Let’s say you’ve successfully landed a client with a perfect product to sell, and you’ve determined which countries you’re going to export it to and sell it in. Now comes the next phase of the game: getting your product into the marketplace and generating those sales.
Assuming you’re going to hire sales help, which specific conduits in the trade channel will be most effective for you? The three most common options for the export management company are:
- Selling direct to foreign markets (hiring your own people to work in the country as sales representatives.)
- Hiring a commission representative or representative company
- Working with a distributor
The best trade channel options for the importer are:
- Manufacturer’s representatives
Before we go any further, let’s review the various conduits of the trade channel:
Representative. This person works alone or as part of a company with various reps on board; they make sales calls for you to wholesale or retail buyers. When they’ve solicited a sale, they pass it on to you. In most cases, you then send the merchandise directly to the buyer. A typical representative’s commission is 5 percent of the cost of the goods, but this varies slightly from one part of the world to another and from product to product.
Distributor. A company that buys your goods and resells them to a retailer or other representative for further distribution through the channel until the product reaches the end user. A distributor, who determines their own sales price for your product, may wait until sales have accumulated before buying the merchandise, or they may purchase the merchandise up front and warehouse it, thus acting as a wholesaler. You won’t have as much control as you would with a representative, but you won’t have as many worries because the distributor handles all advertising, promotions, returns and customer service. A distributor acting as a wholesaler, buying your imported merchandise and warehousing it before accumulating sales, is sometimes called an import house.
Manufacturer’s representative. This is a salesperson who specializes in a specific product or line of complementary products. They often provide additional product assistance, such as warehousing and technical service, and can work alone or as part of an agency, in which case each rep divides their selling time among the various products promoted by the agency. This allows you to field a regional or national sales force without expending any capital. The downside, however, is that because these people carry a variety of product lines, yours may end up at the bottom.
Retailer. The ultimate distributor who sells to the end user.
Direct sales. Direct sales can work for products with a very limited market in which each sale is substantial. If you’re selling jet engine nozzles, for example, you can easily send out your own reps to pitch jet engine manufacturers -- there aren’t all that many out there. When you make a sale, you’ll probably be assured of repeat business (there aren’t too many nozzle suppliers either). But for most products, the markets are so large and complex that this method just isn’t feasible.
Pursuing the perfect rep
Finding the perfect sales rep is just as important as finding that perfect manufacturer and product. Because some reps are better than others at pitching different types of products, the trick lies in choosing one who best complements your particular type of merchandise and, preferably, already has experience and contacts.
If you plan to sell in more than one corner of the world, you may need to locate several representatives. If your target countries are all in close proximity, however, you’ll do better to find a distribution company or rep that can handle them all.
So where do you find these perfect people? If you’re talking exports, take a look at the services offered by the ITA’s Commercial Service, including the Agent/Distributor Service. Other foreign rep sources include:
- Freight forwarders and customs brokers
- Trade associations in the countries you’re targeting
- Foreign consulates, embassies and trade offices
- American chambers of commerce abroad
- International Yellow Pages (which you can find on the internet)
- International trade publications
Sources for domestic distributors and representatives include:
- Domestic trade associations, publications and journals that cover your product’s industry
- Referrals from your international banker
- Manufacturer’s Agents National Association
- Online business directories or even your local phone directory
- U.S. and state trade centers
After you’ve compiled a list of reputable distributors or representatives, the real work begins: choosing the best one for your company and products. Interview your prospects with as much care as you’d take to interview prospective employees. A good place to start is with a sort of interview in a kit, a three-part packet consisting of a one-page fact sheet, product literature and a questionnaire. You should prepare a packet for each client you represent and have enough printed so that you can pop them in the mail or pass them out to sales reps as the need arises. You should certainly be able to email them as well.
The fact sheet should outline your client’s commission structure, agreement policies, and company information so that each prospective rep has a snapshot of who they’ll be dealing with and what they can expect as compensation. The questionnaire, which you’ll ask prospects to fill out and return to you, is designed to elicit as much pertinent information as you could possibly need.
Once you receive a prospect’s questionnaire, make sure you check references. Find out if other companies that deal with this rep are satisfied with the relationship. Delve into what size territory the rep is most capable of covering. You don’t want one with a tendency to bite off more than they can chew.
If a prospect doesn’t return the questionnaire, call or email them with a friendly nudge. If you still don’t receive a response, cross them off your list. A person who doesn’t take the time to respond to a potential associate may have already found work with a competitor or is someone who might not take the time to do a good job, either.
You should now meet your prospect in person. You can find out if you really click, and you can size up the way they handle themselves in a one-on-one situation. If you’re in two different countries, however, and your budget simply won’t stretch for an in-person meeting, be sure to conduct a phone interview. Other alternatives include Skype and FaceTime. For hiring help, you can use software programs, such as ClearCompany or Vidcruiter, both of which are talent management tools that can also help you bring in qualified talent.
Sign on the dotted line
Once you’ve decided which reps you want on your team, you need a written agreement or contract to clarify their responsibilities and duties as well as yours. We strongly advise that you consult an attorney familiar with international law, especially as a newbie, because you might overlook details that could turn into migraines down the line.
The specific details of each agreement will vary from one situation to another, but they should all include these types of basics:
- Responsibilities of the distributor or representative and your responsibilities. Make sure these are clearly delineated. This will be a legally binding contract.
- Term of contract
- Any bonus or incentive programs
- Territory. Does the distributor or rep have exclusive or nonexclusive rights to the territory? This is an important consideration. Most reps prefer to have exclusive rights to market your product in a given territory. Furthermore, granting the rep exclusive rights is a good way to give them a start-off perk and develop that winning relationship.
- Pricing. This is often the most significant variable determining sales success. Price your product carefully, neither too high nor too low. Remember that your rep will earn a specific percentage, while a distributor will buy at the prevailing wholesale market price.
- Warranty and returns. Who’s responsible for returns or repairs? What’s the policy? This can be a critical section of your agreement depending on what you’re selling. Also consider whether you’ll need product liability insurance.
- Does the rep have the right to use trademarks, patents and copyrights in advertising? Make sure the product doesn’t require or infringe on any of these intellectual property rights.
- Marketing and advertising. Spell out who’s responsible. Remember that you or the manufacturer may have to defray some of these costs. Consider having to sign off on advertisements, since they’re essentially representing your business.
- Record-keeping. Both parties should keep sales and other pertinent records, and reserve the right to examine each other’s documents.
- Language. What language in the agreement is legally binding?
- Contract termination. Give yourself an out. If the rep fails to meet certain requirements, for example, a minimum number of sales within a specified period, you can terminate the contract.
- Arbitration. Make sure your agreement contains a clause outlining what happens if you and your rep disagree in interpretation of the terms of the contract. Most such contracts stipulate arbitration by the International Chamber of Commerce.