Once you have identified the most suitable markets for your products and services, you will need to establish what is the most appropriate sales channel: unless your company intends to establish its own office, this is likely to be through either a distributor or an agent.
Typically, a distributor is, in effect, your customer and will purchase your products to sell on to their own customers. An agent, on the other hand, is appointed to negotiate, and possibly conclude, sales with customers on your behalf. In most cases, the distributor will generate its profit by adding on a margin, whereas the agent would be paid a commission on the sales they make. Both channels have advantages and disadvantages and the most suitable route will depend on the nature of the business and its objectives.
Specialist solicitors, Gaby Hardwicke, say that “... by selling to a distributor who contracts with and resells to customers, your business may be able to pass on a large degree of the risk associated with the products. The assumption of risk by the distributor is reflected in the margins on resale of the products, which will generally be greater than the commission payable to an agent (who assumes far less risk than a distributor).” On the other hand, they also point out that “... your business will have far less control over the activities of the distributor than over the activities of an agent.”
Gaby Hardwick have produced a useful briefing paper on the subject which looks at many issues which should be considered. It can be downloaded from their website here.
In its Exporting is Great website, the UK Government suggests that using an agent can be a cost-effective choice as the right one will:
- know the market
- communicate regularly with you
- help to overcome language issues
- already be working with potential customers
They go on to say that a good distributor will:
- understand your overseas market and legal issues
- bear the currency risk
- provide warehousing
- provide local after-sales support
Additional guidance can be had from the Institute for Export who provide a wide range of support, training and other resources. In terms of working with distributors, they suggest:
- Have a 5 year plan for how you go about exporting your product in the medium to long term – this will give greater focus and structure to your initial movements.
- Find the people who are busy and be sceptical about the people who approach you first – the best sales reps are the ones who make you wait for a deal.
- Exclusivity has to be earned so don’t rush making an agent or distributor your exclusive representative for selling your product.
- Test the waters with a new sales rep by hiring them on a trial period with clear targets and a clear time-frame for them.
- Be specific with your terms and regions in your contract to avoid any confusion or legal complications.
Finding an Agent or Distributor
For UK Companies seeking agents or distributors in international marketplaces, there is no easy alternative to undertaking thorough research to find potential candidates. Local construction journals, directories and information portals are likely to prove to be good sources of prospects and contacting industry trade associations can also be worthwhile. However, one of the most effective methods is to visit, or better still exhibit at, a trade show covering the relevant construction sector. In order to help identify the most appropriate event, Construct UK maintains an extensive calendar of over 900 forthcoming (non-UK) construction exhibitions across the world. Subscribers can access this via the International Exhibitions feature here.
Local and international Chambers of Commerce can also prove to be useful sources of potential distributors or agents, whilst the Department for International Trade (DIT) has a network of trade specialists who can also help by “.... arranging introductions to potential overseas buyers, agents and distributors (there’s a charge for this service)”. In order to find your local DIT trade specialist, click here. Furthermore, the Enterprise Europe Network can help companies find distributors in Europe.
For UK businesses seeking distributors in EU countries, Construct UK maintains an extensive database of construction product suppliers and is able to undertake research to identify candidate distributors for most construction product and service groups. Contact us for details.
Non-UK businesses seeking distributors in the UK
For international construction product suppliers and service providers, Construct UK offers a Distributor Finding Service. Full details can be found here.