Routes to market:Using an agent or distributor when exporting
View transcript for Episode 18 - Using an agent or distributor recording
Agents
Agents are individuals or organisations that will sell your product on your behalf. They offer a simple, low-cost introduction to a market.
You'll be able to retain control over pricing and marketing. They don’t hold stock, but instead simply set up the sale, making commission as they go.
You will not necessarily have control over how they sell your product and they may have demands on their time from other suppliers. But an agent will have great local knowledge and the ability to identify new in-market opportunities.
Distributors
Distributors buy your products from you and sell them on. They usually buy in bulk, hold the stock and take care of all logistics. But they may expect big discounts for doing this, and you may lose some control over pricing and marketing.
What you’ll learn
- the difference between an agent and distributor
- the pros and cons for agents, distributors and fulfilment houses
- which option is the best for your business
How agents or distributors can help you
Using an agent or distributor is a relatively low-risk and cost-effective way of entering a new market. Experienced agents and distributors should have a wealth of local market knowledge and know the best way to get the maximum sales in the shortest possible time.
There are advantages and disadvantages with both, and the direction you take will depend on the market, your product and your overall objectives.
However, the foundation of success for either is a solid relationship between you and your chosen partner and a good quality agent or distributor agreement – where all parties are very clear on targets and business goals.
When to use an agent
Agents are individuals or organisations that sell your product on your behalf. They don’t hold any of your stock and transactions are made between your business and the end user.
With an agent relationship all promotions, after-sales service and fulfilment is usually handled by your business. Their main role is to generate sales, earning a commission as they do.
Pros
- Great local knowledge and good contacts
- Ability to identify and exploit new in-market opportunities
- Your business retains control over pricing and marketing
Cons
- Lack of control over how they sell your product
- They may have demands on their time and resource from other suppliers
- Potential loyalty issues
Choose to use an agent if you:
are looking for a simple, low-cost introduction to a market
Do not choose to use an agent if you:
want to share some of the risk of market entry
When to use a distributor
Distributors buy your products from you, usually in bulk and at a discounted price, and sell them on in the marketplace. They typically operate at a regional or national level and will hold stock locally, taking care of all logistics.
Pros
- Buys in bulk and reduces the number of transactions you have to make
- Provides after-sales service and in-market promotion
- Takes on many of the associated risks within the market
Cons
- May expect big discounts and credit terms
- You lose direct contact with your end customers in that market
- You may lose some control of pricing and marketing
Choose to use a distributor when you:
are looking to reduce the risks of entering a new market
Do not choose to use a distributor if you:
wish to retain maximum control over how your products are sold
When to use a fulfilment house
The role of a fulfilment house is simply to hold your stock and despatch orders to your customers. All sales, marketing and after-sales care are still the responsibility of your business.
Fulfilment houses are particularly useful if you are selling overseas through your own website or through an online marketplace directly to the end customer.
Pros
- Quicker delivery times to overseas customers
- No need to invest in storage and distribution facilities
- Reduced shipping rates
Cons
- May not be able to handle customisation (for example, branded or specialist packaging materials)
- Lack of control over delivery
- May not be cost effective if volumes are low
Choose to use a fulfilment house if you:
are selling directly to overseas customers through your own channels
Do not choose to use a fulfilment house if you:
are selling to wholesalers or retailers
Where to find agents or distributors
There is a huge amount of information available on agents, distributors and fulfilment houses on the internet. Dedicated sites will list agents and distributors by sector and country, or go directly to the trade association site in your market, where you should find lots of helpful information for exporters.
When you’re looking for potential agents or distributors online, don’t forget to search in the local language as well as English – or you may find you miss some good opportunities. Once you’ve found the companies you’re interested in, use LinkedIn to get in touch with the appropriate contacts directly. And remember, always document your arrangements with an agent or distributor properly, to avoid legal issues later in the relationship.
International trade adviser
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