If you want to distribute your product via an intermediary, rather than selling to customers directly, there are several options to choose from.
You can choose to use an agent, a distributor or an export management company, and all three carry obvious advantages. They will take many of the more time-consuming aspects of overseas trade out of your hands, provide a local point of contact for your customers, and can draw on first-hand knowledge of your target market.
On the other hand, an intermediary will usually demand a commission, a salary or a share of the profits made your product. They may also wish to take control of marketing your product in their local market, so you could lose control of your brand image. And, if they don’t fully understand your product, they could end up mis-selling to your clients, and damaging your company’s reputation in the process.
Below we have outlined the most common types of intermediary for overseas trade, and listed the benefits and disadvantages of each one – so you can make an informed decision about which is best for you.
Using a commission agent. This involves finding a buyer working on behalf of a foreign firm. A commission agent can be a private company, a government agency, or a purchasing mission.
Using an export management company. An export management company (or EMC) is specifically set up to sell producers’ goods overseas, and they typically work on either a commission or a salary basis.
Some EMCs will provide instant funding by buying your goods off you and then selling them on themselves, or providing export finance – however, only the bigger firms can usually afford to do this.
Using a sales agent. In this case, you will hire the agent yourself and they will work for you; hence they’re trying to secure the highest possible price for your product, rather than the lowest one.
Using a distributor. A distributor will typically buy your product from you and sell it on to their clients, using their local knowledge to handle the sales process.
How to choose the right intermediary
It’s crucial that you find the right intermediary for your job. Whether you’re hiring an agent, distributor or EMC, you need to make sure they know the local market, will maintain your reputation, and can get a good price for your product.
Initially, you can test out their market knowledge by asking them some questions about local business conditions; maybe ask them who your competitors will be, and whether the market has potential for growth. You’ll soon find out if they know their stuff or not.
It’s also crucial that you find out whether the intermediary has the resources to service your product effectively. Do some research on the company; find out how many staff they have at their disposal, and whether their staff can offer English language, technical and after-sales skills. Find out whether they possess full trading rights for your target market, and, if possible, get some details on their financial background.
You can also ask the intermediary how they plan to sell your product, and how they’ve promoted similar products in the past. If possible, take a look at their existing customers – if they’re selling to firms with bad reputations, you may want to steer clear of them.
Don’t forget to take a good look at how they promote themselves – if they can’t sell their own product, there’s a good chance they won’t be able to sell yours. Examine their website, they marketing literature, their business cards and the way they structure their correspondence with you. If they look sloppy or unprofessional, don’t use them.
Never be afraid to ask questions – before you make your final selection decision, you need to have all the facts and figures at your disposal, and it’s unlikely that an intermediary will be offended if a potential client asks about their business.