one distributor per country or two: the arithmetic for a mid-sized European market

For a vendor entering a mid-sized European market such as Poland, one value-added distributor with conditional exclusivity is usually the better arithmetic. Two distributors split the same early revenue into two margins, and each half is too small to pay for the engineer, the lab and the partner training that make the product sell. Two becomes the right answer later, or from day one when the second distributor reaches a segment the first one cannot.

the channel is the route, so the choice is expensive

Cybersecurity is one of the most channel-dependent categories in IT. Canalys put the channel’s share of cybersecurity spending at 91.6% in Q4 2024, with 66.7% going through the two-tier model, vendor to distributor to reseller. Omdia forecasts 72.2% of all EMEA IT spending going through partners in 2026.

In Central and Eastern Europe the distributor is often more than logistics. It is the vendor’s local presence: price list in local currency, presales in the local language, partner recruitment, deal registration, public tenders. A vendor without a team in the country is choosing who will do most of its selling there.

So the real question is who will invest in building this market, and whether they get paid enough to keep doing it.

two different things a distributor sells you

It is tempting to evaluate distributors on reach: how many resellers, how many countries, how big the partner event is. That is the logistics layer. Billing, credit to resellers, stock of licences, ordering.

The other layer is demand. Presales engineers who can run a POC in Polish, a lab, partner training, local events, someone who reads tenders for a living. A new product with no brand in the country needs the second layer much more than the first.

The two layers have different economics. Logistics scales with volume and is cheap per deal. Demand is a fixed cost that has to be paid before the volume exists. One engineer, a lab environment and a partner enablement programme cost roughly the same whether the line sells a lot or a little.

This is where the number of distributors matters. A distributor funds the demand layer out of its margin on your line. Split the margin, and you split the budget for the demand layer.

the arithmetic, with numbers you replace

A hypothetical vendor, no specific company. Every input below is an assumption. Swap in your own.

• Expected revenue through the channel in the country, first 24 months: 1,000,000 EUR at list.
• Distributor margin on that revenue: 12% of what passes through it.
• Cost of one dedicated presales engineer for the line, fully loaded, over 24 months: 120,000 EUR.

With one distributor, its gross margin on the line over two years is 120,000 EUR. That pays for one engineer, roughly, and nothing else. Already tight, which is why vendors entering a new country often add a launch budget, NFR licences and co-funded localisation on top.

With two distributors splitting the same revenue evenly, each earns 60,000 EUR. Neither can fund an engineer for your line. Each will put your product next to twenty others and sell it when a partner asks for it. You now have two price lists in the market, two sets of partners quoting the same customers, and nobody running POCs.

The revenue figure in this example does not grow because you signed a second distributor. In a market where reseller bases overlap heavily, the second distributor mostly reaches the same partners through a different door.

The Global Technology Distribution Council makes the same point from the distributor side, as reported by Channel Insider: too many distributors on one line pushes down prices, margins and the investment each one is willing to make.

Margin and markup are two different numbers. A distributor buying at 65 and selling to a reseller at 80 earns a margin of 18.75% and a markup of 23.1%. Agree which one you are discussing before you argue about it.

what a distributor will ask for in return for exclusivity

If you give a distributor the country, it will spend real money before you see revenue. It will also have watched lines move between distributors after acquisitions, global distribution deals or poor results. So expect it to ask for protection. Conditional exclusivity is the usual answer, and it is a reasonable one.

A structure that works for both sides:

• Exclusivity tied to targets, with six to nine months of ramp-up before anything is measured.
• Year one measured on activity and pipeline: active partners, POCs run, certified engineers. Revenue targets from year two.
• A fallback to non-exclusive if targets are missed, instead of termination. You keep the investment in the market and gain the right to add a second distributor.
• Project protection: registered projects and renewals stay with the distributor for a defined period after the relationship ends.
• A change-of-control clause: what happens if you are acquired and the acquirer has its own distributor.
• A rule for marketplace purchases, so a customer buying through their cloud commitment does not erase the distributor’s deal.

This is the normal cost of asking someone to build your market with their own money.

the legal frame in the EU

The Vertical Block Exemption Regulation, 2022/720, sets the boundaries. In short, and this is not legal advice:

• The exemption covers agreements where the supplier’s and the buyer’s market shares each stay under 30%.
• You may appoint an exclusive distributor for a territory, and share that exclusivity among up to five distributors.
• You may restrict active selling into territories reserved for others. You may not restrict passive sales, meaning responses to customers who come to a distributor on their own. Country exclusivity does not let a distributor block a customer from buying abroad.
• You may recommend a resale price or set a maximum. Fixing a minimum resale price is a hardcore restriction.

Poland mirrors these rules in a 2023 regulation of the Council of Ministers. Any distribution agreement, exclusive or not, is a document for competition counsel in the relevant country.

when two distributors is the right answer

There are good reasons to appoint a second distributor in the same country:

• A segment the first one was never built for. A distributor strong with mid-size integrators may have no managed service provider programme, no monthly billing and no multi-tenant licensing. If MSPs matter for your product, a specialist can be worth a second contract.
• Partner bases that barely overlap. Check this with data. Ask both distributors for their active partner lists in your category and compare them. A small overlap means the second distributor brings reach, and the split-margin problem shrinks.
• The first distributor has hit a ceiling. After a couple of years, a distributor that built the market may lack the capacity to go further. Adding a second one at that point is a decision about growth, made with data on what the first one achieved.
• Global agreements. Large vendors sign regional or global deals with big distributors. A local specialist alongside a global one is common for vendors at that scale. For a vendor entering its first CEE country, it is usually premature.

Also note what a second distributor does to your partners. Channelnomics found that 25% of vendors and 16% of partners see the distributor as a source of channel conflict. Two distributors competing for the same resellers on your line will produce that conflict on day one.

When you get to candidates, the distributor shortlist scorecard lets you weigh up to three of them on the same criteria, with the questions to ask each one.

what to check before signing anyone

ITPro’s checklist for choosing a distributor is a decent starting point: fit between their model and your product, real market position, no competing product in the portfolio (or separate teams if there is one), financial strength if sales exceed plan, and an honest description of geographic reach. Each country is evaluated separately, even when the distributor covers ten.

Add three questions of your own. Who at the distributor will own your line, by name. How many engineers will be trained on it in the first six months. And how much of their own money they will spend before your first deal.

the verdict

In a mid-sized European market, start with one distributor, make exclusivity conditional on targets, and fund the first year together. Add a second when you can show, with the first distributor’s data, which segment or which partners it cannot reach.