When you’re tackling a new international market, should you approach customers directly, or work indirectly through an in-market channel partner?
Both direct and indirect approaches have their own benefits and drawbacks - depending on what you’re selling, and how you plan to grow your business over time.
The choice between direct and indirect exporting is an important one, as often you won’t be able to do both, especially in the same market or for the same customer segment.
If you commit to using a channel partner (such as an agent or distributor), they may not want to see you selling directly in their market at the same time.
Likewise, customers who are used to buying directly from you might not want to work through an intermediary later on.
- Understanding your channel partner (indirect exporting) options
- Selecting and qualifying channel (indirect exporting) partners
- Finding the right partner the key to success in China
Direct exporting involves selling directly to your target customer in-market. You can do this by selling online from New Zealand – backed up with regular market visits - or by setting up a branch office or subsidiary in the target country.
Selling directly to customers means there’s nobody else in the export chain taking a share of your margin. In return, however, you’ll have to make bigger commitments in money and human resources. It takes time to make contacts and build relationships, negotiate deals, understand the market and carry out marketing, especially in an unfamiliar market.
Some advantages of direct exporting
- You’re in control of pricing.
- You’re in full control of your brand.
- You can get a direct understanding of buyers’ and end users’ needs, which allows you to customise and improve your offerings.
- You own and maintain all customer relationships.
- It’s easier for you to identify possible new opportunities.
- Some customers may prefer dealing direct with you, rather than through an intermediary.
Some disadvantages of direct exporting
- You’ll have to commit a lot of time, energy, staff resources and money.
- Many customers see suppliers with local presences as a lower-risk option – so if you don’t have a local presence, you may be at a disadvantage.
- You might need local language capability for after-sales commissioning and service.
- You might struggle to look after your New Zealand customers and your in-market customers and prospects at the same time.
- Remote troubleshooting may not be possible, requiring additional visits if you don’t have local staff.
- Market progress will often be slower, and you’ll likely need to commit to an in-market presence at some point to keep the growth going.
See also calculating the cost of exporting.
Indirect exporting – by selling to, or through, a channel partner - is a relatively cheap and straightforward way to enter a new market. This is the most common approach for many New Zealand companies doing business internationally.
Channel partners can include agents or distributors based in your target export market. Using them can be a quick way to get your products and services to the end user, since you’ll be selling through their existing networks or customer base.
A good channel partner will have in-market experience, reputation and contacts, but they’ll still need appropriate support for the overseas marketing and selling of your product.
Advantages of indirect exporting
- Your initial market entry and sales growth can be fast, using your partner’s existing channels and / or customer base.
- You benefit from your channel partner’s existing knowledge and networks.
- Your channel partner’s local presence is reassuring for buyers.
- If you’re working with a distributor, they will usually take title to the goods - and the risk of any unsold stock.
- Sales, marketing and other costs can be shared between you and your channel partner (the specifics will depend on your agreement with them).
- It’s easier to balance your New Zealand and international business when you have someone else in-market to follow up on prospects, and service existing customers.
Disadvantages of indirect exporting
- You won’t have direct control over pricing.
- You may not have direct control over branding or marketing.
- Customers often effectively belong to the channel partner, not to you.
- You still need to provide sales support if you want growth to continue.
- Your channel partner will take a margin (for distributors) or commission (for agents).
- If your channel partner represents a lot of companies, it may be hard to keep them focused on your business.
Unless you agree on full transparency with your channel partner, you might not be able to get to know your end customers well – which can prevent you from improving your offerings or spotting new opportunities for growth.
New Zealand-based intermediaries
In some cases, you might be able to export indirectly through a channel partner or intermediary based in New Zealand. This saves you from dealing with language barriers or overseas freight and customs issues. However, it can also mean reduced control of your exports and less customer and market contact, which might limit your future growth.
- Conduct market research so you have a good understanding of your target market and potential customers - including how they buy, and where they buy from.
- If you’re considering direct exporting, draw up a shortlist of pre-qualified customers in each target country.
- Plan your strategy – either going direct to market from New Zealand, setting up your own local presence, or selling indirectly via channel partners – and develop an export plan that outlines what you’ll do and how you’ll measure the results.
- If you’re thinking about selling indirectly, you can find out more about your options and what to look for in our Export Essentials guide to channel partner options.