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Essential · 4 AI perspectives
Sales channel in Germany
Question
We have a company in Poland with 14 employees that makes custom solid-wood furniture. Annual revenue is about 1.1 million euros, and a third of it comes from exports, mostly through a single distributor in Germany that accounts for about 60% of that export. We are considering opening our own sales channel in Germany: a web shop, delivery and assembly with our own team, and a German legal entity. The investment is about 80,000 euros, which is almost all of our free capital, and the bank could approve another 60,000 against a guarantee on the company's assets. The distributor may see this as competition. Our gross margin is about 35% on sales through the distributor and about 50% on our own direct sales. We have a contract with them that renews every year, and right now we have two key craftsmen on whom half of our production depends. Should we go ahead now, postpone for a year, or choose another route (for example, another distributor or an online marketplace), and under what conditions?
Start of the report
The recommended option is to postpone the full direct German expansion and instead test a lower-risk route, such as an online marketplace or an alternative distributor. The single most decisive reason is that committing the €80,000 free capital-and potentially borrowing €60,000 against assets-risks current stability for a maximum gross-profit improvement of only €33,000 on the existing distributor volume, before any new local operating costs are paid. This conclusion changes if a low-cost market test proves that the direct channel can rapidly exceed the break-even replacement threshold (V* = 77,000 / 0.50 = 154,000 euros in direct sales) required to recover the gross profit currently provided by the distributor.