E1 | Service delivery model

Is export just a matter of shipping goods to a foreign country in exchange for money? If things were that easy, everyone would do it.

Commissioning your own sales representative to find individuals and firms in the destination country? For now, that’s not an option. It’s a better idea to have somebody else selling on your behalf “while you sleep”, isn’t it?

Please pay attention now, because there are various solutions to this. Two of the more common are the ’employment’ of commission (aka sales, aka trade) agents or distributors. But what are the differences between agents and distributors?

Essentially, two of the main differences are “product ownership” and the related liabilities as well as the way of “reward/compensation”. Another difference is market intelligence.

An agent/agency is the “man-in the middle” (m/f) and does never own the product. The sales are from your (customers’) company to the local client(s) and hence you supply and invoice directly to the buying party. Your agent usually get’s paid an agency fee, often a percentage of the turnover made for the respective country or sales area. An agent represents your company and products to clients and prospects and will inform you about market conditions and requirements, your competition, new opportunities, etc. Names and details will be shared with you.

A local distributor does own the goods after delivery and payment have taken place. They usually do not receive a commission but add a profit margin before selling the product to the end users. A distributor often keeps local stock, spare parts and offers maintenance and other related services. They even may sell competitors products too, which may be an advantage but sometimes not acceptable at all. A distributor may share market information with you but often limited and not disclosing more than the minimal required. All depends on your relationship of course.

While there is no right or wrong choice here (it depends on your industry and what choices you make for growth strategy), do take these differences between agents and distributors into consideration when plotting your next steps.