Korea

Country starter pack
Sales & marketing in Korea
43
3.4 AGENTS AND DISTRIBUTORS
Most Australian firms rely on agents or distributors to
represent their businesses and sell their products in
international markets. The roles of agents and distributors
are often confused, so it is important to understand
the difference between them. The definition and
responsibilities of agents and distributors can also vary
between country and industry. The information below is
of a general nature. It therefore important to make sure
you have the role of the Korean party clearly defined and
confirmed in the individual agreement you have with them,
and not assume they will take on all activities that an agent
or distributor may generally perform.
Agent: Acts as a representative of the supplier, but does
not take ownership of the goods. An agent is generally
paid by the exporter based on a commission of sales value
generated. They tend to be based in the export market
and often represent numerous service or product lines.
They may operate on an exclusive basis, where they are
the sole agent for a company’s goods or services in that
market, or as one of a number of agents.
Distributor: A distributor takes ownership of the goods by
buying them, then reselling them to either local retailers or
consumers. In some cases, the distributor may sell to other
wholesalers who then sell to local retailers or end users.
Distributors may carry complementary and competing
lines and usually offer after-sales service. They earn money
by adding margins to products, which are generally higher
than agent fees. This is to cover larger costs as distributors
are usually responsible for marketing and carry inventory.
Choosing an agent or distributor
The most important consideration when choosing an
agent or distributor is to ensure that you can establish a
close working relationship – you have to be able to build
high levels of trust and regular communication.
Why use an agent?
$
>
Generally cheaper
than a distributor.
Why use a distributor?
You can pass a great degree of
risk onto them.
You have greater control over terms
of sale and marketing, and choice of
customers to deal with.
$
A distributor has greater incentive to
sell your product as they also have to
cover the costs of holding stock.
Direct contact between
manufacturer and customer.
Only have to monitor distributor’s
accounts rather than all customers.
Why not use an agent?
Why not use a distributor?
TAX
It may involve tax implications (check the
relevant laws for that area).
x
Less control over marketing, terms
of sale etc.
☑ $
Maintaining stock inventory can
be costly.
The credit risk is with the distributor
rather than with customers.
An agent may be selling products
that compete with yours.
Distribution agreements regulated by
local competition law.