An international commercial agent works on behalf of an exporter, introducing their products or services to potential clients in an agreed territory (usually a country). The agent is paid a percentage of selling price as in accordance with the sale conditions and the agency agreement.
A distributor (sometimes known as a dealer or re-seller) purchases products from an exporter and has “title” to the goods purchased. The distributor then sells the goods on to the final customers having added their profit to the price. The selling prices and terms of sale are determined by the distributor in the defined territory.
Tips from our trade advisers
- select distributors – don’t let them select you
- carry out an assessment before committing to an agreement
- approach this as a long term partnership
- draw up an agreement which clearly defines responsibilities
- carefully consider the size of the territory
- clarify the payment and reward arrangements
- monitor, motivate and evaluate partners
- encourage communication and feedback
- prepare in advance for an exit strategy
To get ready to work through an agent or distributor, you will need to think about the following steps.
Step 1: Identify potential agents and distributors
Consider the qualities that would be important in a good agent or distributor. Are they professional, well-connected, knowledgeable about your sector, and is there a clear business fit for you? Can they to demonstrate that they will be proactive, and someone you can build a relationship with leading to a long-term partnership?
You can start your investigation for suitable partners in the UK with online research, and enquiring with trade associations or other suppliers operating in your sector. Assistance in your search overseas can be provided by the Department for International Trade through the British Embassy network, local Chambers of Commerce, and other service providers such as banks, lawyers and accountants. If you are in contact with potential customers, ask them for referrals to any local agents or distributors they like to do business with.
There is more likelihood of success if you proactively identify partners in the market. Unsolicited requests you receive by email, social media, or at trade exhibitions may not be a good fit for your business.
Step 2: Draw up a shortlist and assess the possible partners
Carrying out some checks at this stage will ensure a more successful long term relationship:
- research the experience and reputation of the agency
- understand the geographical coverage they can realistically offer
- check if they understand your sector and what other companies they represent
- ask for a reference, and contact one of these existing suppliers, ideally by phoning them, to discuss their experience with the agent
Step 3: Prepare an agency or distribution agreement
As a first step the agreement should be drawn up by a legal firm with suitable experience. You may also need to check the local laws in the country where this new partner is based.
Basic terms which should be specified in any agreement and discussed with a lawyer are:
- the territory (be specific if it covers more than one country)
- the products or services covered
- exclusive or non-exclusive
- duration of the agreement
- commission rates and payment terms
- sales targets
- responsibilities and reporting
- termination (conditions under which you can exit the agreement)
- intellectual property (ownership and situation in the event of termination)
- use of name and logo (and situation in the event of termination)
- dispute resolution and governing law
Step 4: Motivate the partner and overcome problems
The typical problems that can arise after an initial period of working with an agent or distributor are insufficient support from the exporter and a lack of information about the market and customers from the partner. There can also be misunderstandings and disagreements about commissions, margins and prices.
Some practical steps you can take to avoid and resolve these issues include:
- maintaining frequent contact. Identify how your agent or distributor prefers to be contacted, and check in regularly
- understanding how you can add value to their business, and assisting them in achieving their business objectives
- requesting their views and input on sales targets for the next year, segmented by industry sector and geographical region. This will enable you to monitor and review performance against the agreed targets
- involving your partner in the planning and decision-making process for market development. This will help keep them engaged