Dealing with commercial agents and distributors is an effective route to new markets but without the necessary forethought and planning, can be fraught with difficulties. There is often confusion in differentiating between agents and distributors and an awareness of each is a must for businesses trading oversees.
An agent is an intermediary, granted with continuing authority to negotiate and/or conclude the sale or purchase of goods with customers on a business’ behalf. Agents are not employees, and are paid commission on any sales they make. Their main role is introductory, they have no contract with a customer and importantly, never own the goods. The main advantage is that a business retains greater control of terms of sale and price, remains able to select and directly contact customers. There are fewer competition law issues when compared with distributors, and businesses can preserve a level of control over marketing and brand identity.
The main issue however is significant and surrounds an agent’s statutory entitlement to receive compensation in the event of its appointment terminating. This can be tricky and expensive and planning contractual mechanisms for restricting and removing agents is highly recommended.
Conversely, distributors purchase goods for resale and therefore own the goods outright. Dealing with a distributor enables a business to pass on financial risk of stock, negates their need to establish a place of business in a specific area and can secure greater volumes of sales (albeit generating lower margins). The downside is that businesses must accept they have a more limited degree of control over the sale of goods and no real relationship with the customer or end user of the goods.
The main difference is clearly found in the ownership and handling of goods. Whether agents or distributors are the best option for your business depends on what levels of control you might wish to retain or indeed release, risks you’re willing to take and on the relationship you intend to have with customers. Either way it is important to implement effective and bespoke contracts to safeguard your business in its dealings with these third parties.
Source – John Pickervance, Forbes Solicitors
It’s imperative that your business involved in trading internationally establish good business relationships with agents and distributors to ensure they are working to increase sales and vitally important are the agreements and contracts that you produce to ensure your company is trading safely. Update your knowledge at our next Dealing with Agents and Distributors training seminar taking place on the 15th November 2018.
For more information please contact Stephanie Warrington on email@example.com or call 01254 356473