For example, in the case of your company and Company X.
You are a distributor if you buy products from Company X at your own risk, store them in your warehouse and on-sell them to your customers. Your compensation will be the difference between the buy and sell price. If a customer doesn’t pay or something goes wrong, it’s your problem.
You are an agent if you take no risk and sell products to Company X’s customers, at an agreed price, for a flat commission. You don’t own the goods and if you hold them Company X will pay the storage and insurance fees. If a customer doesn’t pay or something goes wrong, it’s Company X’s problem not yours.
If the customer perceives you as the supplier, you are a distributor for Company X. If a customer perceives Company X as the supplier you are acting as an agent.
As an agent, Company X will be directing marketing and promotional activities and selling strategies and covering the costs. If you are a distributor you will be determining how much marketing and promotion to carry out and paying the costs out of gross profits.
In general, as a distributor, you will try to keep Company X at arm’s length to protect your business. If you are an agent you will see Company X as a partner who should know as much about your business as possible.
