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Indirect Exporting: Advantages and Disadvantages to Indirect Exporting

Methods of Indirect Exporting

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Indirect Exporting: Advantages and Disadvantages to Indirect Exporting

Indirect exporting means selling to an intermediary, who in turn sells your products either directly to customers or to importing wholesalers. The easiest method of indirect exporting is to sell to an intermediary in your own country. When selling by this method, you normally are not responsible for collecting payment from the overseas customer, nor for coordinating the shipping logistics.

1. Export management companies

An export management company (EMC) is one such intermediary. A good one will act in all respects as a global extension of your own sales-and-service presence -- more or less what you are attempting to do on behalf of a manufacturer! EMCs offer a wide range of services, but most specialize in exporting a specific range of products to a well-defined customer base in a particular country or region. For example, an EMC might specialize in exporting personal computer business software to educational institutional customers in Asian-Pacific countries.

An EMC is highly market-driven, representing your product along with other companies' non-competing products as part of their own import "product line" aimed at the customer base they have created. Generally, the EMC buys the product from a manufacturer and marks up the price to cover their profit. This is called a buy-resell arrangement. Other common compensation structures used by EMCs include both commission and buy-and-resell, start-up or project fee only, fee plus commission, or fee plus commission and buy-and-resell. An EMC will carry out all aspects of the export transaction:

  • Identifying international markets for your product or service.
  • Locating customers overseas.
  • Arranging agent/distributorship relationships.
  • Preparing, negotiating and handling all communication, documentation and shipping logistics.
  • Exhibiting at international trade shows.
  • Traveling overseas to meet with potential customers.
  • Setting up appropriate distribution channels.

Finding a good EMC is not that difficult. A good Internet search can help you access a list. For each listed company, take note of how long they have been in business, the number of employees, the products in which they specialize and the countries to which they export. Start your own select list of companies that export products similar to your own. Then consult the following for more referrals to add to your list:

  • A local trade association with an international focus. Attend a few meetings and talk some shop -- somebody's bound to know of an EMC, or even run their own.
  • The international division of your bank. They're likely to have an inside line on which companies are reputable and doing well.
  • As always, you can rely on your local chamber of commerce or small business assistance center. They generally know who has been in the export trading business for awhile. At the very least, they can point you to a good online exporting directory.
  • Freight forwarders and logistics experts also might provide you with the names of EMCs that use their service, but because you probably haven't made a sale at this point, you probably don't have a working relationship with a transportation company. Ask someone you know who uses a freight forwarder or reputable international transportation company regularly.
  • Your first and possibly last resort is - again - to search the Internet for listings under "Export Trading Companies" or "Export Management Companies."

2. Export trading companies

You might also use the services of an export trading company (ETC). ETCs are virtually identical to EMCs, but they tend to function on a more demand-driven basis, by which the demand of the market compels them to buy specific commodities. They usually have long-standing customers for whom they source products on a regular basis. For example, they might get a request from a customer to find a supplier of canned sweet peas who can provide twenty container loads a month for a given number of months. The ETC will then seek out a reputable manufacturer who can handle the demand at an economical price, and then arrange for the transport of the goods to the customer. You can track down a good ETC via the same channels recommended above for finding an EMC.

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