Is it better to have an Agent or Distributor in Iran? Why selecting Sole Distributor is better than having an Agent or Distributor in Iran!
Many firms and manufacturers don’t realize that in Iran business is different due to Business Culture differences with other parts of the world. In the recent Project Iran exhibit, I came across an Italian Pain Producer and asked him whether he has found an Iranian Agent, yet. To which he replied harshly that NO AGENTS, ONLY DISTRIBUTORS! After discussing the matter with him for few minutes, he realized that he wasn’t looking for an Agent or Distributor in Iran, but he should have looked for Sole Distributor!
Difference between Agent or Distributor in Iran
An agent is a person involved in making a contract between his principal and the principal’s customer. A trading company or a self-employed salesman operating on commission for a company within part of an overseas territory with local knowledge and connections.
As the agent is only an intermediary, he is generally not a party to the contract between the principal and the principal’s customer and will not have rights or obligations under it.
A distributor on the other hand, buys goods from a supplier and sells them on to his own customers. In contrast to an agent, a distributor has no authority to create a contract on behalf of the supplier and the supplier has no contract with the customer of the distributor. Although the supplier has liability under general legal principles and under product liability legislation.
Why Iranians prefer to be sole-distributors rather than Agent or Distributor in Iran?
A distributor takes more financial risk than an agent but this should be reflected in the profit margins on resale of the product, therefore, it’s worth more for an Iranian Company owned by a proud Iranian, to make more money and be his own boss to dictate his own sale strategies. A foreign company must evaluate it’s own sales strategies to evaluate the amount of cost and risks he plans to invest in the Iranian Market. Since advertising and marketing a new foreign product is expensive, difficult and time consuming, Iranians prefer to become a Sole-Distributor of some highly easy selling products, in addition, becoming the sole-agent for other less attractive products of the foreign producer. That way they make profit on the easy selling products and have a complete basket of the foreign producer on as needed basis on a commission base.
Which is best for you an Agent or Distributor in Iran?
This depends on the foreign producer’s ability to invest and take risks. Best option for companies is to have their subsidiary sales offices and distribute their own product, however, due to high overhead and expenses, some consider other options. In Iran due to the different business anthropology governing the market, a company should really be searching for neither an Agent or Distributor in Iran! The best option is the Sole-Distributor option which is a combination of the two and will benefit both parties on a win-win basis and mutual growth and expansion of the market share. The relationships between your business and its agents and distributors need to be clearly outlined in an agreement. That way your business has less risks, everyone is clear on their roles and responsibilities and payment arrangements are clearly laid out. This reduces expensive disputes as the relationships develop and lost business in the new territory and markets, either Iran or elsewhere!
We have members who are subject matter experts in this regard and are here to Help, don’t hesitate to ask for more information and a professional consultant on this matter!