Last reviewed 16 September 2021
For many years, most exporters have relied on local representation to generate business in other countries. Exporters have typically found it invaluable to have a way of achieving a physical presence in each target market, such as a distributor, a commercial agent, a sales representative or franchisee. This is still the way that most exporters work, but in this feature we look at how the growth of e-commerce is making other methods more feasible and Covid-19 may have hastened a process of change.
It’s logical that exporting companies have tended to use somewhat longer supply chains when selling abroad. For many exporters of technical products, it’s vital to have someone in the vicinity to explain the benefits to a prospective buyer, demonstrate the product, answer technical questions and perhaps provide after sales support. It’s just not always possible to do that remotely. It does mean of course, that the process is more costly, and the exporter has to weigh up relative benefits of margins against market share.
But despite the costs, many exporting companies continue to rely on the use of an appointed local representative, such as a distributor, simply because they believe they can achieve far more in the market that way. A distributor holds local stocks, undertakes local promotion and sales activity and provides the exporter with a presence in the market that can usually compare with local competitors.
While not suggesting that such arrangements are going to die out any time soon, it’s clear that the widespread acceptance of e-commerce has made it much easier to achieve sales directly between exporter and end-user with less need for intermediate help. Businesses that supply a product they can deliver digitally, such as a book or music, have been among the front-runners in adopting international direct sales methods. And for physical goods, fulfilment centres such as Amazon have provided a convenient way to overcome the challenges of physical distribution.
There are potential benefits of local selling that are persuasive. Taking players out of the distribution chain means removing costs, as does reducing the amount of handling in the physical movement of the product. And building direct relations with end users, while creating more work for the exporter, can build a much better knowledge of local market conditions and trends.
Effects of the pandemic
During 2020, many countries were facing lockdown at different times. This hit some international traders particularly hard. When someone was trying to place an order, the exporter was unable to fulfil it. Then when a customer wanted to buy in an export market, the local representative was unable to perform. A double whammy. Some exporting companies found that end-users were coming to them directly via their website because their usual method of purchase wasn’t working. And naturally, many responded to this by finding ways to meet orders directly.
In certain industries, this has been like opening Pandora’s box. There’s no going back, and frequently no desire to. After all, if a method works, if the customer’s happy and it’s making money, why change it? So a gradual movement towards direct selling appears to have accelerated as customers looked for other ways to get hold of the goods they needed.
Now, as the traditional retail high street continues to decline in many countries, buyers both B2B and B2C are becoming more comfortable with buying directly from a remote supplier. And there are steps that exporters can take to facilitate the trend such as:
developing a multilingual (and localised) website
providing local information on prices and delivery
providing a helpline facility in target languages
identifying local fulfilment centres who can hold stock and arrange local deliveries.
Is Brexit a stumbling block?
It’s not always that simple, however. And while the pandemic may have hastened a change towards direct sales, Brexit has been a stumbling block for many. While the UK was a member of the EU, sending small or low-value consignments was more feasible. There were few customs requirements to worry about, very little paperwork, and a supplier could typically offer a suitably rapid delivery in a short time. All this made it easier for the exporter to deal directly with the end-user. But outside of the Customs Union, many have found that costs have soared, and delivery times have expanded. For some, Brexit has made the direct supply method impossible due to the complexity of laws about trading standards and certification.
This is where the role of local service providers can become important. Buyers, it can be argued, are more comfortable than ever to buy online from a foreign website, provided they have confidence in the supplier. But they will have expectations about delivery time and customer service. Non-business consumers will certainly not want to become embroiled in import declarations, paying duties or local taxes. Many commercial buyers will take a similar attitude. So even when we find a buyer, we have to find ways to meet their expectations on what happens next.
New ways of serving customers in Europe
Many B2C companies are discovering new ways of serving customers in Europe via fulfilment centres. This can avoid, or at least minimise the additional costs of export and import declarations and has the added bonus of making it possible to deliver promptly, without the risks of customs delays. But there’s no reason why the same approach can’t benefit certain B2B companies, especially when their customers are smaller businesses who don’t have experience of trading outside of the European Union. Rather than sending large quantities of product directly from the UK to another country, a consignment of stock is sent to be broken into individual orders on arrival, or to be held pending future orders. In the EU, once the exporter’s goods are customs cleared into any EU country, they’re in free circulation across the whole block.
None of this is intended to suggest that the days of the local representative are over, or even numbered. Technical aspects of products, or a need for local support and training are just some of the reasons why the local representative is essential for many exporters. For others, it might be necessary to adopt some kind of hybrid system, where e-commerce via the exporter’s website is used to complement the efforts of the local distributor. The undeniable fact is that the world is changing, and in many ways that pace of change has been given a firm kick in the last couple of years, and the pace may be accelerating as a result. Exporting companies just cannot expect everything to stay the same. The successful exporters will be the ones who recognise and anticipate the changing needs of their customers and prepare to meet the those changes in time.