You can start a dealership business in Bangladesh by fulfilling some terms and conditions of a company, which provides dealership facility. Dealership business is profitable business if you can select a well-known branded company. But this business needs a mentionable capital. In this article, you are going to learn a complete guideline about dealership business in Bangladesh.
What is dealership business?
Dealership business is a contract between a dealer and a reputed company, by this contract, dealer will get products from this company at dealer price. Generally, companies collect dealers to distribute goods in all areas. Without dealers’ help, a company faces difficulty to distribute products across the country.
Dealers also get products at discounted price. A dealer may get commission from the company or he may directly sell products of the company to retailers for his targeted profit margin.
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What are the requirements of dealership business in Bangladesh?
Dealership business requirements may vary from company to company. You should contact with your targeted company to know the requirements, terms and conditions of being a dealer. For example, if you want to get PRAN Foods dealership, you will need to fulfill the following criteria:
Trade license, TIN, Warehouse and Shop, Pickup Van, 5 to 6 lakh investment (Information Source- PRAN Foods Website). On the contrary, to get the dealership from BSRM, you need to fill-up a dealership form (Information Source- BSRM Website).
How much capital do you need for dealership business?
Capital amount is not fixed in dealership business. For example, in order to get dealership from PRAN-RFL group, you have to invest at least 6 to 7 lakh. But for many companies, minimum capital may vary from 10 lakh to 1 crore. So, it is your responsibility to talk with your targeted company so that you can know the minimum capital.
Type of dealership Business
You will get at least two types of dealership: Commission taking dealership and profit taking dealership business. In Bangladesh, Commission taking dealership and Profit taking dealership are the two well-known dealership business.
Commission taking dealership business
In commission taking dealership, company may give you products to display in your shop. You mayn’t pay whole amounts of products price. In order to get products in your shop, you must pay a minimum advance money that is assigned by the company. This advance amount may 10 lakh to crores. When you sell products, you will get a certain commission on MRP. This commission may vary from 5% to 15% or more.
Profit taking dealership business
In profit taking dealership, you will buy products from the company after paying minimum advance and sell them to retail shops by adding your targeted profit margin. This dealership is more profitable than commission taking dealership.
As you can determine sale price, you can add a standard profit margin. Profit taking dealership needs relatively more capital than commission taking dealership. Moreover, in profit taking dealership, dealer can give advance money in off season or when the company badly needs money in order to get discounted price.
In a word, profit taking dealers can seek any chance to get products at cheap rate and can determine a sale price which will bring them a good profit margin.
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Profit from dealership business in Bangladesh
In dealership business, you can get commission or your targeted profit margin. Let’s share an illustration for your easy understanding.
Suppose, ABC company has 100 dealers. When ABC company prepares products price list, it includes two prices in the list: Dealer Price (DP), Maximum Retailer Price (MRP). MRP may 30% greater than DP. That means, when a dealer buys products at DP, he can add profit margin to sell these products to small retailers or he can sell at 30% margin to final users.
If the dealer has retail shop, he can sell products to final consumers. Otherwise, he can sell to retail shops at minimum margin. Moreover, ABC company can give you MRP if you sell products at your shop. Later, you will get a commission on MRP price.
Most profitable dealership business in Bangladesh
1. Steel and Rod dealership business 2. Cement 3. Electronics products 4. Engineering products 5. Healthcare and beauty products 6. Jewelry 7. Furniture 8. Food products 9. Automobile
How start dealership business
1. Search products
First step is search well-known products. You may survey to find out high consumers demand products.
2. Select company
Then find out the company who have created brand value. As you have selected products in the first step, now you need to find out the company, which offers these products.
3. Learn about terms and conditions
In this step, learn about terms and conditions of dealership from the company. You can contact with the company to know the requirements of dealership business.
4. Make an agreement
After knowing the terms and conditions of dealership business, you should analysis whether you agree with their policies. If you agree with company’s terms and conditions, you should make a written agreement with the company.
5. Make advance payment
If the company demands advance payment, you should pay the advance amount. Otherwise, you can pay advance when company wants.
6. Open a shop or collect retailers
Now time to open a shop if you want to open a commission taking dealership business. Otherwise, you can open an office if you start a profit taking dealership business.
7. Collect products
Now time to collect products from the company. If you have a shop, you can display products in your shop. For profit taking dealership, you should collect retailers’ requirements. Then put order to the company accordingly.
8. Determine profit
Finally, calculate your profit amount. For commission taking dealership, you can get a flat rate commission on MRP price. For profit taking dealership, you can add profit margin before selling to retailers. Now your turn to calculate profit by deducting total expenses.
Why should you start dealership business?
In dealership business, you don’t need to make any product. Moreover, you don’t need to invest nothing on products’ promotion. You can start a dealership business with a well-known brand. Company spends much to create a brand. You can easily make sell a reputed brand.
1. Don’t need to create products.
2. Don’t need to develop infrastructure.
3. No headache for products promotion.
4. High chance to succeed.
5. Start business with well-known company’s products.
6. Relatively low risk in dealership business unless any casualty occurs.
7. Unlimited selling opportunity
Disadvantages of dealership business
You don’t own your products rather you have to sell others’ products. In manufacturing business, you have your own products. Although manufacturing products are difficult process, you can create your own brand.
1. Don’t belong to any product.
2. You don’t have no brand for yourself
3. You just work as a middle man
4. Company can cancel dealership without any reason.
5. You have to sell products for single brand in single shop in case you are a commission taking dealer.
6. Company may increase price any time without your consent.
How to get branded company for dealership business in Bangladesh?
For selecting branded company, you should visit final customers to get well-known branded company. If all the Bangladeshi knows a company’s products and you take dealership of this company, you may get less commission or profit but you have nearly no risk to fail in business.
So, select a reputed company. Then communicate with this company to know everything about dealership. Later, you start the business if you satisfy the terms and conditions of the company.
Why do retailers buy products from dealers?
Retailers have less capital to buy products directly from manufacturers. A dealer takes dealership for a specific area. Company doesn’t directly sale products in this area. So, retailers have to buy products from dealers. Dealers pay company in advance to seek the best price. As retailers buy small quantity, they highly rely on dealers.
In Conclusion
Dealership business is highly profitable business with low risk. If you can select a brand carefully, you have high chance to grow your business. Although you don’t belong to a brand in dealership business, you can start your own business from dealership business profit.
Frequently Ask questions
1. Does dealership has high risk?
No. Dealership has relatively low risk if you can choose a branded company.
2. Does dealership make you rich?
Yes. As dealership needs a mentionable investment, you can earn handsome return from your investment amount.
3. Can I start dealership business with 1 lakh?
Yes. But many companies don’t give you a chance with 1 lakh. If you have face value and much investment in other sources, you may get a dealership with 1 lakh. Otherwise, you need 5 to 10 lakh tk for dealership business.
4. Which products are most profitable in dealership?
Luxury products such as automobile are most profitable dealership business.
5. Do all companies provide dealership opportunity?
No. Well-known large companies provide dealership opportunity. Small companies, in most cases, don’t provide dealership opportunity.
6. Why does dealership better than manufacturing?
Manufacturing business needs large capital for investment and have high risk to create a brand. But dealership uses well-known brand. So dealership is easy business than manufacturing business.
7. Can I create own brand by dealership business?
Yes. You can buy quality products as dealership agreement and use your own brand instead of supplier company’s brand.
8. How can I collect retailers for my dealership business?
Collecting retailers is herculean task in profit taking dealership business. You have to spend time and search for probable retailers. Then you offer them the best price to buy products from you.
9. Why do I pay advance for dealership business?
In order to get offer price, you should pay advance. Moreover, you should help the company when it need cash so that you can seek discounted price. Many dealers give loan to the company so that they get products at cheap rate.
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