the taxes are then transferred to you, the distributor, along with a ‘virtual portfolio handling fee of $3-$5 / case.

Now… $3-$5 / case may not compare to the $15-$20+ / case that you are currently receiving, however, you no longer have capital tied up in inventory, nor do you have these overhead expenses. Furthermore, your supplier isn’t being put out in the cold, and the brands are still generating some revenue. If the brand were to flop completely, it costs you nothing. If the brand suddenly takes off, you then add that brand or supplier to your traditional portfolio.

This model benefits both suppliers and distributors.

It makes it simple and easy for new/young/small suppliers to become affiliated with a distributor, and its almost guaranteed that if the brand is successful, it will be included in the distributor’s traditional portfolio.

As more distributors realize the potential of embracing direct sales, they will realize these virtual portfolios are a risk mitigating means of adding wines to their portfolio. Even to the point that a distributor can take on thousands of suppliers, and place them in the virtual portfolio, at no cost (beyond a clerk or accountant processing the tax payment, and the commission check), and monitor their performance, waiting to find that hidden gem. As distributors align themselves with companies that set-up and handle direct sales, they will find that not only can they add their own brands to their virtual portfolio, but they will also be able to add other brands in the direct sales channels to their portfolio. This is because all suppliers need a distributor to sell direct to trade in a particular state. So if you are a distributor representing 10 states, and you agree to utilize this virtual portfolio model, you just opened 10 states for direct to trade sales, and you can be getting a piece of every case sold direct-to-trade in those states.

We feel that those distributors who are the first to embrace these methods, will be the ones that are most successful in the future of this industry.

Tags: Direct Sales, fulfillment, Industry, logistics, trade, wholesale

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