This question comes up in almost every Mexico market-entry conversation, and most companies default to “distributor” without actually testing whether it’s the right fit. Here’s how to think about it properly.
What a Distributor Actually Does
A distributor buys your product outright, holds inventory, and resells it — usually within a defined territory and often with some form of exclusivity. They take on the financial risk of unsold stock, which means they’ll typically want meaningful margin and some control over pricing and positioning in return.
This model makes sense when your product needs local warehousing, when order sizes are large enough to justify a distributor’s investment, or when you’re entering a channel — like traditional trade — that a distributor already has deep, established reach into.
What a Sales Representative Actually Does
A sales representative sells on your behalf without taking ownership of inventory. You ship directly (or via a third-party logistics partner), and the representative is compensated on commission for what they sell. You keep more control over pricing and customer relationships, but you also carry more of the operational load — invoicing, fulfillment, and the working capital tied up in inventory.
This model tends to fit better for higher-value, lower-volume products, for B2B and industrial sales where relationships matter more than shelf placement, or for companies not yet ready to commit to the volume a distributor would expect.
The Question That Actually Decides It
Not “which is standard for my industry” — but “who needs to hold the inventory risk, and who is actually positioned to reach my buyer.” If your buyer is a large retail chain with centralized purchasing, a distributor with existing relationships there is usually worth the margin you give up. If your buyer is a specific set of accounts you can identify and approach directly, a representative model may get you there faster and cheaper.
A Middle Path Exists
Some companies start with a representation or commercial-development arrangement to build the first real customer relationships and prove demand, then transition to a distributor once volume justifies it — negotiating from a position of demonstrated traction rather than a cold pitch. This sequencing is worth considering before defaulting to whichever model your industry “usually” uses.
Get the Terms Right, Whichever You Choose
Exclusivity, minimum performance commitments, territory definitions, and termination terms matter more than the headline commission or margin number. A distributor or representative agreement that looks generous on price but locks you into an underperforming partner with broad exclusivity is a worse outcome than a tighter deal with a partner who actually delivers.