Using agents and distributors in Japan

Some Australian firms rely on agents or distributors to represent their businesses and sell their products in Japan. The roles of agents and distributors are often confused, so it is important to understand the difference between them. 

Agent

An agent is a representative of the supplier,
but does not take ownership of the goods. An agent
is generally paid a commission based on an agreed percentage of sales value generated. A Japanese agent will 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 and reselling them in Japan, either to local retailers or consumers directly. 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 product prices. Distributor margins are generally higher than agent fees because distributors have larger costs, such as for storage of inventory. Marketing needs to be discussed in detail with a potential distributor to ensure that the distributor’s approach suits your brand image.

Researching your distributor’s performance history and ensuring that they are not carrying too many competing product lines will improve the successful sale of your product in any market, including Japan. Research the true value of your product in the Japanese market before you enter into contract negotiations with a distributor. Japanese consumer preferences allow some distributors to charge 50, 100 or even 200 per cent more than the retail price in Australia. But on the terms of a poorly negotiated contract, you might only realise as little as 10 per cent of the profit. This is especially pertinent if you have been asked to make modifications to your product to suit the Japanese market.

Choosing an agent or distributor

The most important consideration when choosing an agent or distributor is to ensure that you can establish a close working relationship; you must be able to build high levels of trust and regular communication. Before making a final choice, meet with your potential partner in their own market. This allows you to get to know them better and observe their knowledge and presence in their environment.

When assessing potential agents or distributors, consider:

• Do they have good networks and contacts? Do they have relationships with the right people in business and government?
• 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 relatively more flexible and innovative in trying to prove
its worth. On the downside, it may have limited experience or contacts. 

Contracts

If you are going to use agents or distributors in Japan, make sure you have detailed and well-constructed contracts in place. If and when a dispute arises between contracting parties, arbitrators and courts rely on the specific terms of the contract to determine a resolution. Ensure that there is no ambiguity in the way the contract can be interpreted. 

Want to learn more? Explore our other Indonesia information categories or download the Japan Country Starter Pack.