Things to consider when deciding to use an Export Trade Intermediary

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Two methods a firm can consider to export their products are direct selling (in-house) , and indirect selling (export trade intermediary).

According to the Basic Guide to Exporting put out by the U.S. Dept. of Commerce,  a company selling direct or indirect must consider the following:

  • Size of the company
  • Tolerance for risk
  • Resources available to develop the market
  • The nature of the product or services
  • Previous export experience and expertise
  • Business conditions in the selected overseas markets

Direct selling requires the creation of an in-house export department; supplying it with the staff and equipment necessary to support and maintain its existence; and having an internal sales force that will generate sales to be handled by the export department. This can be an expensive and time-consuming undertaking. The cost of using an export trade intermediary is normally lower than maintaining an in-house export department.

Indirect selling involves the use of either an Export Management Company (EMC), or an Export Trading Company (ETC).

An EMC is basically an external extension of what would have been the firm’s in-house export department.  The EMC acts as a part of the firm, and usually communicates as the supplier’s export manager or department. The firm sets the export price of the goods, and the EMC receives a commission on the sales.

An ETC is an independent company, and typically takes the title to the goods, and makes a profit on the markup.

Both an EMC and ETC  assume responsibility for finding buyers, shipping products, and getting paid.

Domestic producers may find, or be unaware, their products are already being bought by another domestic company, and then sold overseas. In this case, a firm has a real incentive to actively pursue export markets.

In deciding to use the direct or indirect approach, a firm needs to consider the amount of resources it is willing to devote to develop an export market. Using an export intermediary provides a way for small and medium-sized firms to export without the complexities and risks of direct exporting.

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