Transactions facilitated by resellers are now becoming increasingly common. From a commercial point of view, resellers include persons who are legally and economically independent of producers and consumers, trading firms, organizations that stand between producers and consumers of goods.
In what cases the use of intermediary services is not only justified, but even a necessary means of effectiveness of foreign trade in modern conditions:
1. Historically established customs of conducting foreign trade operations or the legislation of a market may require the use of intermediary services of national firms. This is most often the case in cases where there is a monopolization of the import of goods by large intermediary firms.
2. When selling products in remote hard-to-reach and poorly studied markets.
3. When promoting new products to the market.
4. Under certain political conditions, when the goods are prohibited for export or there are other restrictions. For example, in the days of the former Soviet Union, a foreign trade association was able to purchase American checkered mink, included in the COCOM list, only through a Swedish intermediary.
Among the advantages of using the services of intermediaries are the following:
the exporting company does not invest significantly in the organization of a sales network in the territory of the importing country, since intermediary firms usually have their own material and technical base – warehouses, showrooms, repair shops, and sometimes their own retail stores; the capital of intermediary firms is used to finance transactions based on both short-term and long-term lending; the exporter is exempt from many worries related to the sale of goods (delivery to the importer’s country, sorting, packaging, selection by assortment, adaptation to the requirements of the local market, etc.); opening of markets that are not available for establishing direct contacts.
The efficiency of operations through an intermediary is increased due to the following factors:
1. Increasing the efficiency of sales of goods, which contributes to an increase in profits by accelerating the turnover of capital.
2. Reduction of the costs of circulation for the maintenance in the country of the agent of its administrative and economic personnel and the associated costs. The above costs are covered, as a rule, from the remuneration paid to the agent, that is, they are eventually paid by the seller and the buyer.
3. The sales agent, being closer to the buyers, reacts more quickly to changes in market conditions, which allows selling the goods on more favorable terms for the principal.
4. The sales agent is a source of valuable primary information about the level of quality and competitiveness of the principal’s goods.
The implementation of sales through trade and intermediary firms and individuals has certain disadvantages. The main one is that the exporter loses direct contact with the sales market. In addition, the size of the sale is made dependent on the integrity and activity of the reseller.
Resellers carry out their activities through the performance of various types of trade and intermediary operations. Trade and intermediary operations are operations related to the purchase and sale of goods, and carried out on behalf of producers-exporters or buyers-importers by independent of them resellers on the basis of contracts or agreements concluded between them, as well as individual orders.
Trade and intermediary operations include a number of services:
search for a foreign partner; preparation for the transaction; lending to the parties and providing a guarantee of payment for the goods by the buyer; implementation of freight forwarding operations; insurance of goods; customs formalities; implementation of advertising activities; organization of exhibitions; maintenance and supply of spare parts; representation in arbitration courts, etc.