If you are considering selling your goods or services abroad, rather than carrying out direct sales, you may consider appointing an agent or a distributor in the overseas market. Such a person or organisation may have local knowledge and contacts you do not have and provide a cost effective alternative to setting up your own operation there. It is also possible to appoint such a person for the UK market. But which is the best model to use?
There are basically two types. A sales agent acts as the intermediary between you and the customer, entering transactions on your behalf and in your name with the resulting sales agreement being between yourself and the customer. The other is a marketing agent, who makes introductions for you to follow up directly. You have greater control over an agent’s activities than a distributor’s, including on prices and marketing, and on the relationship with the customer. An agent may however be entitled to a lump sum payment on termination and, for tax purposes, you may be regarded as trading in that territory.
Unlike an agent, a distributor does not have the authority to enter into contracts on your behalf; it buys stock from you and resells on its own account and at its own risk and will normally trade under its own name. As a result of taking on more risk than an agent, a distributor will generally receive greater remuneration through margin than an agent receives by way of commission on sales. There will though be more competition law issues to consider when appointing a distributor.
Other possible models include setting up a franchise operation or the licensing of your brand to a foreign supplier.
Either way, it is important a written agreement is in place to determine the rights and obligations of the parties, to deal with competition law issues and with what happens when things go wrong, including termination payments with agents.