You have a product that sells strongly in the UK. You’ve done your research and believe that with marketing support and perhaps a little modification it may also do well internationally. You’ve visited your target market to get a feel for how you may perform against the competition. The question you need to address now is who will sell your product? A local agent or distributor who has an understanding of the local market, of the preferences and foibles of buyers in your sector, will be an invaluable means of establishing your company on the ground, providing they are the right person for you.
Make no mistake, finding the right partner can be hard work, as Duncan Adams, China Business Advisor at the China-Britain Business Council, points out. “Distribution can be a challenge, but finding the right partner can reduce the time and costs in terms of getting products to market,” he says. “Do your research and due diligence. Ideally spend time getting to know that person face-to-face. The doors that they can open via their own local networks can give your business a real boost.”
Agent or distributor?
Would-be exporters have two main choices when it comes employing local market help: an agent or a distributor. An agent will take responsibility for selling, promoting, winning orders, problem-solving and debt collection in exchange for a commission on sales. They do not usually handle goods, however.
A distributor generally purchases goods from the export business at a discount and sells them on your behalf at a profit. There are different ways to structure an agreement with a potential distributor. They may be the sole distributor in that territory with the manufacturer reserving the right to also sell to customers direct, say, via the internet. Alternatively, they can have exclusive rights to the product. Distributors can also be helpful when it comes to providing local market research.
Identifying potential distributors
A good starting point for identifying potential distributors is the UK Trade & Industry’s (UKTI) Overseas Market Introduction Service. Andrew Wilson, Director of Policy at the International Chamber of Commerce UK, believes this is a vital resource, although companies must be precise about their requirements. “If you are looking for distributors with good links in specific regions, if you need particular expertise in a given sector, make sure you specify,” says Andrew. “It’s important to ask the right questions.”
Trade fairs are a useful way to introduce your product to a foreign market, but they can be costly, particularly in South East Asia or Brazil. Ask UKTI, local chambers of commerce, other businesses and the International Chamber of Commerce UK for their recommendations. You want to ensure that the right kind of distributors are going to be present and that the event has a good track record in attracting those people. “The key thing is not to go in blind,” says Andrew. “We’ve heard of some fantastic successes and other less favourable outcomes. It’s about preparation and getting a steer from the right people.”
The UKTI can provide information on trade fairs for different sectors and geographies, and its experts can also help assess the credibility of companies with whom you may make contact. British Embassies can also help open doors with their extensive networks of commercial contacts.
Finding the right person means entering into negotiations around pricing and commission costs. The key message here is to establish some parameters by researching local pricing. If you have a feel for the selling prices of both your would-be agent and your competitors, you will have a feel for how much margin you are offering. Too many exporters fail to take this step and end up overpaying third parties.
One final due diligence point: take up references and make sure you are dealing with an ethical partner. Under the UK Bribery Act you can be responsible for any bribes that change hands.
There’s no doubt that exporting brings additional costs and risk, not least around the issue of securing payments from your distributor. If you are selling goods directly to the end-user you may want to consider using an international factoring company, who will advance around 80% of your invoice value in exchange for a small fee. International factors assume responsibility for collecting the debt and have expertise in the payment protocols of different countries.
The Export Credits Guarantee Department can assist by insuring UK exporters against non-payment. They also help overseas buyers to purchase goods and services from UK exporters by guaranteeing bank loans for those purchases. The department can also offer working capital for export contracts by sharing risks with banks on loans over £1 million.
Passport to Export
The UKTI can provide invaluable support to first-time as well as more experienced exporters through its network of experts, based both in the UK and in key markets across the globe. Its ‘Passport to Export’ programme offers new exporters a tailored and subsidised programme of assistance designed to answer the specific needs of the business.
An individual package may include:
- Advice from an experienced international trade advisor
- An export action plan
- Market research and help with contacts sourced from the relevant embassies and consulates.
Passport to Export can also offer subsidised support with visits to potential markets, training and ad hoc ongoing support.
Research is key in finding an overseas distributor. Find out as much as you can about your target markets and the key players, including competitors and distributors. The UKTI, local chambers of commerce and the International Chamber of Commerce are all on hand to offer advice.
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