What Is the Difference Between Direct and Indirect Exports?
In indirect exporting, a manufacturer turns international sales over to a third party, while in direct exporting, a manufacturer handles the export process itself. Manufacturers that engage in indirect exporting hire export management companies, distributors and commissioned agents or brokers to work as intermediaries with the end-users, retailers and distributors in the foreign markets. Direct exporting requires the manufacturers to deal with these foreign entities themselves.
Indirect exporting offers small manufacturers the advantages of entering foreign markets without being subjected to the risks and complexities of direct exporting. Direct exporting requires the manufacturer to make decisions about the entire export process, such as marketing, distribution, sales, fulfillment and payment. Small companies with limited experience in exporting could make drastic mistakes when exporting without guidance. On the other hand, companies with knowledge of a foreign market often benefit from making these decisions themselves and choose direct exporting. This allows them to maintain closer relationships with global buyers and learn more about global competitiveness. They also eliminate fees from export management companies. Manufacturers choose between indirect and direct exporting based on their long- and short-term circumstances and goals. Often, companies test the waters of a foreign market with indirect exporting and shift to direct exporting if the endeavor is profitable.