International Selling Techniques Overseas Agents and Distribution Strategies

It is customary for exporters to have agents (the distributor or sales representative) located in the importing country. The distributor imports, stocks and distributes the product. The sales representative solicits order from the distributor and collects a commission and/or a fee from the exporter and/or the distributor.

Agency Arrangement

Distributor versus Sales Representative The decision to have a distributor or a sales representative depends on the product, market size, distribution patterns, and business practices of the importing country. For a small market like United Arab Emirates, a distributor is preferred. For a huge market like U.S.A. or China, several distributors and/or sales representatives is necessary. The domestic market is widely spread across the states in U.S.A. or provinces in China. It is difficult for one agent to effectively handle the entire U.S.A. or China.

Exclusive Agency versus Non-Exclusive Agency Exclusive agency means only one agent represents the exporter in an importing country. An exclusive agency usually requires an annual quota, that is, a required annual import volume, and prohibits the agent from representing competitors. Non-exclusive agency means any agent can represent the exporter in an importing country or can buy from the exporter at anytime without an annual quota. Both the exclusive agency and the non-exclusive agency normally require a minimum amount in a shipment. It is important to let the agent have a trial sales period, for example six months, in order to gauge the performance before granting exclusive agency. It is necessary to deal on a non-exclusive agency basis for a large market like U.S.A.. At times an agent from the U.S.A. may request exclusive agency covering a specific state. This arrangement rarely works to the benefit of the agent. It is difficult for the exporter to prevent its distributors in other states from selling to that specific state.

Company Exclusivity versus Product Exclusivity Exclusivity or exclusive representation normally refers to company exclusivity, which means that the agent exclusively represents the exporter and all its products and services in an importing country. Product exclusivity means that the agent exclusively represents the selected product(s) of the exporter or the product(s) made by the exporter under contract from the agent. Product exclusivity is common in the OEM (Original Equipment Manufacturer) arrangement between the buyer and the export-manufacturer. The exporter supplies the proprietary product made under contract to the buyer and the exporter is prohibited from selling this product to other buyers.

Agency Contract In certain countries agency contracts are regulated by the government. Agency contracts may be required by some exporting countries in commission sales abroad, even on a non-exclusive agency basis. The agency contract and supporting shipping documents are used by the exporter to apply for the remittance to pay the overseas agent's commission. The exporter must be cautious in selecting an agent and in preparing the agency contract. The agency contract in certain countries is quite onerous. It can cost the exporter a fortune to rescind the contract due to the agent's poor performance or non-compliance to the terms of the contract. At times, it is impossible to rescind the contract under the national laws and regulations. The international litigation is costly. The agency contract issued and signed is binding and it must be respected by the exporter and the agent. The export-manufacturer who is exclusively represented in a country must not intentionally sell its products to that country through any export-traders in the exporter's country or in a third country. This malpractice is exercised by some exporters in the hope of selling more. The malpractice usually ends in a price war between the exporter's own product in the importing country. The agent's loss of profit may end in the agent's loss of confidence in the product and the exporter.

Agency Inquiry Quite often, an exporter exclusively represented in a country may still receive inquiries from other agents in that country. Some agency contracts may stipulate a procedure to follow in the event of receiving such inquiries. Otherwise, the exporter may send a reply indicating that it is being represented already in that country and give the name, address and contact number of the agent, and then forward a copy of both the reply and the inquiry to the exclusive agent for

reference. Or, the exporter may forward a copy of the inquiry to the exclusive agent, without directly replying to the inquiry.

Selecting the Overseas Agents

The goals of the export company influence the criteria in selecting an overseas agent. It is necessary to take foreign cultures and business practices into consideration when selecting the overseas agent. The experience, connections, interest, commitment, sincerity and credibility of the agent are vital to the success of the export product and company.

Agent's Experience and Connections Experience in the export product or its product line and in the national market of the importing country is essentially required of a foreign agent. Export products like the stapler, paper clip and ball-point pen, belong to the product line office supplies. Twist drills, taps and dies, and inserts fall under the product line cutting tools. Products that have the same product line normally have the same market outlet. As such an exporter selling the stapler can look for an overseas agent experienced in staplers or in office supplies. Likewise, an exporter selling the twist drills can approach an agent experienced in twist drills or in cutting tools. In practice, the overseas agents in some countries may handle more than one product line. In some cases, under an agency agreement, the exporter may train the agent if the latter is inexperienced in the product. The experience of an agent is measured by its market expertise, and not necessarily by the age of the company. For example, a 5-year-old company being managed by a person with 20 years experience may have more leverage than a 7-year-old company. The agent should be familiar with local cultures and business practices. It takes time to acquire an in-depth understanding of foreign cultures and business practices in a market. The agent's special connections may be necessary for certain products and services. In some countries, personal ties to persons in public office is necessary in order to successfully conduct the business.

Agent's interest and Commitment The agent's interest in the product and the agent's commitment of time and resources to the product are important. The product suitability and competitiveness influence the agent's interest. New product inventions and designs and products that give a higher profit margin attract more interest from agents. In many countries, a smaller company often devotes more time and attention to the product. Generally, the more products an agent represents, the less is the commitment of time and resources to each product.

Agent's Sincerity and Credibility The agent's sincerity may have a higher precedence over the agent's credibility in some countries. The credibility often refers to the ability to pay and the record of payment. Because a customer has the ability to pay, which connotes material adequacy, it does not mean that the customer will pay within the terms of sales. Because a customer has a good record of payment with one supplier, it does not always mean that a customer will have a good record of payment with another supplier. The most popular and a safer method of payment in exporting is by a confirmed irrevocable letter of credit (L/C) at sight. The question of agent's credibility becomes insignificant unless payment is by other methods. Therefore, the importance of a credit rating check on foreign importer is reduced when payment is by a confirmed irrevocable L/C at sight. The credit rating check in certain countries is either difficult or impossible due to its lack of popularity or its non-existence, particularly in certain Third World countries. The agent being sincere means that the agent does not have the intention to defraud the exporter. Please refer to Fly-By-Night Importers for related information. The occurrence of counterfeit product is not uncommon in many countries. A fraudulent act (malpractice) of some importers is to counterfeit the products represented by other importers. Cases of importers counterfeiting the products they represent have occurred before. Ironically, importers who counterfeit the products most often have the ability to pay and a good record of payment, but lacks sincerity.