Exporting Your Goods
Working with Intermediaries
Even if you are exporting directly to buyers, intermediaries can be extremely helpful as they already have established networks in your export market. The following 11 questions and answers can help you select an appropriate intermediary:
What types of intermediaries should we consider?
What is the difference between an agent and a representative?
What types of agents are there?
What services can foreign agents or representatives provide?
How is a foreign distributor different from an agent or representative?
What is an export management company (EMC), and what does it have to offer?
What is a trading house, and what does it have to offer?
Where can I search for trading houses?
Who can help us choose an intermediary?
How can we protect ourselves if we have made a poor choice?
How should we choose an intermediary?
What types of intermediaries should we consider?
- Agents
- Representatives
- Distributors
- Export management companies
- Canadian trading houses
What is the difference between an agent and a representative?
Agent: secures orders from foreign customers in exchange for a commission.
Representative: operates within a specific geographic area and also sells related lines of goods or services.
Both agents and representatives may be authorized to enter into contractual sales agreements with foreign customers on your behalf. Normally they do not take ownership, and you pay them a commission only when they sell your goods.
An agreement with a foreign agent or representative immediately gives you a presence in your export market. This is usually less costly than setting up your own direct sales operation. Your representative can also make more frequent sales calls than you probably could.
What types of agents are there?
- Commissioned agent: The agent is paid a percentage of a sale only when the sale is made.
- Retainer agent: The agent is paid a fixed amount to do certain work for your company over a specified period of time whether they do anything or not.
- Retainer / commissioned agent: The agent is placed on a retainer but also receives a percentage from each sale.
- Agent based in Canada: A foreign national living in Canada but sells goods to their homeland through their networks there.
What services can foreign agents or representatives provide?
- Conduct market research
- Identify potential customers and market to them
- Advise you on financing and transportation options
- Translate for you and act as your interpreter (or retain a simultaneous interpreter for you)
- Validate the translation of your publicity materials
- Clear your goods through customs in your export market
- Make collections
- Help you with local travel and accommodation arrangements
- Supply information on local business practices, laws, and cultural traditions
- Provide guidance on local government regulations
How is a foreign distributor different from an agent or representative?
Unlike agents or representatives, distributors actually purchase your product and resell it to local customers. Often, they set the selling price, provide buyer financing, and look after warranty and service needs. They can usually provide after-sales service in the foreign market.
What is an export management company (EMC), and what does it have to offer?
An EMC basically acts as your export department and handles all aspects of export management for a commission. Typically EMCs have established sales networks abroad and may even have foreign sales and warehouse subsidiaries, though more typically they appoint representatives and distributors. An EMC can be particularly useful if your firm does not have staff available to oversee the export development process.
What is a trading house, and what does it have to offer?
Trading houses are Canadian intermediaries that market your goods abroad for you. A full-service trading house can handle a great many aspects of exporting such as market research, transportation, appointing distributors or agents, exhibiting at trade fairs, and preparing advertising and documentation. Some act as “principals” and will buy your products outright (in which case it is a domestic sale), while other act as “agents” and sell on commission. Some specialize in specific industry sectors, while others focus on particular foreign markets.
Where can I search for trading houses?
Who can help us choose an intermediary?
- Other Canadian exporters
- Trade associations
- Business councils
- Banks
- Canadian Trade Commissioners abroad
How can we protect ourselves if we have made a poor choice?
You can enter into an initial limited-term trial agreement. If the foreign intermediary does not meet your expectations, you can find an alternative once the trial period is over.
How should we choose an intermediary?
Here are some questions to consider in your selection process:
Size of sales force
- How many field sales personnel does the agent or distributor have?
- What are its short- and long-range expansion plans, if any?
- Will it have to expand to accommodate your needs properly? If yes, would it do so?
Sales record
- Has its sales growth been consistent? If not, why not? Try to determine its sales volume over the past five years.
- What are its sales objectives for the next year? How were they determined?
Territorial analysis
- What territory does it now cover?
- Is it consistent with the coverage you're looking for? If not, is it willing and able to expand?
- Does it have any branch offices in the territory you wish to cover? If so, are they located where your sales prospects are greatest?
- Does it plan to open additional offices?
Product mix
- How many product lines does it represent?
- Are they compatible with yours?
- Does it represent any other Canadian firms? If so, which ones?
- Would there be any conflict of interest?
- Would it be willing to alter its present product mix to accommodate yours, if necessary?
- What would be the minimum sales volume needed to justify handling your lines?
- Do its sales projections reflect this minimum figure?
- From what you know of the territory and the prospective agent or distributor, is its projection realistic?
Facilities and equipment
- Does it have adequate warehouse facilities?
- What is its method of stock control?
- Does it use computers? Is their software compatible with yours?
- What communications facilities does it have?
- If product servicing is required, is it equipped and qualified to do so? If not, is it willing to acquire equipment and arrange for training?
- If so, to what extent will you have to share these additional costs?
- If necessary, would it be willing to inventory repair parts and replacement items?
Marketing policies
- How is its sales staff compensated?
- Does it have special incentive or motivation programs?
- Does it use product managers to coordinate sales efforts for specific lines?
- How does it monitor sales performance?
- How does it train its sales staff?
- Would it be willing to share expenses for sales personnel to attend seminars?
Customer profile
- What types of customers is it currently in contact with?
- Are its interests compatible with your lines?
- Who are its key accounts?
- What percentage of its total gross receipts do these accounts represent?
Principals represented
- How many principals does it currently represent?
- Would you be its primary supplier?
- If not, what percentage of its total business would you represent?
- How does this percentage compare with other suppliers?
Promotional thrust
- Can it help you research market information?
- What types of media does it use, if any, to promote sales?
- How much of its budget is allocated to advertising? How is it distributed?
- Would you be expected to share promotional costs? If so, how will this amount be determined?
- If it uses direct mail, how many prospects are on its mailing list?
- What printed material does it use to describe its company and the lines it represents?
- If necessary, can it translate your advertising copy?
- Does it have its own website?