Whether using commercial agents can help you develop your business often depends on the nature of your product or service and where you want to sell it. If you are producing an easily recognisable product or service for a local market then there may be little point in appointing an agent. In some cases, using an agent can be a cost effective way to test a new market.
Advantages of using commercial agents
The main benefits of using a commercial agents to sell your goods are:
- Lower overheads - you don't have to pay for the salary, the car or the office of sales agents.
- Easy to find - agents are easier to recruit than experienced sales executives with specialist knowledge.
- Cost - using a network of agents can be acost-effective way of reaching a wide variety of markets.
- Local experience - some markets, including overseas markets, are difficult to break into without existing contacts, local knowledge and experience.
Disadvantages of using commercial agents
Some of the downside of using commercial agents are:
- Control - it can be difficult to control the agent's activities and to make sure they continually work hard on your behalf.
- Sales methods - an agent might not sell your product or service in the way that you would like.
- Customers - they might sell to unsuitable customers who might undermine the integrity of your product.
- Understanding - an agent might not fully understand your product or service and you may be better off with hands-on control.
- Contract - they can be entitled to compensation on termination of the contract even if they breached the agreement.
Indirect exporting is the process of selling products to an intermediary, who will then sell your products directly to customers or importing wholesalers. When looking for an intermediary to help you with indirect exporting, the easiest way is to find one in your own country. Some of the advantages of selling your products to an intermediary are that you are normally not responsible for collecting payment from overseas customers, nor are you responsible for coordinating the shipping logistics.
Export Management
An example of an intermediary is an export management company (EMC). Good EMCs will function as an extension of your sales and service presence.
Most export management companies specialize in exporting a specific range of products to a defined customer base in a particular country or region. For example, an EMC might specialize in the exporting of office supplies to healthcare facilities in European countries.
EMCs will carry out every aspect of the exporting process:
- Identifying international markets for your product or service
- Locating overseas customers
- Arranging and maintaining relationships with agents and distributors
- Handling the preparation and negotiation of all logistics, from communication and documentation, to actual shipping
- Setting up proper distribution channels for your business
Freight forwarders might be able to provide you with a list of EMCs that use their service, which can help create stronger relationships throughout your supply chain.
Along with helping you find an EMC, a freight forwarding company can give you advice on export costs, route planning, contracting insurance, preparation and presentation of Trade Documents, and more.
Trading Companies
Export trading companies (ETC) are very similar to EMCs – the key difference being that ETCs are often very demand-driven, in that the market will compel them to buy specific commodities, which they then supply to long-standing customers.
For example, a customer might send a request to their ETC to find them a supplier of organic tomato sauce who can guarantee a supply of thirty containers per month for a specific period of time. From there, the export trading company will look for a reputable manufacturer that can handle the demand at a price that works for both the ETC and the customer. Once all of the numbers are in order, the ETC will arrange for the transport of the goods to the customer through an international shipping company.
Intermediaries
Selling to an intermediary in the country where your customers are is another option for indirect exporting. In this case, you won’t know who your end-customers are, and you will usually be responsible for collecting payment from the overseas customer and for coordinating the shipping and logistics.
In some cases, the intermediary may request that they be responsible for the shipping of goods from your country to theirs – in which case, you would simply need to have your shipment ready by a specific date.
Advantages of Indirect Exporting
- Low risk involved with getting started
- Export process is relatively hands-off
- Increased focus on domestic business while others take care of international markets
- Depending on which type of intermediary you go with, you may not have to concern yourself with shipment and other logistics
Disadvantages of Indirect Exporting
- Higher overhead costs, which means less profit for you
- You are not fully in control of your foreign sales
- Lack of direct contact with your customers overseas, which means you may have to do additional research on tailoring offerings to their market
- Intermediary could be selling a very similar product, which might include directly competitive products
Conclusion
Your decision to use an indirect exporting model will largely depend on your goals, resources, and the type of business and industry you are in.
By working with a trusted logistics company with knowledge of the ins and outs of indirect exporting, you can be sure that your interests are protected.