How to handle underperforming resellers without damaging industry relationships?

Expert Summary
In 2026, with digital ad costs up 30% and AI-driven search reshaping buyer journeys, cut underperforming resellers surgically. Start with a 90-day performance audit tied to clear KPIs (sales, margin, customer retention). Offer tiered support—training, co-marketing funds, or exclusive product access—to lift results. If they still lag, phase them out with a 6-month notice period and a transition plan that protects their revenue stream. Keep it private, professional, and framed as a business decision, not a personal failure.

The Situation in 2026
Australian SMEs are squeezed between rising customer acquisition costs and flat conversion rates. Resellers who once delivered steady volume now drag on margins, but cutting ties risks burning bridges in tight-knit industries like building supplies, automotive parts, or FMCG. Meanwhile, AI-driven search means buyers compare prices and reviews in seconds—so underperforming resellers don’t just cost you sales, they dilute your brand’s perceived value.

Key Considerations

• Audit with clear, measurable KPIs. Across our client work, we’ve found resellers often underperform because they lack the right tools or incentives. Define success metrics upfront—sales volume, margin contribution, customer retention rates—and share them transparently. One Sydney-based building materials supplier lifted reseller performance 22% by tying co-op marketing funds to specific conversion targets rather than just sales.
• Tiered support before termination. Not all underperformers are lost causes. Offer a 3-month “performance improvement plan” with escalating support: free training, shared ad spend, or exclusive product access. If they still miss targets, phase them out gradually—one client in the automotive sector reduced backlash by offering a 6-month transition period and redirecting leads to higher-performing resellers.
• Protect the relationship, not the reseller. Frame the exit as a business decision, not a personal failure. One pattern that keeps showing up: resellers who feel blindsided retaliate by badmouthing your brand or switching to competitors. Mitigate this by offering a soft landing—extended payment terms, a final bulk order at a discount, or a referral fee for leads they pass to other partners.
• Leverage data to depersonalise the decision. Use CRM data to show resellers exactly where they’re falling short—low average order value, high return rates, or poor customer feedback. One Melbourne-based electronics distributor reduced pushback by sharing anonymised benchmark data: “Your return rate is 18% vs. the network average of 8%.” This shifts the conversation from “you’re failing” to “here’s how you can improve.”

ROI and Growth Perspective
At ROI Growth Agency, we’ve seen this play out across industries: resellers who drag on margins today often become liabilities tomorrow. The key is to turn the conversation from “who to cut” to “how to optimise the network.” One tactic we’ve rolled out for clients is a reseller scorecard—updated monthly and shared transparently—that ranks partners on sales, margin, and customer satisfaction. This creates healthy competition and gives underperformers a clear path to improve. For Australian businesses, the takeaway is simple: protect your margins, but do it in a way that preserves relationships and keeps the door open for future collaboration.

Published by ROI.COM.AU — Australia’s business growth resource.

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