Distributors vs Agents : Key Differences
You’ve got a fantastic product and would like to sell it overseas.
However, before you hunt for contacts abroad, deciding how you intend to penetrate the market of your choice is essential.
Some people use distributors to do business, while others use agents.
Distributors vs Agents : Both have unique benefits and drawbacks, so it’s important to understand the differences before deciding.
When it comes to selling products overseas, there are 2 main ways to do it:
- through distributors
- through agents.
Distributors vs Agents
- Distributors can provide you with a direct line to your target market.
- However, they can also be more expensive.
- Agents, on the other hand, are typically cheaper.
- However, they may be less familiar with the customs and regulations.
- Both methods have pros and cons, and it’s important to understand which will work best for you and your product.
1. Distributors Buy Your Goods; Agents Don’t
- Distributors buy your goods and then resell them to retailers.
- They usually have much experience in the industry and can help you get your product into stores.
- Agents don’t buy your goods but use their contacts and relationships to help you find buyers.
- They usually have less experience than distributors, but they can be cheaper.
2. Agents Represent You. Distributors Don’t
- An agent is your representative, meaning everything he does is supposed to be authorised by you.
- Any promises made to third parties by an agent are as good as if you made them.
- Therefore, you must be kept apprised of all the agent’s activities.
- A distributor is forbidden from pretending to act on your behalf or promising that you will do something for a third party, such as offering a discount.
- Any transactions between a distributor and a customer don’t involve you.
- The distributor does not function as your representative and is obliged to handle sales without your help.
- It’s important to remember that the distributor is an independent business and should be treated as such.
3. Agent’s Mistakes Are Your Mistakes, Distributor’s Mistakes Are Not
- The principal appoints the agent to carry out certain activities on its behalf.
- This means that anyone employed by your agent to carry out its activities is technically acting on your behalf.
- This, in turn, means you might be directly responsible for the acts of a careless, negligent or misbehaving employee.
- You need not worry as much about whom the distributor chooses to hire, as you cannot be held liable for their actions since they are an independent business.
4. Agents Have To Provide You With A Customer List, Distributors Don’t
- Once a distributor has purchased goods from you, they are off your hands, and it is up to the distributor how and to whom he will sell them.
- The distributor may sell the goods to other businesses or consumers.
- The distributor may also choose to sell the goods in a specific region or to a specific type of customer.
- It is crucial to remember that the distributor is not obligated to sell the goods to anyone, and you, as the supplier have no control over how the goods are eventually sold.
- An agent typically works much more closely with you and will provide you with customer lists so you can have the products manufactured accordingly.
- This way, you can ensure that the products you sell are what the customers want and that you are not overproducing or underproducing items.
- This allows for a much more streamlined and coordinated manufacturing process.
5. Agents Have More Influence Over Customer Satisfaction; Distributors Don’t
- Every businessperson knows that appeasing angry customers is a difficult task.
- When selling through an agent, you have far more control over issues like after-sales services and warranty works and can ensure that your customers are satisfied.
- By providing good customer service, you can turn an angry customer into a satisfied customer who will likely recommend your product or service to others.
- Good customer service can help build customer loyalty, increasing sales and profits.
- While the distributor may be better equipped to market and sell your products than you are, there are also some risks associated with selling through a distributor.
- For example, the distributor may not be as motivated to sell your products as you are and may instead prioritise sales of its products.
- If the distributor goes out of business, your customers may not be able to find your products anymore.
Although the goal of agents and distributors is to sell your products in a particular market, the dynamics of your relationship with each can be quite different.
Regardless of your path, always keep your lines of communication open with your agent or distributor.
They are a vital part of the process; if you treat them well, they will be more likely to work harder to sell your products.
A distributor can get you more sales, but an agent can offer you more support. We understand that this can be a difficult decision. Speak to us via Lawyer Anywhere; we’re help to help you every step of the way!
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Important Disclaimer
The information contained here only provides general information on the subject covered. Nothing in this publication should be regarded as constituting legal advice concerning any particular business, operational or other situations you might face. Further, the law may have changed since the first publication, and the reader is cautioned accordingly. Please seek professional advice before taking any action.