In almost all sectors the development of the markets require more and more intensive distribution efforts. Thus distribution became a key role: Only companies with a convincing business modell can survive in the long run. Therefore cooperations with commercial agencies – the external specialists for all sales tasks – is an great option.
The choice for a distribution channel is based on different criteria such as:
- industry-specific features
- costs and
- the expected efficiency of a preferred form of distribution.
In the recent years more and more businesses had to undertake rationalisation in the management and manufacturing. But manufacturing and administrative costs can not be reduced any further. That´s why also the distribution channel is under review when it comes to utilising potential for rationalisation and cutting costs.
A strategy to bridge the gap between low cost and high efficiency is to outsource distribution functions to external specialists. In this context commercial agents play an important role because they are external sales specialist.
Who are Commercial Agents?
Commercial agents are self-employed entrepreneurs that perform in the B2B area of all sectors.
Commercial agents intermediate the sales of goods between businesses of all market levels e.g. between industry and retail or wholesale and retail. They manage almost all sales tasks. Besides this there are also other forms of distribution that perform similarly in the B2B area e.g. brokers, distributors, sales engineers.
Concerning the number of principals a distinction can be made between agencies that represent only one business and agencies that represent multiple businesses. Most of the commercial agents are active for more than one principal. However, there is no rule for the appropiate number of businesses a commercial agent should represent. CDH statistics show that on average commercial agents perform for 4.7 principals. This can vary from sector to sector. Commercial agents are also strongly active in the international business. About half of the agencies represent at least one foreign principal.
Customers are of great importance for commercial agents, because the customer base is the capital that they contribute to the relationship with their principals. At the same time agencies are highly interested in having a reasonable spread of large, medium and small customers. The more large buyers an agencies has, the greater is the risk of losing one of these customers and therefore the risk of economic dependency.
Agents inform and advise customers in regular visits. Customers also benefit from the range of products that commercial agents offer. These products often complement each other that customers can manage their purchase more rational and with fewer business partners. In addition to this, they have a competent business partner that can be contacted quickly if there are any questions or problems.
Fixed distribution costs can be eliminated by outsourcing sales activites to external partners. The commercial agent receive a commission, that is usually a percentage of the sales turnover. Costs like employee and travel costs are borne by the agent himself. However, there is no “common” rate of commission. The commission rate depends on various factors: the market position of the principal, the intensity of customer service, the competition, the product itself (will the product be launched or does it exist already on the market, complexity, what kind of service must be offered in addition). Therefore the commission rate must be negotiated on an individual basis.
Another key benefit of cooperating with commercial agencies is the variety of services that agents offer both principal and customer. Besides the core business – the intermediation of goods – agents often offer a package of additional services such as:
- providing information and consultation,
- technical consulting and development,
- warehouses, sample rooms,
- representation at trade fairs and exhibitions,
- implementation and monitoring of special promotions,
- shelf maintenance,
- organization and performance of logistics services,
- complaint handling and more.
These services are usually remunerated separately. Along with growing challenges the image of commercial agents has changed: commercial agents went from salespersons to full-service businesses. Nowadays, a modern office, equipped with all kinds of communication devices, and qualified staff is taken for granted. Over the past 20 years commercial agents have created about 120,000 jobs.
CDH supports you
If you are looking for commercial agents we will be pleased to assist you. Further information here