Agents, representatives and distributors

Many different types of firms located abroad sell U.S. products. The two principal types are commission sales agents (i.e. manufacturers' reps) and distributors (i.e., wholesalers, value-added resellers and strategic allies) -- especially for services -- who import. In addition, international manufacturers may wish to source U.S. products that complement their own product lines.

Commission sales agent or independent representative

The terms "agent" and "representative" are synonymous. A commission sales agent acts as the sales representative for suppliers with whom he or she has a legally binding contract. He or she may have power of attorney to act on behalf of the supplier. An agent/representative generally does not stock the merchandise, but may provide servicing depending on the agreement negotiated with the supplier. The agent generally sells through a network of distributors (wholesalers) and/or dealers (retailers). The agent may also solicit orders directly from end-users (manufacturers or contractors, for example). In all cases, the U.S. supplier ships to and bills the customer, not the agent.

The agent's compensation -- the commission -- is based on a percentage of the sale. It is typically paid to the agent after the customer pays the U.S. exporter. Commission rates vary according to product, order size and other factors. In general, commission sales agents work on an exclusive-territory basis and won't handle competitive product lines.

Distributor

An international distributor is a business that buys from a U.S. supplier at a pre-negotiated price and resells to end-users, retailers or smaller distributors. The distributor sets the selling price (usually after consulting the exporter). The U.S. supplier's brand recognition and leverage in a market can strongly influence the selling price. Distributors can be exclusive or non-exclusive.

Exclusive distributor

An exclusive distributor has exclusive selling rights in a specific territory from a U.S. supplier. A few words of caution: Whenever you respond to a lead, receive an inquiry from overseas, or exhibit at a trade show you will more than likely be aggressively approached by international firms that want to be your EXCLUSIVE representative -- for as long as possible and covering as much geographic territory as possible. Exclusivity means exactly what it implies -- you assign sole sales rights to that particular company.
Exclusivity, should you decide to eventually award it, is a goal that must be earned through consistent sales and support success. Awarding exclusive rights to a representative without a track record in a particular market is a decision most exporters come to regret. Exclusive reps also enjoy legal protection overseas, which may make it difficult and expensive to sever the relationship with a non-performing representative or distributor.

The advantages of an exclusive distributor are worth considering. They often assume full responsibility for local sales promotion and servicing. The exclusive distributor will not handle competitive products. In general, you can expect an exclusive distributor to stock inventory, have a sales force and extend credit to its customers. The exclusive distributor may provide installation, training and maintenance to its customers. A strong relationship between the U.S. exporter and an exclusive distributor is essential to a successful relationship. The U.S. supplier may invest significant time and resources to train exclusive distributors and assist them in sales and promotion depending on the product or service and the relationship. Volume discounts are usually provided to exclusive distributors.

Non-exclusive distributor

The non-exclusive distributor functions in much the same way as an exclusive distributor, but the U.S. exporter does not grant an exclusive right to the sales territory. In general, until a distributor is able to demonstrate at track record of successful sales performance, suppliers are advised to keep non-exclusive distributors.

Export trading companies

Export trading companies in the U.S. are generally engaged in multiple business activities across a horizontal range of industries (i.e., they conduct business in unrelated or broadly-related product or service lines). They take ownership of the products they represent and resell them.

Overseas, trading companies may be large and part of an industrial group, which includes factories, banks, shipping and insurance companies. In some transactions, the company buys on its own account; in others, it acts as a commission agent.