Comparison between sales agents and importers
These are historically the two big options available for exporters. The figure of the importer, which in the European Union usually involves distributionship, has been the traditional objective of exporters when entering new European markets.
It is generally an intermediary that offers the seller a “turnkey” service: once the importer has received the goods under the terms agreed with
the manufacturer, the latter only has to raise his invoice; the rest of the operative in his market of destiny depends on the importer.
Undoubtedly it defines an attractive, comfortable relationship for a high percentage of companies, especially SMEs that have scarce resources to allocate to a single market.
However, if your company has already experience in collaborating with importers, most likely several of these uncomfortable situations will be familiar to you:
– Profit Margin: Have you ever thought how unfair it is that your importer unilaterally marks margins that are often similar or superior to those you obtain as a manufacturer? Don´t you think that if your importer reduced his margins to reasonable levels his sales would be much higher?
– Financing and Payment Method: Doesn´t your importer impose you a financing and a form of payment that usually does not correspond to his sales volume? Do you know how your importer charges his own customers?
– Control of communications: Does your importer faithfully transmit the values and virtues of your company and products? Does your importer prioritize his own brand over that of the products that your company sells?
– Number of references: Today importers cover a number of references that is difficult to handle. Don´t you have the feeling of being “one more of a lot” when you visit the store of your distributor? How well does your distributor know the products/services that you manufacture?
– “Reactive” selling: Don´t you think that if you didn´t “push” your importer, he would hardly do any commercial work on your products and would only limit himself to making them available for his clients? Does your importer impose excessive commercial efforts on you?
– Exclusivity: Non-negotiable aspect on the part of your importer, he will usually want the entire market regardless of the resources he has and his geographic coverage. Have you noticed how much your importer’s sales are concentrated in the area where he has his offices?
– Direct knowledge of the clients: Undoubtedly the most worrying; you hardly get to know your final clients! Do you know who they are, what their concerns are, what they like most about your product, and what less? Some importers will tell you this information, but most don´t and they will ask you to mind your own business when you ask them.
Do any, maybe most, of these situations sound familiar to you? What is your experience with foreign importers/distributors? Are you satisfied with their work, or do you simply believe that they are the best that your company can aspire to? Or maybe you think that your importer could sell much more, but at least he doesn´t bother you while you prevent your competitors from collaborating with that importer?
It is clear than an importer is not as efficient as he should be. The reason is very simple: the balance of forces between the supplier and the importer is not usually compensated, leaning towards the latter. Importers usually impose their conditions with the argument that they know the market best and that the conditions offered are the same as those accepted by his other suppliers.
On the opposite side sales agents usually let you negotiate the terms of your collaboration far beyond the price factor that importers focus on.
Let’s see below how the agents position themselves in front of the situations described in the first half of this post:
– Sales Commission: The agent does not add his commission to the sale price, but from the beginning it is your company as the Principal that must integrate those commissions, discounting them from your profit margin. In addition, the level of these commissions is generally considerably lower than the margins applied by distributors.
– Financing and Payment Method: Very simple, the one imposed by the market itself. Your company will invoice directly to the clients, not to the sales agent, reason why you will know it at first hand.
– Control of the selling price to the end user and of all his communication: You as the Principal have easy access to your clients and you offer them your own tariff. You are even able to turn price into a powerful selling argument.
– Number of references: Sales agents have limited reference capacity i.e. portfolios of products/services that they offer to their clients. On the other hand, the larger the range of products/services of your company, the greater dedication you will receive from your sales agent.
– “Proactive” selling: The sales agent is the proactive professional par excellence: if he doesn´t sell, he doesn´t earn a commission. Is there a greater incentive than that?
– Exclusivity: The sales agent will also ask for exclusivity, just like the importer. But with the agent, it is more common to negotiate geographical areas, specific sales channels and even product lines, not the entire market. In practice, these different levels of exclusivity allow you to segment and have more than one agent in the same market, generating a certain level of competence, very beneficial for your company.
– Knowledge of the clients: Last and almost more important, you will know your clients personally. As we have said your company directly invoices them and access to them is less restrictive. The level of opacity of the agent is much lower than that of the distributors, which will allow you to really know the market and act accordingly.
Of course sales agents are not perfect, but they are often a more effective way to cover a market and even more so if you are introducing your products/services in a market for the first time. Nevertheless, you need to do things right to collaborate with sales agents if you want to benefit from the advantages they offer to Principals.
What is your experience with commercial agents? What are the biggest flaws you’ve encountered?