Distributor or agent: a dilemma

Why choose to work with a distributor or commercial agent? Both are independent contractors, have a customer base, are fluent in the local language, and will take local sales and marketing off your hands to help you get closer to your customers and enter a foreign market without hiring lots of extra staff.

The difference

Distributors run their business at their own expense and risk, while commercial agents act on your behalf and have less freedom when it comes to making decisions about pricing, for instance. However, there are more differences.

Making the right choice

If you have your own brand, you want to stay in control of your pricing, brand experience, customer base, and sales channels. This is especially common in the clothing industry and with luxury products like bags and shoes. In this situation, working with a commercial agent tends to be the more sensible choice. The drawback is that you assume all debtor risk yourself.

If far-reaching control is less important to you or if you want to immediately push stock to your overseas market, distributors are a better bet. Distributors add value by selling products at their own expense and risk. They support you with service or maintenance and their proximity to the end user facilitates faster delivery.

Finding a reliable partner

After deciding whether you are after a distributor or commercial agent, it is time to go looking for the right partner. In some cases, you might spontaneously receive a request to collaborate in a foreign market from a retailer who is eager to represent your company and promises lots of revenue. Do not jump in head first and do your due diligence.

Check that they are reliable and investigate whether they are not just looking to keep your products from the market because they are already selling a similar product from another supplier. They might actively offer customers the alternative product while your product gathers dust on the shelf. A request for cooperation will tell you that there is demand for your product in the country in question, providing insight into new opportunities and a reason to actively seek out a reliable business partner yourself.

Make sure you yourself are a reliable party for your foreign business partner. Check the Business Register regularly to make sure the details about your company are still correct.

Picking the right partner

Local partners represent your business abroad. If they act wrongly or fail to sell your products, your reputation will be damaged, and you will not make a profit. Talk to multiple candidates and draw up a list of requirements that your future partner should meet, such as product knowledge, a sound customer base and network, the number of employees you need, and what other products they sell. Make sure that your products complement their existing inventory and will not have to compete with other products, as well as checking that the company employs enough people to properly sell and service your product.

With this list in hand, hold talks with multiple parties and take a look behind the scenes at the companies themselves. The best match gets ‘the job’. It is important to trust your gut feeling: your partner should look good on paper and feel good, too.

Agreements

Regardless of whether you partner up with an agent or distributor, you should lay down agreements in writing. You do not have to, but we certainly recommend that you do.

Distribution agreement

If you opt for a distributor, draw up a distribution agreement to document arrangements about minimum stock levels, the duration of the agreement, service windows, and warranty terms, for example.

Agency agreement

If you opt for an agent, draw up a contract to document agreements about marketing work, a non-complete clause, commission, and payment dates.
By including a ‘Del Credere clause’ in your contract, you can encourage your agent to be more diligent, as they will be liable under Dutch law if a customer withholds payment or fails to pay you on time. With this clause, you are both responsible for debtor management, so your agent will take a closer look at customers’ financial situation when closing an order. If you do not draw up a contract, your agent is protected by the European directive for self-employed commercial agents.

Model contracts

The Association of Dutch Trade Agents and Importers (VNHI) and the International Chamber of Commerce (ICC) have model contracts , which you can easily adapt to your personal situation.

Good start

You have come to an agreement with a distributor or agent and have built a solid foundation: time for the first orders to start coming in. Help your partner get off to a good start by sending them technical specifications, for instance, so that they can solve problems themselves. Provide sales training focused on the Unique Selling Points (USPs) of your product. Support your partner at trade shows, provide technical manuals, flyers, website copy in the right language, and make sure you mention your partners on your own company website.

Keep in touch with your local partner to build a bond together. Your partners have multiple suppliers and have to manage their time and attention accordingly. Your goal is to have them go the extra mile for you, not for other suppliers. To make that happen, you need to invest in a good relationship. Consider asking them how many quotations they issued last quarter, for example. Check in with them to see how things are going, and whether they need more support from your end.

The future

If you intend to expand and export your products to more countries, your network of distributors and commercial agents will grow along with you. When you become successful, managing local partners will become a full-time job.