Selecting
Overseas Representatives for Your Products
John R. Jagoe
Establishing an international
sales network is one of the most challenging aspects of selling products in
overseas markets. In essence, when an overseas representative is appointed,
that agent is charged with the legal right to represent company and products
in markets located thousands of miles away from the company's direct supervision.
A non-performing export representative can cause serious damage to the company's
reputation in world markets that could take years to correct. Also, in many
markets, it can be very costly to discharge a representative because of laws
protecting local businesses from abuse by foreign companies. Therefore, before
appointing overseas representatives, the potential foreign agent and its finances
should be thoroughly researched and site visits and conversations with key
personnel, suppliers and customers conducted.
The type of overseas sales representatives needed will depend primarily upon
whether they will be required to purchase the company's products for resale
within the local marketplace. Representatives that have the financial and
organizational capacity to pay for and maintain a complete inventory of the
products are referred to as either Stocking Distributors or Export
Management Companies. In return for paying for products in advance, they
require a steeper discount because they will also be paying the marketing
expenses incurred to sell and service the products. Stocking Distributors
or Export Management Companies earn profit from the differential between their
total costs and the selling prices paid to them by their customers in the
local marketplace.
Overseas representatives that will not be purchasing and maintaining a physical
inventory of the products are referred to as Sales Agents. They will act as
"Middlemen" between you and the foreign buyer. Sales Agents do not
usually become directly involved in the physical possession and movement of
the products to customers in overseas markets. They do not pay for the advertising
and promotion of the products. Sales agents will earn their profit
from the sales commissions received from the company less costs in arranging
for the sales with the foreign buyer.
Once an overseas representative is identified, a comprehensive Distribution
Agreement should be made ready for discussion upon travel to the foreign
agent's facilities. A considerable amount of money in legal fees can be saved
by preparing a preliminary distribution agreement in advance - and then presenting
it to an international attorney for revisions and final approval. When the
final version is ready, the company preparing the document might ask itself
whether it would sign if its role were reversed to that of the sales agent
or distributor. A successful Export Distribution Agreement must be to both
the mutual benefit of both the seller and the buyer.
For more information, please visit www.exportinstitute.com, or contact Mr.
Jagoe at (800) 943-3171 or jrj@exportinstitute.com.
John R. Jagoe is the president of The Export Institute of the United States.