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Doug Nebeker ("Doug")
Things have been ticking along OK since I last posted about my first sale, slowly but surely my product seems to be getting a bit of traction, although sales are still low in absolute terms, enquiries and downloads are rising (along with support requests :) ).
Today I got an email from a large seller of marine electronics in Japan. They used to re-sell my direct competitor, but there has been an interesting development there so let me digress a little. My competitor is also a one-man-band, that has been around for some 10 years with a very loyal user base. In the last 2 weeks, his website has been suspended after he announced that his product has been bought out - and will apparently be back soon. In the mean-time, his product cannot be purchased, and the abrupt manner of this suspension might have rankled with a few of his distributors/affiliate sellers - although that is conjecture on my part. What is certainly true is that this seems like it could be a good moment for me to capitalise on, and also some of the personal-level loyalty that people showed this product and its creator might diminish.
Anyway - to the point of my post. This large electronics distributor in Japan has emailed - they seem entirely legit, the website is genuine (I had found this some time ago when researching the competition). They want to re-sell my premium-priced product as their preferred solution, and quoted 50-100 units a month. They want my Ts&Cs.
OK - so I'm slightly panicked by this as I am still in getting-off-the-ground mode and even the lower end of the estimate is still more - per month - than my total sales so far. Of course I want to come across professionally in this encounter, and I think the idea of this kind of reseller is a massive value add for me - its a market I would find very hard to penetrate on my own, and the capability of a hardware vendor to offer my product as an extra at the point of sale is going to generate sales which I almost certainly wouldn't achieve myself.
So - what do I tell them? I have read, on here and elsewhere, about average % etc., and this is what I am thinking:
1. "affiliate" program, where I offer 30%. This would required customers to download and purchase the app via my existing merchant (Fastspring) with a tag on the link. The reseller wouldn't get to set the price. It would be easy for me to implement and administer.
2. They buy bulk keys from me, and direct the users to download the software. I would offer a bigger discount - perhaps on a sliding scale from something like 30-50% depending on how many they bought.
I am considering offering them both of these options.
I am not set up for offering terms of payment etc. How should I negotiate option 2? I am thinking they would have to pay for the keys up front - say 20-50-100 at a time if they really think they can do that volume. They could then charge whatever they like for the product - I wouldn't care. Is it reasonable to ask for the money up front? I don't have a merchant account - it would have to be direct wired.
What if they want boxed copies? Not something I've thought about!
I know these are probably basic business questions, but I would really appreciate some advice here - I have not answered the mail yet - don't want to leave them hanging and give the impression of poor service, but also want to make sure I say the right things.
I have removed the link to my site for this post - sorry.
Don't panic! No one is born knowing this stuff. We all have to do it for the first time at some point. Just don't tell them it is your first time, if you can possibly avoid it!
I would suggest just sending back a friendly email saying that you would be delighted to work with them and asking them whether they wanted to to purchase licences or do an affiliate deal, whether they want CDs etc. Don't talk about numbers yet.
There is bound to be some negotiation. That's business.
Try to get money up front if you can. But, if they are a reputable company, I would also consider payment in arrears. But make it clear you can do a better discount if they pay up front. Also only give them a limited number of licences if they are paying in arrears.
30-50% reseller discount sounds reasonable in the circumstances.
BTW Japanese companies might do business rather differently to Western ones. Might be worth trying to find out about cultural differences.
Yep - already been Googling around on Japanese etiquette - now I need to try and work out which is the first and family name of the contact - can't get that wrong apparently! Do you think using formal Japanese greetings and sign off is going a bit far?
Also - good idea about not doing the numbers things straight up. I'll let them know we are keen and have some options. It's most of a business day since the mail, and they won't get a reply til Monday now - I hope that's too much of a no-no.
Also one more question - the title of the email I received was "Japan's Dealer". No mention of exclusivity, other than that slight allusion in the.
Should I make it very clear that I do not grant any exclusivity to dealers/resellers? I don't want to grant exclusivity for all the reasons that have been much discussed on this forum or elsewhere, but maybe if they don't ask for it explicitly, I should refrain from mentioning it? I don't want to sound too aggressive.
Based on our experience, you may have hard time selling to Japanese customers without a local reseller or distributor. You can search for my past posts on this topic here on BoS.
To cut the long story short, exclusivity is not a problem as long as the territory is limited to Japan, and the reseller agreement permits you to terminate it for convenience at any time without penalties.
As far as pricing goes, you seem to be on the right track. One common practice is to offer some discount tiers on the initial bulk purchase and then apply the discount from the selected tier to all sales occurring over the next 6-12 months. This serves as an incentive for the reseller to buy more up front.
Friday, April 19, 2013
>Do you think using formal Japanese greetings and sign off is going a bit far?
Probably. You don't want to seem to keen IMHO.
I wouldn't mention exclusivity unless they bring it up first.
Be very careful about exclusivity. I once had a company who wanted an exclusive deal. They ended selling a grand total of 7 licences.
You could negotiate exclusivity in a particular market (e.g. Japan). But:
-get a sizeable up front payment that you keep, even if they never sell a licence
-make their exclusivity lapse after a period if they don't sell enough licences
You can probably find boilerplate reseller agreements online.
Might be worth approaching Patrick McKenzie at http://www.kalzumeus.com/ for questions about Japanese business etiquette. But I wouldn't lose too much sleep over it - they will hopefully make certain allowances for barbarian westerners. ;0)
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