Decision

Sales agent vs distributor vs direct sales in export markets

Done-for-you B2B outbound · Decision

In short

This gets decided as a cost question and is really a question about who ends up owning the customer. A commercial agent is cheap to start, expensive once it works, and in Europe carries a statutory termination payment most business cases never model. A distributor costs you pricing, the customer relationship and honest market feedback. The way out is not picking better, it is sequencing: prove demand yourself, win two or three references, then choose from a position of strength.

Almost every manufacturer entering a new country asks the same question first: do we appoint an agent, sign a distributor, or hire our own people. It usually gets decided as a cost question, and it is really a question about who ends up owning the customer. The cheapest option at the start is frequently the most expensive one to unwind.

The three models

	Commercial agent	Distributor	Direct sales
Paid by	Commission	Trade margin	Fixed cost
Who invoices the customer	You	The distributor	You
Who sets the price	You	The distributor	You
Start-up risk	Low	Low	High
Cost once it works	High, permanent	High, permanent	Falls per unit
Who owns the relationship	In practice, the agent	The distributor	You
Market feedback	Filtered	Heavily filtered	Direct
Cost to exit	Statutory indemnity or compensation	Contract, sometimes statute	Employment law
Scales through	One person	One company	Your team

The exit row is the one missing from most business cases, and in Europe it is not a small number.

The termination payment nobody budgets for

Across the EU, self-employed commercial agents are protected by a directive that has been implemented in every member state, and which the UK retained after Brexit as the Commercial Agents (Council Directive) Regulations 1993. Its central feature: when the agency ends, the agent may be entitled to an indemnity or to compensation for the customer base they built and from which you continue to benefit.

Three details do most of the damage in practice:

It is triggered by ordinary termination. You do not need to have done anything wrong, and neither does the agent. Simply ending the arrangement can create the entitlement.
You generally cannot contract out of it in advance. The protective provisions cannot be derogated from to the agent's detriment before the agency ends, so a waiver buried in your standard terms usually will not hold.
The indemnity route is capped at roughly one year's remuneration, averaged over the preceding years. For a successful agent in a market you have grown, that is a substantial sum arriving precisely when you have decided the relationship is not working.

The wrinkle worth knowing: distributors are generally outside the directive, because they buy and resell on their own account rather than acting for you. But that is not universal. Some jurisdictions extend goodwill compensation to distributors by analogy where the distributor was integrated into the supplier's network and had to hand over its customer base, and at least one has dedicated legislation on terminating exclusive distribution. Assuming "distributor means no exit payment" is a jurisdiction-specific bet, not a general rule.

None of this is legal advice. The point is narrower: the exit cost belongs in the model before you sign, not after you want out.

What the distributor model actually costs you

A distributor removes the exit exposure of an agency in many jurisdictions and takes on stock, credit risk and local logistics. In exchange you give up three things that are easy to underestimate.

Pricing

The distributor buys from you and resells at whatever it chooses. You can publish recommended prices, but under EU competition rules fixing your distributor's resale price is a hardcore restriction, not a negotiating position. If your positioning depends on a price point, a distributor can undermine it and you have limited lawful means to stop them.

The customer

The end customer is the distributor's, contractually and practically. If the relationship ends, you may find you do not know who your users are, which is a poor position from which to appoint a successor.

The truth

A distributor reports what it sells. It rarely reports which deals were lost and to whom, which specification gaps keep recurring, or which segments it has simply never approached because they are inconvenient. You end up planning against a filtered picture.

The chicken-and-egg problem

The strongest practical objection to appointing an intermediary at market entry is not legal at all.

Good agents and distributors already carry a portfolio. They add a line when they expect it to sell, and that expectation rests on the brand already being asked for. An unknown manufacturer with no local references is unattractive, because the intermediary would have to fund the market-building themselves and would not be paid for it.

The consequence surfaces about a year later: you do not get the good intermediary, you get the available one. The available one has spare capacity precisely because their existing portfolio is not performing, and yours will not perform either.

There is one way out. Win two or three reference customers in the country under your own steam. Your negotiating position then inverts completely: you arrive with proof rather than promises, and you choose between several intermediaries instead of hoping one says yes.

When each model fits

Commercial agent

Your brand is already asked for in the country
The product needs explaining and local presence matters for service
You have found someone who already covers the right accounts
You accept that the relationship will effectively belong to them, and you have modelled the exit cost

Distributor

Local stock and short lead times drive the purchase decision
The product is standardised enough to be sold without you in the room
You are willing to give up pricing and the end-customer relationship
Credit risk and logistics in that market are genuinely worth outsourcing

Direct

The market is large enough to carry fixed costs
Aftermarket, service or consumables are where the margin actually is
You need unfiltered market feedback for product development
You intend to be there in ten years

The sequence that beats the choice

In practice the useful move is to stop treating this as a binary and treat it as an order of operations.

Map the market properly first. Named accounts or sites, not a market-size figure. Without this you cannot tell whether an intermediary is covering twenty percent of your market or eighty.
Approach it yourself, in the local language. Cheaper than a trade fair stand and far cheaper than a bad appointment you cannot unwind for two years.
Win two or three references. This is the asset that changes every subsequent negotiation.
Then decide the permanent structure, on evidence: real response rates, real objections, real reasons deals were lost.

The map keeps earning after the decision too. It is the only way to audit whether an appointed intermediary is working the whole territory or just the comfortable part of it.

Questions to settle before signing

Which law governs, and what does it say about termination?

Settle this with a lawyer in the relevant jurisdiction before signature. The answer differs by country and it is the single largest financial variable in the contract.

Is the territory exclusive, and against what performance?

Country-wide exclusivity with no minimum performance and no consequence for missing it is two lost years with no remedy. Consider splitting by region or by segment.

Who owns the customer data?

Require ongoing transfer of customer records in writing. Without it, at termination the intermediary holds the customer base and you hold an indemnity claim.

What else do they carry?

Complementary lines are an advantage. Competing lines are a conflict you cannot supervise.

What happens in year three if it works?

Model the commission or margin at your target volume. Many manufacturers discover the arrangement they chose for its low start-up cost is the most expensive channel they have, and by then it is protected.

Where Ripe Leads fits

We are not an alternative to an agent or a distributor and we do not claim to be. We do the step before: building the market map at site level and running first outreach in the buyer's own language, so you can measure real demand and win the first references before committing to a structure you cannot easily reverse.

We work across the Baltics, Poland, Czechia, Slovakia, the Nordics and the German-speaking markets, in the local language. Pricing is published: EUR 3,750 for the first month including setup, then EUR 2,850 per month, cancel anytime.

Fit boundary: we do not call, we do not negotiate contracts, we do not recruit or vet agents and distributors, and we do not advise on commercial agency law. If you need someone selling and closing on the ground, that is an agent or your own hire, not us.

More on this: TAM analysis and market mapping, entering Central and Eastern Europe, lead generation in Europe, the European agency comparison.

Frequently asked

Is a commercial agent really the cheaper option?

At the start, yes, because there are no fixed costs. Once it works, commission is permanently more expensive than a direct team whose cost per unit falls with volume. And at the end there is an exit cost most business cases omit: across the EU, and in the UK under the retained 1993 Regulations, a self-employed commercial agent may be entitled to an indemnity or compensation when the agency terminates. The model does not remove risk, it moves it from the beginning to the end.

Can we contract out of the agent's termination payment?

Generally not in advance. The protective provisions cannot be derogated from to the agent's detriment before the agency ends, so a waiver in your standard terms usually will not hold. The entitlement can also arise on ordinary termination with no fault on either side, and the indemnity route is capped at roughly one year's remuneration averaged over preceding years. Settle the governing law and the termination position with a lawyer in the relevant jurisdiction before signature, not afterwards.

Do distributors carry the same exit exposure as agents?

Usually less, because a distributor buys and resells on its own account rather than acting for you, which places it outside the commercial agency regime in most cases. That is not universal, though. Some jurisdictions extend goodwill compensation to distributors by analogy where the distributor was integrated into the supplier's network and had to hand over its customer base, and at least one has dedicated legislation on terminating exclusive distribution. Treat it as a jurisdiction-specific question rather than a general rule.

What do we give up by using a distributor?

Pricing, the customer and the truth. The distributor resells at whatever price it chooses, and under EU competition rules fixing its resale price is a hardcore restriction rather than a negotiating position. The end customer is contractually and practically theirs, so at termination you may not know who your users are. And a distributor reports what it sold, rarely what it lost, which specification gaps recur, or which segments it never approached because they were inconvenient.

Why is it hard to find a good agent in a new market?

Because good agents already have a portfolio and add a line only when they expect it to sell, which assumes the brand is already asked for locally. An unknown manufacturer with no references would require them to fund market-building unpaid, so they decline. The result is that you get the available agent rather than the good one, and the available one has spare capacity precisely because their existing portfolio is not performing. Winning two or three references yourself first inverts the negotiation.

What is the practical alternative to choosing upfront?

Treat it as a sequence rather than a binary. Map the market as named accounts or sites, approach it yourself in the local language, win two or three reference customers, then decide the permanent structure on evidence: real reply rates, real objections, real reasons deals were lost. The map keeps paying afterwards too, because it is the only way to audit whether an appointed intermediary is working the whole territory or only the convenient part of it.

Want evidence before you commit to a structure?

Book a short call. If your product needs someone selling on the ground, we will tell you that an agent or your own hire is the answer, not us.

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