Customer Concentration

April 17, 2019
by a searcher from The University of Texas at Austin - Red McCombs School of Business in Austin, TX, USA
Looking at a paper product manufacturer where the primary customers are distributors and the top 3 represent ~50% of sales. Do the traditional thresholds for customer concentration still hold for distributors, or is this typical for the industry?
from University of Pennsylvania in Miami, FL, USA
1) what is the dynamic between the distributor and your company - are you selling to distributor or end customer? can distributor drop you easily? do they have any reason to.? can you replace them easily? why do they want to stick with you?
2) Dynamic between distributor and end client - who has the leverage? who is making the buy decisions?
3) Industry dynamic - do other similar products face the same challenges and there is no way to diversify away from these 3. are there lots of competitors that could easily replace you in the line-up.
This is not a deal killer and may be an opportunity to get a lower price and to grow the business in other directions.
Jason
from Stanford University in Honolulu, HI, USA