What is a sales representative?

A sales representative is a person or entity that helps a company sell its products to a customer, and that gets a commission on the sale. The sales contract is between the manufacturer and the end user. The manufacturer defines the terms and conditions with the customer; he is in charge of shipping the goods (although this depends on the contract terms), of invoicing the customer. The manufacturer bears the financial risk. The sales representative is usually paid a commission. As a general statement, the manufacturer has more control over the sale with a sales representative than with a distributor.

What is a distributor?

A distributor is an independant entity that buys the manufacturer's products and resells them. Distributors take posession of the goods, they can have inventory. They usually buy from the manufacturer at a discounted price and their revenue comes from the difference between purchase price and resale price. Distributors bear the financial risk of selling to their customers. As a general rule, the manufacturer will have less control over the sales process with a distributor than with a sales representative.

What are the other forms of sales representation?

Other forms of representation exist. We will note in particular:

Sales agent: in theory a sales agent is a person acting in the name of the manufacturer. He or she can commit in the name of the manufacturer. This is a major difference with a sales representative. However this distinction disappears and sales agents and sales representatives are used interchangeably.

Dealer: generally another name for distributor.

Franchise : you will have more control over the activities of a franchise, in particular over marketing activities. You sell the right to use your brand name to the franchise.

Sales representative or distributor: which one to choose?

Is it better to have a sales representative or a distributor? There is not one answer to this question. Both have advantages and inconvenients. From a financial point of view, both are equivalent: a sales representative will get a commission on the sales price, a distributor buys your product and resells it. In both cases, manufacturers can remain in control of the revenue from their products.

Advantages and drawbacks of a sales representative:

Advantages of a sales representative

Drawbacks of a sales representative

More control over final sales price.

Direct contract with the customer:

• The manufacturer is in charge of the administrative process

• The manufacturer is responsible for collecting the revenue from the sale, which can be problematic when dealing with international customers

Advantages and drawbacks of a distributor:

Advantages of a distributor

Drawbacks of a distributor

The sales contract with the end user is the responsibility of the distributor.

The manufacturer can have a long term contract with the distributor, which facilitates the administrative process.

Less control over final sales price.

Below are a few examples of choices between a sales representative and a distributor:

• Product with high sales price: it is better in this case to choose a sales representative. You stay in control of the sales price and you have more possibilities of negotiating with the final client. A sales representative will also avoid the outrageously high sales price that a distributor could charge. It is not rare, in a country where the manufacturer has little control and where competition is low, that the distributor charges twice the original sales price.

• To find the first opportunities to enter a new market: a sales representative is the best solution. You keep control of the offers you make. You get to know your clients and the local sales customs. A distributor will develop the market without you knowing the market. You will be at the mercy of the distributor.

• Volume sales: a distributor is the best solution. You get rid of the whole administrative part of the sales. You only get the revenue from the sale, with your distributor as the unique contact.

• Technical sales: a sales representative is the preferred solution. You will need to give a lot of information to the final customer, either through the sales representative or by travelling to the customer's site for a technical presentation.

• Management of local distributors: in those cases where you have several distributors in the same geographical area, outsource their management to a sales representative. You will then have a unique contact point and you will minimize the management work. The sales representative will get a commission on the sales made by the distributors, so he will make sure that the distributors give their best.

• Necessity to store locally: for products that need rapid delivery, such as perishable products or common products, choose a distributor. Distributors will be in charge of managing the inventory they need for their territory.