US distributor or direct: the channel choice most NZ companies get wrong

What each channel gives and takes

A US distributor or channel partner gives you speed. They already have the retail relationships, the buyers, the shelf space, or the installed base. For a NZ company with no US presence, that access is real and hard to build alone.

The cost is margin, control, and the customer relationship. Distributors take 20% to 40% or more. They own the end customer, so you don't see who buys, why they churn, or what they'd pay. And they are hard to remove: a distribution agreement can tie up your US rights for years, and if the partner underperforms you often can't go direct without a legal fight.

Selling direct gives you margin, control, and customer data. It costs you time and money to build, because you are creating US demand generation, sales, and fulfilment from zero. Direct is slower and more expensive up front, and it compounds, because everything you learn stays yours.

The margin math

Run the actual numbers before you decide, not the instinct.

Through a distributor at 30% margin to them, you keep 70% of a wholesale price that is already below retail. Direct, you keep the full retail margin but you pay US CAC to earn each customer. The question is whether your direct CAC, at realistic US costs, is lower than the margin you give away to the distributor. For high-consideration or high-value products it often is. For low-price, high-volume products where reaching customers one by one is expensive, the distributor's margin can be worth it.

There is no universal answer. There is a calculation, and most NZ founders make the channel choice before they run it.

The working capital trap

Big US retail looks like the prize and can be the risk that sinks you. Anihana got an inbound call from Target in 2021 and grew to 4,000+ US stores with 384% revenue growth by 2025. That is a genuine success. It also carried a working capital risk most NZ founders never model: large US retailers order in volume, pay on 60 to 90 day terms, and expect you to fund the inventory to fill their shelves in the meantime. You can win the account and still run out of cash funding it. Growth through big retail is a financing problem as much as a sales problem, and it needs to be planned before the first purchase order, not discovered after.

How to choose

1. Calculate your real direct CAC at US cost levels. Not your NZ CAC.

2. Compare it to the distributor margin you would give up. That comparison is the decision, per segment.

3. Model the cash. If the channel involves large orders on long payment terms, model the working capital you need to fund growth before you commit.

4. Protect your exit. If you go with a partner, negotiate performance minimums and termination rights so a weak partner can't lock you out of your own market.

Should a New Zealand company use a US distributor or sell direct?

It depends on the margin math. Compare your real US direct customer acquisition cost against the margin a distributor would take. Distributors give speed and access; direct gives margin, control, and customer data.

What is the risk of using a US distributor?

You give up 20% to 40%+ margin, lose the direct customer relationship and data, and can be locked into a multi-year agreement that is hard to exit if the partner underperforms.

Why is big US retail a working capital risk?

Large retailers order in volume and pay on 60 to 90 day terms while expecting you to fund the inventory. You can win the account and still run out of cash financing the growth.