Guide

Entering overseas markets

Advantages and disadvantages of using an overseas distributor

A distributor buys your goods from you and then takes full responsibility for selling them on in the overseas market. While the role of a sales agent is to find you customers, a distributor is your customer.

Advantages of using an overseas distributor

  • The main advantage of using a distributor is simplicity. Distributors enable you to access international markets while avoiding logistics issues and many trade-related risks.
  • The distributor is usually responsible for the shipment of goods, and the accompanying customs formalities and paperwork.
  • If you sell to a UK-based distributor, you avoid currency-related risks.
  • It would be easier for a distributor with an established reputation and contacts list to introduce a new brand to the market than it would be for you.
  • Distributors generally spend on marketing to support their sales effort, although they will sometimes expect you to make a financial contribution.
  • A distributor will often offer credit facilities to potential customers.
  • Many distributors carry a stock of the products they sell - so they buy in bulk, and take care of warehousing and inventory control in the overseas market.

Disadvantages of using an overseas distributor

  • In return for taking on your trade-related risks and burdens, distributors will expect heavy discounts and generous credit terms from you.
  • You may lose control of the way your products are marketed and priced.
  • If you use a sales agent, you can use the commission structure to motivate them - there's no similar mechanism with a distributor.
  • Distributors often demand a long period of exclusivity, so you need to be sure that you choose one that has experience selling your type of products and has customers for the kind of goods you sell. Read more aboutĀ finding and contracting with overseas agents and distributors.

It's important to seek advice from your legal adviser before concluding a distributorship agreement.