Distribution via Domestic Organizations

Distribution via Domestic Organizations

Distribution via Domestic Organizations

The simplest method of all is to supply the product to a wholesaler engaged in export business and let him export it under his own brand name. Alternatively, one may use concessionaires. These are firms which purchase merchandise, usually as principals, on the understanding that the manufacturer gives them the concession to export his products in a particular overseas area. Concessionaires do, in fact, operate very much in the fashion of the manufacturer's export department. However, they pay for the goods they receive in the domestic currency and free the supplier from all exporting cares. They can be useful for limited amounts of overseas business. A point may be reached, however, when the volume of trade involved is such that it can be more profitable for the manufacturer to undertake his own exporting.

Another means of avoiding, or at least minimizing, the possible trials and tribulations of exporting, is to enter into some form of group trading arrangement. This can be useful for a small organization where the amount of export business which is anticipated is considered insufficient to warrant the expense of establishing an export department. Sometimes a small firm will approach a larger company, producing non-competing lines, with the proposal that the major organization should export the small man's product along with their own. This so-called 'picka-back' method is often conducted on the basis of the payment of commission or a sharing of costs. The additional lines can assist the economic viability of the larger firm's export operation by reducing its sales and distribution costs.

With a similar aim in view, several small firms, whose interests do not clash, sometimes get together and set up a special export company. This can, however, produce problems for the participants. Jealousies are liable to creep in, especially if it is suspected that the degree of effort being devoted to the sale of one man's lines is less than that given to others.

There are certain categories of overseas business for which it may be impracticable for a single manufacturer to contend on his own. An example is a construction scheme, involving many types of products and skills, which cannot be supplied solely by one firm. In these circumstances, companies enter into a consortium to offer a package deal. The method has been applied with notable success in deals with countries in the Soviet bloc, where all negotiations are conducted with a centralized state purchasing agency.

One of the most widely used methods of exporting without overseas involvement, is to sell to a firm of Export Merchants. Such organizations are generally specialists, dealing primarily in a specific group of products and trading with specific geographical markets. The Export Merchant both buys and sells as principal. He thus relieves the product manufacturer of all the risks involved in overseas trade, he pays promptly for the goods he buys in domestic currency and usually undertakes all packing and shipping arrangements.

The use of an Export house for the distribution of one's product overseas can work very well if one is in a comparatively small way of business and the nature of the product is such that personal communications with the consumer and the creation of goodwill in the overseas market are not considered particularly important. However, by the nature of his business, the Export Merchant usually buys only those goods which he knows he can resell quickly. He purchases the type of merchandise which he is confident will satisfy the immediate demand of his overseas clients and will seldom seek to develop a market for a specific product. Because he is unlikely to have any long-term interest in any one product his after-sales service may be minimal.


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