Legally speaking, however, the differences between a sale by an agent and a sale by a distributor are significant, both from the point of view of customers and from your point of view, as the manufacturer of the product.
The key difference is that a distributor buys your goods and then re-sells them to customers whereas an agent sells them on your behalf directly to customers, ie there's no re-sale. If you think about it, the difference is quite important. If you sell to a distributor you should get paid on delivery to the distributor. If the distributor can't then sell the goods on, that may bring its own problems for a host of other reasons (including the long term viability of an unattractive product) but at least you've been paid and the financial risk of that shipment is now with the distributor. However, if your agent can't sell your stock you’re stuck with it (but at least there won't be any commission payable to the agent). Swings and roundabouts, you could say.
Ultimately it doesn't do anyone any good if the product in question isn't selling, whether via an agency or a distributorship, because that means there's no cash being generated, and the legal relationship isn't going to save you in the long run.
Another factor to bear in mind is the level of control that you can exert over your agent or distributor. In broad terms, you have more control over an agent because the agent is really an extension of you and enters into sales contracts on your behalf. A distributor is a separate person and doesn't have the ability to enter into contracts on your behalf, so the law limits the extent to which you can require the distributor to sell your goods in a particular way (mainly because they aren't actually your goods by the time the distributor sells them on).
An agent also has certain rights under the Commercial Agents (Council Directive) Regulations 1993 which aren't available to a distributor, but this blog isn't the place to go into the detail of the Regulations (much to your relief, no doubt, as well as mine).
Aside from the legal issues, you'll also need to think about the following, regardless of whether you're appointing an agent or a distributor:
- is the person you've chosen the right person to be selling your products and representing your business?
- in what geographical territory will they be operating?
- for how long will the arrangement last and in what circumstance can it be ended early if things aren't working?
You also need to be clear whether you're appointing an agent or a distributor and not mix them up. I've seen various home-made agreements over the years which have elements of both agency and distributorship but aren't really either. That's the worst of all worlds and really is a recipe for a lot of hassle, especially if the relationship isn't a match made in heaven and the parties decide to go their separate ways.
If you're thinking of selling into new geographic markets, whether in another part of the UK or abroad, and are thinking about appointing an agent or distributor, give me a call and I'd be happy to have a word about the best way of structuring your new arrangement.