Using Agents and Distributors in Indonesia

Many Australian firms in Indonesia rely on agents or distributors to represent their businesses and sell their products in the Indonesian market. There is often confusion about the roles of agents and distributors, so it is important to understand the difference between the two before you enter into any discussions. The definition and responsibilities of agents and distributors can also vary depending on the industry, so it is always necessary to confirm their specific roles and responsibilities. The information below is of a general nature. It therefore is important to make sure you have the role of the Indonesian party clearly defined and confirmed in the individual agreement you have with them and not assume they will take on all activities that an agent or distributor may generally perform.

Agent: Acts as a representative of the supplier, but does not take ownership of the goods. An agent is generally paid by the exporter based on a commission of sales value generated. They tend to be based in the export market and often represent numerous service or product lines. They may operate on an exclusive basis, where they are the sole agent for a company’s goods or services in that market, or as one of a number of agents.

Distributor: A distributor takes ownership of the goods by buying them, then reselling them to either local retailers or consumers. In some cases, the distributor may sell to other wholesalers who then sell to local retailers or end users.

Distributors may carry complementary and competing lines and usually offer after-sales service. They earn money by adding a margin to products which are generally higher than agent fees. This is to cover larger costs as distributors are usually responsible for marketing and carry inventory.

Choosing an agent or distributor

The most important consideration when choosing an agent or distributor in Indonesia is to ensure that you can establish a close working relationship – you have to be able to build high levels of trust and regular communication. Before making a final decision, make sure to meet with the potential partner in their own market – this allows you to get to know them better and observe how much they know and their presence in their own market. Also, ask your potential business partner for trade references and consider using a professional credit-checking agency to confirm their financial stability.

Knowledge of the market

When assessing the right partner, be sure to consider:

• Do they have good networks and contacts?
• What is their experience in that sector? Do they have good knowledge and have they represented a similar product previously? Can they help with marketing?
• A well-established company with a good network of contacts may not be flexible or open to your ways of business.
• A young, energetic company will tend to be flexible, innovative and trying to prove their worth. The downside is they may have limited experience or contacts.