Finding and engaging the right local market representative is a crucial element to doing business and succeeding in a new market. In-market representation may include pre-sales representation to assist in market scoping, marketing and pre-sales activities or engaging an agent or distributor . Partner identification, engagement, contract, due diligence and developing a positive working relationship are important steps that contribute to successful market entry and growth.
Finding the right local partner such as an agent or distributor providing the required levels of support and customer service is a critical success factor for the Australian market.
Finding Local Representation
Visiting the market, networking & developing relationships and undertaking research & due diligence are critical for identifying and engaging with prospective local partners. Reviewing trade publications and attending events, exhibitions and trade shows are effective ways to understand and connect with potential partners and distributors as well as to gain an understanding of the market for specific products.
It is also useful to engage with the appropriate business and bilateral chambers, trade agencies, industry associations and market-entry specialists to assist with information and intelligence. These organisations may offer research services as well as partner research, search and pre-qualification services based on specific requirements usually on a fee-for-service basis.
The Australian Chamber of Commerce & Industry (ACCI) operates the Australian TradeLinks Business Matching Service. This fee-based online service connects international companies to Australian suppliers, customers or trade partners.
Types of Representation
It is important to fully clarify the activities, responsibilities and trading terms of agents and distributors as they may vary on a case-by-case basis. Issues such as territory, exclusivity, performance and termination terms are important considerations.
Agent: In Australia, a local agent acts as the representative of the supplier. Agents are usually remunerated on sales-value based commission or success fees and sometimes a combined retainer or salary. Commissions for agents typically vary from 5 – 15%.
Distributor: A distributor buys the goods from the supplier and resells the goods locally. Distributors undertake inventory management/warehousing, marketing, order processing, delivery, customer credit, invoicing and debt collection and after care services. Given the additional responsibilities and risk, the remuneration is typically higher than an agent representation. Distributors generally carry a wider range of complementary or competing products and offer client servicing and after-sales service.
Contract & Pricing
The relationship between a company and its Australian agent or distributor should be set out contractually.
The pricing of goods and services supplied under contract between an agent/distributor and an overseas supplier must be set on "arms-length" principles and comply with transfer pricing laws in relation to goods and services imported.
Checking and Vetting a Potential Partner
In addition to engaging and developing a relationship, visiting facilities and developing a deep understanding of a potential partner's capability and expertise, it may also be necessary to do some checks or undertake due diligence on a potential business partner.
While legal and advisory firms are best placed to undertake a thorough and full due diligence on a business acquisition, it may not be necessary for this level of due diligence. There are however many resources available to assist in checking and vetting a potential partner.
- Australian Securities and Investments Commission (ASIC) Registers. Incorporated businesses operating in Australia - whether incorporated in Australia or overseas - should be registered with the Australian Securities and Investments Commission (ASIC). ASIC maintains publically-accessible registers on Australian companies as well as foreign-registered companies registered to trade in Australia (ARBNs). These registers can be used to check that the company is registered and confirm details of the officeholders of the company. Some information is made available for free while other information must be purchased either from ASIC or from approved brokers.
- Australian Business Register (ABR). Whilst incorporated companies will be registered with ASIC, other types of trading entities - typically sole traders or partnerships - may not be incorporated but should have a registered business name (state-based but registered centrally) and an ABN (a national registration). The ASIC Registers search above allows you to select to search for Business Names. The ABR also provides a simple search facility for ABNs for such types of entities.
- Information Brokers. ASIC-approved information brokers provide company information and intelligence from ASIC registers and other sources and databases such as credit information.
ASIC also publishes a conducting due diligence guide: Dealing with Businesses Information Sheet (Info 26)