An understanding of the legal duties and responsibilities of all parties will clarify the degree of control and the constraints imposed on the supplier. There is no one best solution in the choice between agent and distributor and the decision will depend very much on the circumstances and objectives of the supplier as well as market factors, such as the ability of the channel to exploit the market potential. It is therefore critical to examine the differences between agent and distributor not only from the legal perspective but also from the perspective of a range of additional factors such as:

• The product range or services to be marketed
• Market dynamics (e.g. Market size, level of competition, target sales required and market coverage needed)
• Financial factors (e.g. Purchases, pricing, payment, and the burden of credit risk)
• Customer-facing activities (e.g. A target market and marketing perspective
  

While it can be hard to remember all the characteristics, duties and responsibilities of channels and the supplier, the chapter simplifies the exporter’s understanding by grouping the characteristics of agents versus distributor in two simplified summary table formats for direct comparison according to the main factors discussed in the text.

The following sections describe the characteristics and duties of agents and distributors, the influencing factors and the comparative advantages to be considered in appointment of either channel.

Agent – Supplier relationships

Characteristics of a Commercial Agent

An agent generates sales between a principal (supplier) and its customers and is rewarded by earning commission – usually tied to the value or volume of goods or services sold. Title, possession or risk in goods does not ordinarily pass to the agent at any stage. This reduced risk is one of the reasons an agent would normally receive less remuneration (consisting of commission) than a distributor that can set its own margins.

In an agency agreement the supplier retains control over key areas such as marketing strategies, product price lists and the customer base. The contract for sale of the supplier’s goods or services is between the supplier and its customer, with the agent acting only as a facilitator.