I have noticed that the true meaning of the terms used to describe export Sales Partners is not always fully understood. Terms such as Export Distributor, Importer or Broker are not always clear. This is also the case with other terms such as Sales Agent and Wholesaler and most likely many more.
So what do these terms mean?
To add to the confusion, trade contacts in different export markets will use the terms slightly differently to the way we will use them in Australia.
The terms Export Distributor, Importer, Broker, Wholesaler and Sales Agent all refer to business operators who operate as potential Sales Partners who operate at varying stages of the distribution chain. Typically they serve as the interface between an Australian product or service provider and their end customer or other Sales Partners who on-sell them to their end customer.
Sales Partners are a term that I use to refer to the broad group of businesses that help Australian product and service providers gain distribution and sales revenue from new markets.
I refer to them as Sales Partners because they partner with you in sharing the risk by investing in the Sales and Marketing of your products or services on your behalf in return for a margin of some form.
The Export Sales Partners for Australian product or service providers can take the form of other Sales Partners such as Distributors, Wholesalers and Retailers, Sales Agents and more.
One of my previous posts The Baker Marketing: 2014 Marketing Summer School (part 4) will provide you with more information regarding your Market Channel planning and decision-making. Today we will simply be focusing on what the terms mean in the first place.
Export Importers, Distributors and Wholesalers
Export Distributors, Importers and Wholesalers generally have one thing in common, that is they typically purchase product and warehouse it. This is quite a commitment and requires the resources to do three important things, namely:
- Purchase the product in the first place
- Provide warehousing facilities i.e. they need access to a warehouse facility
- Hold the stock until it is on-sold within their marketplace or elsewhere
Export Distributors, Importers and Wholesalers will on-sell the product onto different players at varying levels within the distribution channel.
An Importer for example may simply purchase product in container or multiple container quantities with the intention of simply on-selling it to a network of Regional Distributors or Wholesalers.
A National Distributor may refer to a business that plays exactly the same role that I have described above for an Importer.
Export Distributors and Wholesalers tend to represent organisations that are more localised in their on-selling activities. Export Distributors and Wholesalers will often be the Sales Partners who on-sell Australian products to Retailers, other small Local Wholesalers and End Customers.
Although the terminology is often interchangeable, the common link remains that Export Distributors, Importers and Wholesalers will generally purchase product, warehouse it and on-sell it on behalf of their suppliers.
In summary, the Export Distributor, Importer or Wholesaler will take ownership and physical possession of the product from the Australian supplier. They will then handle all further physical distribution and logistics on behalf of the Australian supplier, albeit with further support and/or financial contribution depending on the arrangements entered into.
My previous post Export Pricing – The difference between Margin and Mark Up will provide you with an introduction to understanding margins and mark-ups.
Export Brokers and Agents
Export Brokers and Agents will typically operate on different business model to Importers, Distributors and Wholesalers.
The business model of the Export Broker or Agent will often not include taking ownership or possession of the product.
Instead they will present your product or service offering for sale to buyers with the intention of ‘brokering’ a sale and then extracting a margin.
The Export Broker or Agent will generally rely on the Australian supplier to handle all physical delivery and logistics of the product or service to the customer.
The customers targeted may be another Sales Partner or the End Customer depending on the product, service and industry.
Often Service Providers will use the term ‘Agent’ when looking for a Sales Partner to help on-sell their services in an Export market. However, the term Agent is regularly used for various product orientated industries.
Exceptions, Variations and Hybrids
Outlined above is a summary of what the various terms mean based on my own experience in various export markets.
There are always variations and combinations that will occasionally create confusion.
Export Distributors, Importers and Wholesalers will often ‘broker’ some products for which they do not wish to commit to holding stock. They will also purchase small quantities of selected products to on-sell to their ‘boutique’ retailers whilst simultaneously acting in a ‘broker’ role in dealing with sales to major supermarket buyers at head office level on a ‘brokerage’ basis.
Businesses who are primarily ‘Brokers’ will also often purchase quantities of product to warehouse and on-sell to their own direct customers or boutique retail customers.
Country Specific Variations
To make it even more challenging to stay on top of what the terminology refers to many countries seem to adopt their own variations on the themes.
In the United States I noticed that the term ‘Distributor’ often referred to companies that specialised in physically delivering the product and not playing any role in the sales and order-taking process.
In Japan the term ‘Wholesaler’ in the food industry often referred to a network of small wholesalers who on-sold to a chain of ever-declining sized ‘smaller wholesalers’. The end of the boutique ‘smaller wholesaler’ could in fact be making deliveries on the back of a motor scooter down the side of a mountain to service a small regional community. The point being that the term ‘wholesaler’ could refer to a very small or ‘micro’ business of which a significant network was required in order to sell volume.
In a number of South East Asian markets I noticed that in many product categories the term ‘Distributor’ was often rarely used. Instead, the term ‘Importer’ was used to differentiate the operator who brought the product into the country. Those operators who on-sold the product but did not import it into the marketplace were collectively referred to as ‘Wholesalers’. Thus the term ‘Distributor’ did not often get a mention.
In some European markets I found it to be almost the complete opposite of this where the term ‘Distributor’ was used to refer to the operator who did the initial importing.
What does this all mean?
So the moral of this story is that you have to be prepared for all variations. It helps if you are inquisitive enough to get to the bottom of what your Export contacts and customers actually mean when they use these terms.
Some of the terms refer to very specific roles and responsibilities when it comes to the Export Sales and Marketing of your products or services so it is important to know which is which.
Which Export Sales Partner is Right for Your Business?
In my next article I will provide suggestions for you to consider when deciding exactly which Export Sales Partner is right for your business.
Step 5 of my previous post The Baker Marketing: 2014 Marketing Summer School (Part 8) and also The Baker Marketing: 2014 Marketing Summer School (Part 9) provide information regarding promotions planning and marketing action plans. This will help you determine exactly what it is you need your Sales Partner to implement.
In the meantime I suggest you start creating a list of exactly what role you want your Export Sales Partner to fulfill.