Selling your goods internationally: what is the difference between agents and distributors?

In international trade, appointing agents or distributors in overseas territories can be a really good way of getting your products into those markets due to their local knowledge and connections.

Agents and distributors work in slightly different ways so it is important to know the distinctions so you can choose the most appropriate arrangement for your business. You can even choose to have both.

What is an agent?

An agent is like a salesforce. They act on your behalf to negotiate and sell your products. You retain the direct relationship with the customers that they find, and they earn a commission on the sales.

The advantages of an agent

Choosing to appoint agents rather than distributors allows a business to retain more control. This applies to a number of aspects:

• Customers: the customers the agent finds and nurtures still belong to you. You can also dictate the kinds of customers the agent deals with by setting parameters and guidelines.
• Price: you can safeguard your prices with an agent to ensure your products are not being devalued
• Marketing and brand: if your brand is particularly valuable or intrinsic to the product, you can protect how the brand is marketed and promoted
• Stock value: all stock ownership remains with you, meaning that if something happened to the agent (they become insolvent for example), stock should be returned to you and cannot be claimed by the agent’s creditors

An agent’s commission will usually be less than a distributor’s margin because the agent takes on less risk, so the cost to you will be lower.

The disadvantages of an agent

The process is more drawn out with an agent as you have to wait until they have secured sales to get paid. You must also offer support to help them achieve sales such as training and marketing assistance, which adds cost.

What is a distributor?

A distributor is an independent contractor who buys your products from you and then resells them to their own customers at a mark-up. They are effectively your customer and you don’t have any further relationship with end users beyond your distributor.

The advantages of a distributor

The biggest advantage of a distributor is that you make the sale direct to them and then it’s up to them to find their own sales, so it’s a shortened process and you get paid quicker. The risk associated with making sales beyond that point is all theirs.

They also have to fund the cost of selling your products locally, for example through retail stores, and pay for storage/warehousing etc.

The disadvantages of a distributor

The main issue with a distributor compared to an agent is the loss of control once you have sold your products to them. They can set their own price and market your products in any way they wish to.  They are also likely to demand a lower price to allow them to make a sufficient margin.