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Indirect Exporting: Advantages and Disadvantages to Indirect Exporting

Export Intermediaries: Pros and Cons

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In continuation of indirect exporting methods, here we explore 'other' export intermediary options. We also offer the pros and cons to using an export sales intermediary.

3. Intermediaries

Indirect exporting can also involve selling to an intermediary in the country where you wish to transact business, who in turn sells your products directly to customers or to other importing distributors (wholesalers). Under these circumstances, you will not know who your ultimate consumers are. When selling by this method, you are normally responsible for collecting payment from the overseas customer and for coordinating the shipping logistics. In some instances, the overseas agent might request that they be allowed to handle the shipping, usually because they receive special transportation rates from carriers with whom they've done volume business for years. In this case, you will need to arrange for the cargo to be ready by the shipment date. You must still collect payment from the customer, but your actual involvement in the transaction is minimal. It is nearly as easy as a domestic sale.

The advantages are:

  • It's an almost risk-free way to begin.
  • It demands minimal involvement in the export process.
  • It allows you to continue to concentrate on your domestic business.
  • You have limited liability for product marketing problems -- there's always someone else to point the finger at!
  • You learn as you go about international marketing.
  • Depending on the type of intermediary with which you are dealing, you don't have to concern yourself with shipment and other logistics.
  • You can field-test your products for export potential.
  • In some instances, your local agent can field technical questions and provide necessary product support.
The disadvantages are:
  • Your profits are lower.
  • You lose control over your foreign sales.
  • You very rarely know who your customers are, and thus lose the opportunity to tailor your offerings to their evolving needs.
  • When you visit, you are a step removed from the actual transaction. You feel out of the loop.
  • The intermediary might also be offering products similar to yours, including directly competitive products, to the same customers instead of providing exclusive representation.
  • Your long-term outlook and goals for your export program can change rapidly, and if you've put your product in someone else's hands, it's hard to redirect your efforts accordingly.

Piggybacking your goods or services is another viable indirect export option. With this method you allow another non competing company, which has a customer and distribution base already in place, to sell your company’s product or service in addition to its own – giving you immediate overseas market access at a nominal expense. If you have no intention of ever selling direct, this process works fabulously.

But only you can determine which export strategy suits your needs. Your choice will depend on your goals, your available resources, and the type of business you run. I do recommend that you choose the method that makes you most comfortable and lets you focus on your own business priorities, so that you won't be wasting your energy worrying that something isn't working. At the same time, though, I think I've made my bias in favor of direct exporting abundantly clear -- it's the only way to maximize control, profits and market presence. I urge you to move in that direction as soon as you feel able.

Early in my career, I worked with an export trading company that purchased goods from my company for export to Japan. I, in turn, was acting as an export trading company for the manufacturer, who thus had two intermediaries between themselves and their foreign customers. Imagine the high retail price the consumer paid once the product landed in their country! If you are two or three times removed from a direct relationship with your customers, think twice -- or even thrice! -- about how you might get to them directly. After all, the name of the global game is generating your own network of customer relationships. The sooner you begin building this foundation, the sooner you will have a flourishing import/export business.

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