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We have discussed how to develop sourcing strategy
and and identify key markets in earlier issues. Once you have zeroed
in on target markets and have your sales basket ready - the next
step is to determine how will you sell your products or services
overseas.
There are broadly four ways of selling in an overseas country :
- Selling Directly to Overseas Buyers
- Selling through Overseas Agents/Representatives
- Selling through Domestic Buying Agents/Buying Office
- Selling through Export Management Company
Your sales strategy may be based on one of above or you may go for
a mix of several options depending upon product spec and available
resources.
Selling Direct
You exercise maximum control over all overseas operations
by selling directly to buyer. This option is also simple to manage
and gives maximum profit margin as there is no third party between
you and your buyer. However, it is often the hardest option and
expensive too. Normally, it takes more time to establish oneself
as selling direct requires time and resources for prolonged period.
We shall discuss the details later
Selling through Overseas Agents/Representatives
You appoint commissioned agents or sales representatives
to sell. Agents and reps act as brokers, finding specific
foreign buyers for your product or service in return for a commission.
While they do the selling, they often will not fulfill the orders
or handle details such as collections or shipping.
For more information on Overseas Agents, Distributors and Representatives
- particularly how to identify, negotiate and enter into agreement
- please visit Agents / Distributors
/ Representatives section
Selling through Domestic Buying Agents/Buying
Office
Major importers prefer to source products through
their own buying office or representative. Having own office or
representative means better control over sourcing process, wider
selection of vendors, competitive price, better quality control
and reliable pre-shipment inspection.
Selling through buying agent is advantageous for exporters also,
as it helps in significant cost and time saving. Exporter saves
in marketing cost, courier and communication cost, overseas travelling
cost etc. This option also helps in reducing business risk significantly
as buying agent representative keeps regular control over quality
during production process. As goods have to go through pre-shipment
quality inspection under supervision of buying agent - there is
hardly any chance of getting quality complaint after the goods reach
destination.
However, selling through buying agent is very competitive and entails
far less profit marging compared to selling direct.
Here's a Directory of Buying
Agents and Buying Houses in India
Selling through Export Management Company
Selling through Export Management Company (EMC) or
Export Trading Company (ETC) is quite popular in the West - but
is yet to catch up in India. Software and BPO sectors have a few
well organized EMCs, but in merchandising trade - it is small companies
and consultants ruling the roost. Neverthless, we discuss their
working as large organizations like IMS may decide to visit India
in this age of globalisation.
EMCs act as an outsourced export department, both representing your
product to overseas buyers and taking care of all aspects of the
export transaction. Among the functions EMCs perform are:
- Conducting market research to determine the best foreign markets
for your product
- Attending trade shows and promoting your products overseas
- Assessing distribution channels
- Arranging export financing
- Handling export logistics, such as invoicing, insurance, customers
documentation, etc.
- Advising on legal issues such as compliance issues and trade
regulations
EMCs tend to work on a commission basis and represent products of
many companies. However, a growing number of EMCs now take title to
the goods they sell, making a profit on the markup. This carries the
possibility that your products may be priced incorrectly, which can
affect your competitive position in the market. Be sure to discuss
issues related to pricing at the outset of any negotiation.
Export Trading Companies (ETCs) perform many of the same functions
as EMCs, but they tend to be demand-driven, simply fulfilling orders
instead of actively marketing a product or service. Most ETCs will
take title to your goods for export and will pay your company directly
while handling shipping and invoicing. While you may give up control
over how your product is priced and serviced, this arrangement does
eliminate many of the potential risks associated with exporting.
Happy and Productive Surfing
Dr. Amit K Chatterjee
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