How To Sell Through A Distributor

Transcription

1 OHIO EXPORT INTERNSHIP PROGRAM - REPRESENTATIVES OR DISTRIBUTORS April 17, 2015

2 IN MARKET REPRESENTATION Agent or Distributor? What is the market size? Why type of product are you selling into the market? How much control do you want over your product?

3 KEY DIFFERENCES Representative Distributor À A representative of the exporter À A customer of the exporter À Buys for own account, i.e. the distributor purchases the produce from you À Not financially involved in sale the representative does not purchase the and then on-sells to customers product from you. À Involved in facilitating import if required À Imports the product À The agent works for you and is paid by you in an agreed way normally sales commission. À Marks up supply price to cover additional in-market costs of ownership, distribution and invoicing/debt recovery À Customer ownership is technically yours, but many well-established representatives have their own customer base, and some wholesalers may only buy through a certain representative À The distributor has a strong relationship with customers in the retail/wholesale field. À Not normally responsible for after sales service À Responsible for after sales service and in some cases warranty and guarantee issues À Unlikely to be involved in funding promotional activity in the market. Representatives are actively involved in introducing new products to customers À Helps pay for and undertakes promotion and marketing of your product/service in the marketplace À Will not usually have name and contact on exporter s promotional material À Usually has name and contact details on exporter s promotional material À No control of resale price À Controls selling price À Does not accept credit risk for principal À Accepts credit risk of buyers

4 ADVANTAGES/DISADVANTAGES Of a representative Advantages of an representative Disadvantages of an representative À Representatives have an important role in some markets with wholesalers they are independent. À Representatives can be important for exports of large, one-off items, e.g. machinery. À Representatives can have very good market expertise, technical expertise and their own customer base. À An representative normally charges an agreed commission (around 7-15 percent, depending on the product and sector) on all sales - your selling costs are known in advance and can be built into your pricing. You normally pay an representative after the buyer has paid you. À Because you are responsible for all marketing and promotion you retain control over your branding. À The manufacturer bears the cost of all deliveries. À No stock is held in the market you may need to supply a range of clients, which can result in a relatively complex distribution process. À The representative does not take responsibility for after-hours client service À The representative is unlikely to be involved in funding promotional activity and does not usually undertake marketing or promotion of your product, though this does vary according to the market. À You carry the credit risk on all transactions, but because you normally pay the representative after you have been paid, there is an incentive for the representative to follow up payment on your behalf

5 ADVANTAGES/DISADVANTAGES Of a distributor Advantages of a distributor À You ve only got one customer (the distributor), who picks up the credit risk for all sales À The distributor holds your stock in-market À The distributor provides back-up service to clients À The distributor helps pay for and undertake marketing and promotion of your product in the market À The distributor develops a customer base for your product À A distributor handles more of the in-market work, saving you time and costs Disadvantages of a distributor À You have no control over the selling process À The costs of selling through a distributor can force the product out of market competition, e.g. a distributor may add up to 50 percent mark-up (or even more) to your product prior to it reaching the retailer À You may not know who your customers are À Because a distributor shares responsibility for marketing and promotion, you may not retain total control over the branding of your product À The distributor is a wholesaler (rather than a specialized master distributor) they may not sell effectively as other wholesalers À May not have the sales force for new product introductions in larger markets À Your distributor may represent multiple products, so their attention and time may well be divided

6 CHOOSING THE RIGHT PARTNER Selecting the right partner to be your representative in-market is vital to your export success. Inappropriate partners and distribution structures can be very difficult to change once you are in the market. The most crucial factor is that you and your representative must get on well. You need to be able to build a strong, positive relationship based on open two-way communication, a genuine liking for each other, and high levels of trust. To increase your chances of finding an appropriate representative for your company, use an organization that specializes in this service. i.e. USCS or DSA At least five or six candidates should be interviewed and assessed before an appointment is made. Personal rapport is vital and is by far the most important factor when determining which representative to appoint. If there is no rapport between you, the relationship will not work, no matter how good the fit between their company and your product, and it would be foolhardy to proceed.

7 CHOOSING THE RIGHT PARTNER Items to Consider: Are they financially sound? How many employees do they have, in particular sales staff? Are they representing other product lines too similar to yours? Do they have a good reputation with their clients? Do they have a thorough understanding of competitive products and prices? Do they have a good network of representatives and/or contacts? How many years experience do they have in your market sector?

8 WHAT WOULD YOU DO? CASE STUDY A company that specialized in airport baggage handling systems is interested in the Indian market Over time, this company has been involved with 426 airport projects, each one at least a little different from the others, in 38 countries. During the company s time in the industry, there have been two major developments in these baggage handling systems the introduction of automated baggage sorting barcodes, and the development of scanning for explosives. This company has been a leader in developing appropriate solutions and is considered to be an innovative company within the industry. It has invested in high-level software to integrate with its systems and with those used by major airlines. As the company tries to determine a market entry into India, what questions will be important in determining whether they choose a representative, distributor, or go at it with a more direct method?