Direct and indirect export: pros and cons
You want to export your goods. Do you want to keep matters in your own hands, or do you employ agents or distributors? Whether the best choice for you is direct or indirect export depends on your situation, your product, and the demands posed by the foreign market. Consider the pros and cons of both options.
What is direct export?
Direct export means direct sales to a customer abroad. You send your invoice directly to the customer. For instance: you produce handmade mobile casings, and mail them to your customers in Belgium and Germany. You maintain close contacts with your customers and undertake your own marketing and sales. Sales through a foreign branch of your company are also direct exports.
Direct export pros and cons
Advantages:
- direct customer contact
- higher profit margins
- independence from foreign partners
Disadvantages:
- greater financial risks
- investment of time and staff
- limited market coverage
- insufficient knowledge of market and culture
What is indirect export?
Indirect export means you appoint third parties, like agents or distributors, to represent your company and your products abroad.
Indirect export pros and cons
Advantages:
- no or very few extra staff required
- agent knows and has access to the market and distribution channels
- completer market coverage possible
- smaller financial risks
Disadvantages:
- lower profit margins
- dependence on commitment of partner
- no direct customer contact
Record your arrangements
Whichever mode of exporting you choose, make sure you lay down your arrangements in writing. There are model contracts you can use as a basis, provided by the International Chamber of Commerce and the Verbond van Nederlandse Handelsagenten en Importeurs (page is in Dutch, but contracts are available in English). If you sell goods directly to the end user abroad, you can draw up an international sales contract. If you are starting a collaboration with an agent or distributor, you can draw up an agency or distribution contract.
Get help
Are you just starting to export? Get help:
- The KVK Advice Team has extensive knowledge on international business. Call them on 088 585 22 22.
- The Netherlands Enterprise Agency RVO offers extensive information and personal advice on Going international.
- To find out about customs declarations and taxes, visit the website of the Dutch Customs Administration.
Questions relating to this article?
Please contact theNetherlands Chamber of Commerce, KVK