The fifth in a series on appointing and managing distribution partners, written from the brand side of the table.
Two markets. The same decision in both: stop selling through importers and run the brand through a local entity.
One of them collapsed. Two and a half years after launch the brand was handed back to head office. The other started from an inherited loss so large that leadership had already decided to drop the brand — and three years later it was a profitable business that justifi ed a second, deliberate local launch.
The difference was not luck, and it was not market size. It was what got checked before the decision.
1. The failure began with a signal that looked real
The brand was priced above mass market, so it was never going to be a volume play in that market. Then a well-known performer from our home market mentioned the brand during a stop on tour there. Sales started climbing, quickly.
We read that as the market opening. Organic demand was rising, we already had a local entity, so the conclusion seemed obvious: launch the brand properly, now.
Here is the problem with that reasoning. A sales increase can be a trend — the market structurally opening — or a spike — one exposure event working its way through. Early on the two look identical. Both are a line going up. The only thing that separates them is persistence, and persistence takes time you have not spent yet.
Demand created by a celebrity mention is the textbook spike. Exposure creates awareness; awareness is not durable demand. Every investment we built on top of that curve — the launch, the team, the channel commitments — was built on a foundation that was already dissolving.
2. Knowing that your product sells is not knowing how a market works
The deeper failure was that we launched without a team, without a business structure, and without a strategy for that market.
That sounds like carelessness. It was not. It was a specific and very common error: we had been operating there cross-border, through importers, and we mistook the knowledge that gives you for market knowledge.
Cross-border tells you one thing — does the product sell. Running a market directly requires something else entirely: how the channels are structured, how consumers actually complete a purchase, what the trade practices are in offline retail, how to staff and run a local team. Those are different categories of knowledge, and the first does not accumulate into the second.
The question we never asked ourselves was the simplest one available: are we actually ready to launch this brand through this entity? We did not ask it, so we never discovered that the answer was no. Being unprepared is rarely laziness. It is usually not knowing which knowledge you are missing.
3. The channel that decides a market is not always the one you won in
The truth arrived when we launched offline.
That market was heavily offline-weighted — offline was where most of the revenue was completed. All of our early success had come from online, which was a small window onto a much larger room. Succeeding completely in online still left us needing to build a business in a channel with entirely different economics: shelf space, fixtures, display, trade practices, none of which transfer from an online operation and all of which cost time and money we had not planned for.
The trap was generalising from the channel we happened to win in to the market as a whole. An entry strategy should not start from does the product sell. It should start from where does revenue in this market actually get completed, and whether the success you are pointing at came from that channel.
4. Recovering an entry means repositioning, not forcing
After the brand came back to head office, the second attempt changed the channel structure instead of trying harder in the same one. We moved to online-led, and we decided not to plan an offline expansion in that market at all.
That is not a retreat, and the distinction matters. There are two ways to recover a failed entry: fight the market structure with more capital, or accept the structure as a given and find a defensible position inside it. We took the second. The brand was redefined as an online premium brand in that market rather than an omnichannel one.
Positioning starts from what the market structure permits, not from what you would like to be. Giving up the ambition to win every channel in order to win one is a discipline, not a concession.
5. The recovery started with a diagnosis, not a plan
The second market began worse. Two brands, one premium colour cosmetics with more than five years of local history, one dermatological skincare brand with none. The colour brand had accumulated losses on a scale that had already led leadership to decide to drop it. We took on the brand and the remaining inventory and started from there.
The first thing we did was not to build a plan. It was to work out why the losses had continued for five years.
The answer was structural, and it had two parts. Investment had concentrated in premium department stores, where shelf space, fixtures, permanent staff and a recurring event calendar are all fixed cost — and the revenue was never going to carry it. And promotional discounting had settled at around half of retail, which produces revenue without producing margin.
Both of those are fixable. That mattered more than the size of the loss. When you inherit a losing business, the question is not how bad it is. It is whether "why has this kept losing money" has a structural answer that can be corrected, or whether the answer is that the market is wrong for you. The first case is a rebuild. The second is a wind-down. Confusing them is how brands spend years on either the wrong exit or the wrong rescue.
So we closed the department store channel, handing the contracts the previous team had signed back to head office. We moved to online. And we cut promotional depth roughly in half, to the 25–30% band, to restore margin.
Walking away from that channel was the hardest part, and the reason is worth naming: money spent on shelf space and fixtures cannot be recovered or moved. That is exactly what makes it hard to abandon — the sunk cost argues for staying. Breaking that loop requires putting down the channel you cannot afford and restarting in one that fits your cost structure.
6. Build the margin first, then put revenue on top of it
The sequencing in the rebuild was deliberate. Before starting any live commerce or influencer work, we designed the price and margin structure — does this brand, at this price, through this channel, actually leave a profit.
Where the answer was no, we did not do the deal. If an influencer could not commit to volume that made the economics work, we did not sign. That is a lonely principle, because it means declining opportunities that would have raised revenue quickly. We never grew fast. We grew one step at a time: make a profit, invest that profit, sell, make a profit again.
The alternative — invest heavily up front and recover later — grows revenue faster and is exactly the model that had produced the five-year loss we inherited. Organisations reach for it because current revenue feels heavier than future margin. An influencer deal looks like growth. Sometimes it is margin erosion wearing the costume of growth.
7. Two brands, one principle, two timelines
The two brands needed the same discipline and different speeds, and the variable was existing brand asset.
The colour brand had five years of local awareness. Influencers would work with it. Our job was to monetise an asset that already existed — fix the pricing, reset the channels.
The skincare brand had never been managed locally, so it had no awareness and no reason for an influencer to partner with it. We had to build the asset ourselves through content — visuals, video, things people would actually watch. Higher upfront investment, same rule: never at the cost of margin.
Three years later both were producing meaningful revenue, and more importantly the business had gone from a large inherited loss to a profitable structure. The skincare results were strong enough that we went back to the brand team and argued for a proper local launch — this time as a conclusion, not an assumption.
8. What actually separated the two
Put side by side, the two launches differed on one thing: whether the readiness conditions were verified before the expansion decision, or assumed.
There is no easy moment to launch a local operation. That is why it has to be a composite judgement across several conditions — the brand's own condition, the local customer and market structure, and the capability and category experience of whoever will distribute. These variables move independently, and you are choosing a direction and a timing inside that mess.
And there is one more variable that does not appear on any checklist: who is pushing. In the failed launch, the brand team's ambition ran ahead of the local operation's readiness. They did not understand that market well, and they pushed hard for a fast launch. The party that wanted it decided the timing, rather than the party that knew the market.
That is the failure mode to watch for inside your own company, because it is invisible from the outside and obvious in hindsight. A healthy launch decision answers what is ready, not who wants it.
The five-line version
Your turn
- The signal that made you conclude the market is opening: over the last several months, is it a sustained trend or the tail of a single event?
- Is your knowledge of that market at the level of "the product sells" or "here is how this market works"? Which specific things would you not be able to answer?
- Where does revenue actually get completed in that market — and did your evidence come from that channel or from a smaller one?
- In a business you are carrying at a loss: does "why has this kept losing money" have a structural answer you can correct? If not, what are you waiting for?
- The push to launch or expand right now — is it coming from a diagnosis that the market is ready, or from someone's ambition to be there?
Written from the brand side of this table — twenty-two years appointing and managing distribution partners across Asian markets, across categories and price tiers.
Previously in this series: How to Evaluate a Distributor Before You Sign · Exclusive or Not · When to Stop Selling Cross-Border and Set Up Locally · What to Do When Your Distributor Asks for a Lower Price.
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