Last reviewed 31 August 2023
Let’s start with the short answer. Lots of exporting companies need agents and/or distributors. Even in the face of rapidly changing technology and practice, exporting goods and services via a representative within market seems to remain the most common route to market.
The world of trade is changing, however. And it looks like the long-term impact of the pandemic is only just beginning to be felt. For example, when retail outlets were closed in a lot of countries, many exporters either instigated or accelerated direct sales efforts. The prevalence of so-called fast parcel operators, (FPO’s) and the increasing willingness of consumers and businesses to seek out and buy products online, has survived the end of worldwide lockdowns. Consumer behaviour is changing. According to a report from Statista, the value of e-commerce is predicted to double in five years to 2023 to US$6 trillion. That’s almost double the annual gross domestic product of the UK.
How change affects exporters
How does this trend affect exporters? It very much depends on individual circumstances. In particular, it depends on the nature of the products, the markets and, perhaps above all, the goals and aspirations of the business itself.
There are so many potential advantages to having personal representation in key export markets. For consumable products, and those that consumers expect to buy on demand, a good distributor will use their market knowledge and contacts to ensure your products are in the right place at the right time. For exporters of capital goods and “bespoke” goods, and for many of the growing number of services exporters, a good commercial agent can play the role of a local sales representative, building relationships with target customers, keeping tabs on local opportunities and providing knowledge and guidance on local needs. It seems unlikely that such constructive arrangements will suddenly become redundant.
But agents and distributors are expensive, too. Agents typically earn a commission on each sale. Distributors add a margin to the price. How this compares with alternatives, such as direct sales from head office or establishing a local branch or subsidiary, will depend on the nature of the business. But if our competitors are gaining an advantage by changing their strategy, we may need to follow a similar plan just to be competitive.
Some exporters want it both ways, and many will succeed. There are global brands that offer their products to buy via their website as well as through local stockists. How the exporter manages to square the circle of supporting their local representatives while potentially acting in competition with them is a matter for negotiation. Such exporters are operating multiple roots to market.
This can be made to work. A feasible strategy is for the exporter to offer and accept a sale via their website, and then instruct their local distributor to fulfil the order. This is a seamless strategy, where it doesn’t matter where the consumer buys, the local distributor still benefits (most exporters would retain a percentage of the sale to contribute to their costs).
Managing change in consumer behaviour
Managing change in consumer behaviour is always challenging. The supplier who makes the wrong move may well lose market share, but so will the one who does nothing. So, understanding the nature and extent of change is crucial, and our distributors and agents may not be the first to notice.
Being an agent or running a distributor business can be precarious. Such a business is dependent on so much that’s out of their control. An agent can devote time to finding business but will only get paid if the principal accepts the business, delivers according to customer expectations and gets paid. A distributor can only sell the products that their supplier offers. And both agent and distributor often fear the possibility of the exporter cutting them out. That’s a fact of life and can be a serious handicap to achieving a real relationship of mutual trust.
So every exporting company needs to give careful consideration to how their markets are changing. It’s unlikely that there will be a uniform pattern over all markets. And given the likely reluctance of agents and distributors themselves to acknowledge changes that could undermine their livelihoods, the exporter needs to use their own eyes and ears to spot the signs of change.
This means, more than ever, that exporters need to have strong and open relationships with their representatives. Building a winning relationship requires ongoing time and effort, and managing change requires a strong and resilient partnership based on honesty and openness.
Exporters should keep a critical eye on sales performance. This means more than just the line on the graph, however. To protect our business, we need to have information about market share, trends and competitor activity. It also requires a willingness to challenge long-held assumptions about market characteristics. So, as well as looking at our own sales trend in each market, we should be looking at world trade figures. With knowledge of our tariff numbers, we can carry out some very simple evaluation of market trends. The International Trade Centre collects trade statistics from all over the world and provides a free-to-view database of the combined results. We can see at a glance how much is being imported to a country by tariff number, where it’s coming from and what the trends are, going back over as much as 20 years if we want to. It’s not perfect, but it might help to at least highlight significant changes.
Check out trade media
Check out trade media as well. And use sources such as the websites of major exhibitions and leading retailers to spot new entrants to the market. By regularly monitoring simple trade data, we can become adept at spotting changes.
It might be advantageous to make an independent visit to key markets, not accompanied by your distributor. Take care not to allow the distributor to feel undermined.
We live in times of rapid change. Anticipating and adapting to changes is going to be an ever-increasing part of exporting success. Equally important is to work at maintaining strong and viable relationships with distributors and agents through regular communication and support. The exporters who assume that the next 10 years will be more or less the same as the previous 10 may no be around at all before too long.
So who needs agents and distributors? A lot of exporters do and will probably continue to do so. But the game may be changing, and everyone needs to take care to spot those changes and react to them.