Trade Intermediaries: Role, Services and Tips
A trade intermediary works as an agent between the manufacturer of a good and the end user of the product or service. As an intermediary, your job is to make the export process as easy and seamless as possible for the products/services you represent.
As the export department or authorized export representative, you seek exclusive rights to represent a company/product line in specified markets for X years, with an option to renew. You will seek to develop markets, screen and qualify potential buyers and distributors, and present the manufacturer/wholesaler with confirmed purchase orders backed by guaranteed payments. You handle all documentation, payment and delivery arrangements. In return, you expect to receive a commission on the value of the export sale.
Typically the percent ranges from 5% on low-margin commodities up to 15% on more elastic goods. As needs arise, you may also offer to purchase the products for export. In that event, you will arrange to pay directly, take title to the goods and sell them to the overseas customer. If you take title of the goods, you may charge more of a commission to cover the finance risk and invoicing.
So how do you do all this? To help you in this trade intermediary role, the CITD can provide all the building blocks to help you expand your overseas markets and sales. Here’s a sampling of what we do for you:
- Assess your/your client’s export readiness and market potential
- Identify best markets for the products you represent
- Assess the product’s competitiveness in each market
- Develop effective market entry strategies
- Find overseas buyers and distributors
- Promote the products in target markets
- Respond to overseas inquires
- Issue price quotes [for the products you represent]
- Present purchase orders to you with delivery terms
- Arrange secure financing and payment terms
- Complete all export documents
- Arrange delivery of the products
The following are some tips for start-up trade intermediaries (a.k.a. export management companies, or EMCs). There is much more to this subject than can be discussed in one message, but this will give you some initial food for thought.
The question, “Which comes first, the chicken or the egg” presents a similar dilemma for the new EMC—should you seek buyers first (search for trade leads, etc.) then try to find matching suppliers? OR, should you try to find suppliers to represent, then try to find matching buyers? No matter where you start, you must convince your “client” – the buyer or the seller – that you have the expertise to effectively do the job. Establishing credibility for a newcomer is not easy.
A second problem is, how to avoid direct contact between the supplier and buyer you brought together (bypassing you).
A third problem is a buyer’s perception that dealing through middlemen raises the cost of the product (commission add-on). This is often a false perception, because your modest commission is probably much lower than the cost if the supplier had to maintain an in-house export function.
Establish credibility: You need some kind of literature about you and your company to answer the question: “who are you?” and “what can you do for me?” This could be a flyer, brochure and/or a webpage.
Product Focus: It is best to focus on products you know most about, rather than any or all products that come across your radar screen. At some point, your prospective supplier or buyer will ask how this product stacks up against the competition (why should I buy yours instead of X; or how well can you explain why a customer should buy product instead of brand X). You should ideally be able to converse persuasively about any product you handle.
Market Focus: Although you may receive unsolicited inquiries from time to time, you’re better to determine and systematically pursue the most promising markets for the product. This requires investigation – talking to others in the industry, market research, contact lists of buyers/distributors, etc.
Protecting against direct buyer/seller contact: This is a contractual issue. If you undertake any contacts in behalf of any buyer/seller client, you obviously do not want to disclose names of your “interested” contacts until you have a written agreement with your client that protects your interests in a specified time frame. If the agreement is properly worded, even if one or the other party attempts to bypass you at some point within the time frame, you are legally entitled to the commission they attempted to avoid. An attorney can help you
draw up agreements that cover single or multiple transactions with any named parties or broadly, with exclusive or non-exclusive rights in specified territories.
Avoiding “middleman” stigma: Once you have contractual “rights” to represent a supplier, you should attempt to present yourself as much as possible as if you were the supplier’s export manager or department in communication with overseas buyers or distributors, with you as their contact.