This is the second of three articles that explore the topic of effectively identifying and managing international agents and distributors. Article 1 covered the key differences; why you would choose to use a middleman; and the most common pros and cons.
Now we will turn our attention to the key factors when deciding upon your distribution model; and how to locate an agent or distributor if this is your preferred option.
In article 3 we will move on to structuring the deal and managing the relationship.
So let’s look at the fundamentals of what needs to be considered when choosing a distribution model.
- Firstly, identify the options that are available to you for direct or indirect exporting; including:
v Selling direct from NZ
v Selling direct but through overseas branches or subsidiaries
v Working with Agents & Distributors
v Forming a Joint Venture in the target market(s)
v Working, perhaps as a stepping stone, with specialist organizations based in NZ, e.g.:
- Export Merchant or Export Agent
- Export Broker
- Commission Houses
- Export Management or Trading Houses
- 2. Now, for each option, review three essential elements – Cost, Control; and Risk
It is essential that you thoroughly research each option and consider the differing advantages & disadvantages. Research … research … and research again!
- The investment costs in setting up and running your own overseas operations
- Agent commissions and Distributor discounted buy pricing; and the relative impact on your expected margins
- On how product is marketed, sold, and after sales service
- How much say will partners or intermediaries have?
- To your hard fought brand integrity
- Payment delays or default, particularly if dealing through an agency model where you carry the payment risk when dealing with a number of ‘end’ buyers
- Exchange risk
- Cash flow
- T’s & C’s
3. Rank your priorities
Consider other relevant factors, e.g.:
- Do you have market knowledge and contacts that you can leverage without having to partner or use intermediaries?
- Have you explored the local market regulations and their impact on the distribution options available? For example, in some markets you may have to work through a JV; and it may be far too premature or risky for you to take this step.
- How do your competitors operate?
OK, let’s assume that you have weighed up your options, and decided to run with an agency or distributor model.
Now how do you find that elusive high performing agent or distributor?
(A) Of course you can surf the internet, and/or attend relevant trade fairs or conferences (but not to sign up the first Jonny Come Lately who promises everything you want to hear!!!)
(B) Additionally, and importantly, prepare a brief on your requirements (the ‘perfect profile for your agent or distributor of choice) and look to engage with:
– Other NZ companies who operate in your field and who may have recommendations, and certainly experience to share
– Target customers in territory who may have their ‘preferred’ local operators
– Chambers of Commerce (in NZ and your target export markets)
– Relevant Trade Associations and Business Councils (again in NZ and overseas)
– Relevant consultants or specialist market research organizations (NZ and overseas) Consultants
– Trade Fairs & Conferences
– Banks; who can liaise with their local branches and connections
(C) Aim for a target shortlist of 3 or 4 candidates to engage with. Consider how you can best sort out the rabble.
(D) Prepare a checklist for discussion, including:
- Company Background/facts
- Target territory
- Market Knowledge
- Sales – modus operandi, personnel, networks, key clients, sales targets/expectations, etc
- Product/Service to be represented& any competing company or portfolio products/services
- Future Aspirations; growth plans
- Financials & References
- Contractual – any “hot buttons’; exclusivity requirements; stock, etc
- Personal Attributes
(E) Armed with your checklist/aide memoire, meet & interview the shortlist contenders.
(F) Commit to nothing at the first meeting.
So discussions have gone well and both parties are enthused to work together.
Now it is time to structure the deal and consider all the key ingredients to managing an effective relationship – the subject of the third and final article in this series.
Watch this space!!