An explanation of what "Indirect Exporting" is and how it can benefit smaller U.S. companies. This information is part of the U.S. Commercial Service's "A Basic Guide to Exporting". Last Published: 10/20/2016
Indirect Exporting
The principal advantage of indirect exporting for a smaller U.S. company is that an indirect approach provides a way to enter foreign markets without the potential complexities and risks of direct exporting.
Export Management Companies
What are they?
Export Management Companies solicit and conduct business in the names of the producers it represents or in its own name. They work for a commission, salary, or retainer plus commission. Large EMC’s can provide immediate payment for the producer’s products by either arranging financing or directly purchasing products for resale.
Pros:
EMCs usually specialize by product or by foreign market, or sometimes by both. The best EMCs know their products and the markets they serve very well and usually have well-established networks of foreign distributors already in place. This can help companies save time and money. Immediate access to foreign markets is one of the principal reasons for using an EMC.
Export Agents, Merchants, or Remarketers
What are they?
Export agents, merchants, and remarketers purchase products directly from the manufacturer. They pack and label the products according to their own specifications. They then sell these products overseas through their contacts in their own names and assume all risks.
Pros:
The effort required by the manufacturer to market the product overseas is very small and can lead to sales that otherwise would take a great deal of effort.
Risks:
In transactions with export agents, merchants, or remarketers, your firm relinquishes control over the marketing and promotion of your product. This can have an adverse effect on future sales abroad if your product is underpriced or incorrectly positioned in the market or if after-sales service is neglected
Piggyback Marketing
What is it?
Piggyback marketing is an arrangement in which one manufacturer or service firm distributes a second firm’s product or service. The most common piggybacking situation occurs when a U.S. company has a contract with an overseas buyer to provide a wide range of products or services. Often, the first company does not produce all the products that it is under contract to provide, and it turns to other U.S. companies to provide the remaining products. The second U.S. company then piggybacks its products onto the international market.
Pros:
Company can export without incurring the marketing and distribution costs associated with exporting.
Risks:
Usually require that the product lines be complementary and appeal to the same customers.