Distributor or commercial agent: a dilemma

Why choose to work with a distributor or commercial agent? They can help you find foreign customers more quickly without hiring lots of extra staff. They will be fluent in the local language, and will take sales and marketing abroad off your hands. Both distributors and commercial agents work independently and have their own customer base. 

Make written agreements with a foreign partner in advance. And make sure to maintain good contact.

The difference

Distributors run their business at their own expense and risk, while commercial agents work for a company . They have less freedom when it comes to making decisions about pricing, for instance. And there are more differences.

Making the right choice

If you have your own brand, you want to stay in control of your pricing, brand experience, customer base, and sales channels. This is especially common in the clothing industry and with luxury products like bags and shoes. In this case, working with a commercial agent tends to be the more sensible choice. The drawback is that you assume all debtor risk yourself.

Do you sell products where this is less important? Or do you want to have stock available on the foreign market? Then distributors are a better fit. Distributors add value by selling products at their own expense and risk. They often support you with service or maintenance and because they are close to the customer delivery is faster. 

Finding a reliable partner

After deciding whether you are after a distributor or commercial agent, it is time to go looking for the right partner. In some cases, you might receive a request to collaborate in a foreign market. For example,  from a retailer who is eager to represent your company and promises lots of revenue. Do not rush into this. You cannot be sure the partner is reliable. They may actually be trying to keep your products off the market because they are already selling a similar product from another supplier, for example. They might actively offer customers the alternative product while your product gathers dust on the shelf.

Such a request for cooperation does tell you that there is demand for your product in the country in question. This means there are opportunities. So, actively seek out a reliable business partner yourself.

Also make sure you yourself are a reliable party for your foreign business partner. Check the Business Register regularly to make sure the details about your company are still correct.

Think about what you want in advance

Local partners represent your business abroad. If they act wrongly or fail to sell your products, your reputation will be damaged, and you will not make a profit.

So, talk to multiple candidates. First think about what you would expect from the perfect partner. Have clear requirements  such as product knowledge, a sound customer base, and a network. Also think about the number of employees you need, and what other products they sell. Make sure that your products complement their existing stock and will not have to compete with other products. Check that the company employs enough people to properly sell and service your product.

With this in mind, hold talks with multiple parties. Also take a look behind the scenes at the companies themselves. The best match gets ‘the job’. It is important to trust your gut feeling: your partner should look good on paper and feel good, too.

Agreements

Regardless of whether you partner up with an agent or distributor, you should lay down agreements in writing. This is not mandatory, but we strongly recommend that you do so.

Distribution agreement

If you opt for a distributor, draw up a distribution agreement to document arrangements about minimum stock levels, the duration of the agreement, service windows, and warranty terms, for example.

Agency agreement

If you opt for an agent, draw up a contract to document agreements about marketing work, a non-compete clause, commission, and payment dates.

Model contracts

The Association of Dutch Trade Agents and Importers (VNHI) and the International Chamber of Commerce (ICC) have model contracts , which you can easily adapt to your personal situation. If you are unsure, ask a legal specvialist for advice.

Good start

You have come to an agreement with a distributor or agent and have built a solid foundation: time for the first orders to start coming in. Help your partner get off to a good start by sending them technical specifications, for instance, so that they can solve problems themselves. Provide sales training for your product. Explain why customers buy the product. For example, price, quality, or user-firendliness.

Support your partner at trade shows, provide technical manuals, flyers, website copy in the right language. Mention your partners on your own company website. That way customers can see at once where they can buy your products.

Keep in touch with your local partner to build a bond together. Your partners have multiple suppliers and have to manage their time and attention accordingly. Your goal is to have them go the extra mile for you, not for other suppliers. To make that happen, you need to invest in a good relationship. Consider asking them how many quotations they issued last quarter, for example. Check in with them to see how things are going, and whether they need more support from your end.

The future

If you intend to expand and export your products to more countries, your network of distributors and commercial agents will grow along with you. When you are successful, managing local partners can become a full-time job.