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    1. Siennak is offline

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      #1

      Role of Agents and Distributors in Wholesale Business - Understanding Agencies and Distributorship

      Hello all,

      I am new to wholesale and want to know what is the role of agents and distributors?

      Can someone help?
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      MissWholesale is offline

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      #2
      Hello Siennak,

      Welcome to Wholesale Forum

      Many brands and manufacturers rely on agents and distributors to represent their business in international markets. Understanding the differences between the roles of agents and distributors is essential to understanding your risks of representing a brand in your country. Responsibilities of agents and distributors vary by country and industry, and also depend on the their contractual agreement with the brand / manufacturer; it's crucial that you review the terms of the contractual agreement between the two parties, to evaluate which responsibilities are covered by the agent / distributor and which responsibilities will be passed to you as a retailer.

      1) Role of an Agent

      Agents are appointed by brands and manufacturers to promote the sale of their products and services, but are generally not responsible for goods ownership. This means that with agents you bear a greater share of responsibility. Due to this transfer of risk, agents are generally able to accept a lower percentage commission on sales. In general, an agent simply procures and forwards orders to the brand / manufacturer / exporter, the exporter then delivers the goods or services directly to the customer. You, the customer, would then act in most cases as the importer, and are therefore subject to the same responsibilities as any other importer in your country. The manufacturer / brand is only responsible for compliance in their own country, and even then you would need to be in a position to challenge the brand / manufacturer legally in their own country should anything go wrong. The agent has very limited responsibility, except for ensuring your order reaches you.

      Agents may operate on an exclusive basis or a non-exclusive basis. In an exclusive basis, the agent acts as a sole agent for a company’s goods or services in a specific export market whereas in a non-exclusive basis, the agent acts as a one of agents for the exporter in that market. Obviously working with exclusive agents means you would have greater exclusivity in your market.

      Advantages of working with an agent
      • Greater control of product branding, marketing and pricing.
      • Agents can work on lower commissions, which can lead to higher margins for you.
      • Agents tend to have smaller product ranges compared to distributors, hence they can offer more focus and expertise on individual products.
      Disadvantages of working with an agent
      • As agents work on a commission basis, they are less committed to your business success.
      • A sales agent is likely to have fewer resources compared to a distributor.
      • Less brand recognition: agents do not get involved in increasing awareness for the products they promote, unlike many distributors. Marketing is mostly in your own hands.
      • You need to invest more of your own time in monitoring the performance of an agent's work, whereas distributors offer higher service standards with limited intervention on your part needed.
      • Since working with agents transfers many of the responsibilities to you as the importer, factors like product recalls, warranty claims and currency fluctuations can all have an effect on your profitability.
      • You are at risk of losing market share if you use a non-exclusive agent or if you agent is approached by a competitor. Distributors are more prone to maintain exclusivity relationships and have a greater legal incentive to abide by the terms of any contractual agreements you may have signed with them.

      2) Role of a distributor

      A distributor buys goods from manufacturers, imports them (if the goods were manufactured overseas) and then resells them to retailers. In some cases, the distributor may sell goods to other wholesalers as well who then sell to local retailers or end users, usually in smaller quantities compared to the distributor's minimums. In comparison with an agent, a distributor has more responsibilities in your own country, which reduces your risk; as a result, they require a higher margin. Their higher margin may impact on your product pricing and make your end price noncompetitive depending on the marketplace in which you sell. It is also important to note that many distributors are also responsible for generating brand and product awareness in their country on behalf of the manufacturer. Their prices may be higher compared to agents, however their products come with lower risk to you and often with greater market awareness; therefore their higher prices could easily be offset by greater demand and lower risks for you.

      Further, each distributor can offer different benefits and skill-sets. Make sure you discuss your objectives and expectations beforehand, to verify that the distributor can assist you meet those targets.

      Advantages of working with a distributor
      • Distributors can help you in marketing and promotion your product.
      • Distributors have to work within brand / manufacturer imposed guidelines, leading to higher service quality.
      • Market risks are handled mostly by the distributor.
      • The distributor is actively involved in growing a customer base for the product.
      • Distributor reduces your order lead times, by holding stock in hand.
      Disadvantages of working with a distributor
      • You have less control over the selling process and selling parameters (like price).
      • Distributors bear greater risk, consequently they charge higher wholesale prices. Those higher prices may throw your product out of your market, depending on the level of competition of the marketplace in which you sell.
      • You have limited influence on the product branding.
      • A distributor is likely to represent many different products at any one time, which limits the attention and time they can dedicate to a single product.
      • Sales-rights are controlled by the distributor on behalf of the brand / manufacturer. Make sure you have a strong contractual agreement in place to retain your sales rights over time.
      To learn more about finding and verifying suppliers see:Hope this helps
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    3. Thank you for this post:

      SandroRibeiro (27 Nov 2014), UTI Paris (03 Feb 2015)

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