Market Entry India: Distributor, Dealer or an Agent?

India offers European companies a lot of interesting opportunities, but doing business in this country also has specific challenges. For a successful market entry, having a local partner with the necessary market knowledge is therefore not an unnecessary luxury. But how do you know whether it is best to do business with a distributor, agent, or dealer in India? We explain these different options for you.

What does a distributor do?

A distributor buys your goods and then sells them to wholesalers, retailers or consumers in the region where they operate in India. Distributors almost always work with a portfolio of different companies in various sectors. Distributors can offer both complementary and competitive products and usually provide after-sales service. They make money by adding a margin to the product prices. Distributors often offer a wider range of services than agents, such as after-sales, replacement service and technical support, and have a good knowledge of logistics in the country. There are three things you need to keep in mind when planning to find a suitable distributor:

• Firstly, no distributor can offer you nationwide coverage in India, the country is too big and diverse for that. Therefore, choose your first distributor in your most important location/Indian state. Once your business is up and running there, you can start looking for distributors in other important regions of the country to expand your business further.
• Secondly, the distributor’s attention to your product. Because distributors work with multiple companies and products, you are not automatically the priority. European products often fall into the high, expensive segment in India, which means that fewer are sold and the income for the distributor is lower. European companies therefore often encounter the problem that the distributor puts little time and effort into their product and more into products that are sold en masse.
• Thirdly, international companies must take into account that marketing is not necessarily a task that the Indian distributor can take on. Especially if you offer a high-quality or technical product that requires a lot of knowledge of your sector and product. Because distributors are often active in different sectors, it is advisable not to rely entirely on the knowledge of your distributor for your marketing, but to work together with experts in this field. Read more about setting up a successful Indian marketing strategy here.

What does an agent do?

An agent is the representative of your company in India, but does not take over the ownership of the goods for the sale of your products. An agent generally receives a commission for the number of products sold or based on the contracts he or she is able to conclude.

In many cases, the agent does not work exclusively for a foreign customer, because this can lead to permanent establishment. If you do not want your agent to work for other companies, for example because you want to protect your intellectual property, you should set up your own entity in India where the agent will be employed. This way, you do not run the risk of permanent establishment and the associated high fines.

An advantage of working with an agent is that you always remain the owner of your product and sell it directly to the Indian customer instead of to a distributor. In addition, agents often have a good insight into your sector and in which segment of the market your product will be most successful, because they also work for other companies in the same sector.

Working with an agent does mean that many tasks remain with the European company, such as import management, handling insurance claims, international logistics, transfer pricing, registrations, etc. The agent is only responsible for storage, sales, logistics within India and invoicing.

What does a dealer do?

A dealer falls between a distributor and an agent. It is someone who buys a product for their company, keeps it in stock and then sells it to the customer. They are often seen as the intermediary between the distributor and the customer and act as authorized sellers of specific goods in a certain sector.

Unlike a distributor, a dealer does have the technical knowledge to be able to properly promote and sell your product. A dealer often adds an extra, high margin to the price of your product, which can cause you to price yourself out of the market. We therefore advise companies to look for a suitable agent or distributor for their first steps on the Indian market.

Can I also do it myself without an agent, distributor or dealer in India?

Starting yourself without an agent, distributor or dealer in India is of course also an option, although it is the most challenging. It means that you have to set up your own company, logistics, storage and sales in India right away. And then we haven’t even mentioned all the non-core business elements you need to arrange such as permits, taxes, personnel regulations, etc. It is incredibly difficult to do this without local knowledge of the market and doing business in India in general. A safe way to start your own business in India is through the business incubator. All you have to do is put together your sales team in India and IndiaConnected will do the rest. Your employees will be on our payroll and the legal liability and responsibility will also be with us. In addition, we arrange everything from back office to performance reviews and we have five physical locations where we can house your team.