Wholesalers, distributors, brokers and agents - Sales Management

Wholesalers and distributors

Where a product user does not warrant direct call from a manufacturer’s representative, perhaps because of low volume orders, remoteness of location, or simply a limitation on sales resources such that all potential customers cannot be covered by the supplier’s team, another alternative is to introduce the customer to a wholesale stockist or other distributorswho can provide the products and any supporting service. These other distributors are not agents, in that they take title to the goods and resell on their own behalf.

They may have a formal territorial franchiser distribution agreement with the supplier,or simply take goods on a non-exclusive wholesale basis. Exclusive distributors maybe more aggressive in pushing a supplier’products, but often have the limitation of not covering all of the potential customers within any assigned geographical area or trade channels.

Brokers and agents

An extension of wholesale distributors could be the appointment of sales brokers (see Figure), who effectively act as sales agents on a fee or commission basis without taking title to the goods. Some brokers will go beyond a pure agency role, and actually hold stocks where they have the facilities to provide logistical support such as physical distribution,invoicing and credit control. The role of sales brokers is well established in the USA where few companies can afford national sales organization. In other markets the term broker may not be in use, but therole is often filled by independent sales agents.

Customer contact

At some point in the selection process it will be essential to visit potential customers and end users (for industrial products) to satisfy yourself that the potential agent or distributor has market acceptance and credibility,and to get a feel for how aggressive the potential agent may be in pushing your products. Should you be marketing consumer products, there is no substitute for your own random store check to establish:

  • strength of competitive products (e.g. user attitudes, usage, distribution, display, etc.)
  • which distributors, brokers or manufacturers are most effective in obtaining displayed distribution (retail
    products)
  • which agents and distributors are know nand respected by store managers or product end users: strength of agent/distributor relationships (e.g. reputation and goodwill) with customers
  • a distributor’s practices in respect of display, merchandising, pricing and promoting products
  • market pricing practices for the product category through the various trade channels (e.g. product price levels, key price points, trade margins and terms)
  • sales achievements of your potential agent or distributor with products already represented
  • your potential representative’s ability to implement your marketing plans and programmes
  • your potential agent’s/distributor’s selling skills.

Alternative-distribution-models

Alternative-distribution-models1

Agreements with agents and distributors

Before entering into any exclusive agency representation or distribution agreement,check the local laws that may be applicable to such agreements in the market. Some countries have agency laws that will give protection to agents, after termination of a contract,in respect of future commissions on business from customers introduced by them (this is the position within the European Union).

There are probably as many different forms of agreement as there are lawyers, or so it seems to the lay person, but the key points essentially cover:

  • product exclusivity and product range or extensions
  • territorial exclusivity
  • rights to supply other parties
  • limitations to export to other territories
  • method of quoting prices
  • duties of the principal
  • duties of agent/distributor
    • performance clauses
    • special storage, handling and packaging
  • principal’s right to accept or refuse orders
  • market pricing and costing guidelines
  • marketing programmes and planning
  • promotional responsibilities and materials
  • payment terms
  • commission arrangements
  • reporting/marketing information reports
  • training of agent or distributor’s personnel
  • warranties
  • indemnities
  • limits of authority
  • confidentiality clauses
  • trademark/patent protection
  • dispute handling
  • duration of the agreement
  • assign ability
  • termination
  • non-waiver clauses
  • entire agreement clause
  • force majeure clause
  • applicable country for legal enforcement and interpretation.

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