Sales Representative in India
- Trading Companies
- Type of Organization
- A distributor acts as an importer and typically purchases the product on his own account and stocks the products before selling it to the retailer or even to an end user.
- Type of Organization
- Import-export wholesalers are particularly useful for their logistic organization, information processing, product promotion and selection. Normal wholesalers who mainly offer a logistic service, stocking goods so as to supply retailers, as they need them.
Nevertheless with competition increasing in the Indian distribution market, manufacturers are directly getting in touch with the retailers, leading to an evolution in wholesaling. As a result many wholesalers have opted for a more vertical integration of their activity by even developing their own brand names and retailing goods themselves.
Using a Commercial Agent
- The Advantages
- To have on-the-ground presence an agent, representative, or a distributor could be appointed. It is advisable to appoint regional representatives & dealers, considering the fact that India is a diverse country with 30 local languages.
- Where to Be Vigilant
When evaluating a distributor or agent, the Indian firm’s business reputation, financial resources, willingness and ability to invest, marketing strength should be checked.
In addition, one should be aware of:
1. The long-list syndrome: The potential representative offers you a long list of foreign clients, which may be outdated and the relationships may no longer exist.2. The no follow-through syndrome: Generally the Indian agent projects a professional image in terms of having a qualified workforce and countrywide presence. A foreign company should make sure that such an agent should not leave everything on its network and sales should not suffer due to lack of follow-up.
- Elements of Motivation
- Exclusivity, higher sales commissions, incentives for achieving sales targets, foreign trips, frequent communication per fax, mail, phone, plus regular visits to India .
- The Average Amount of Commission
- From 5 to 15% for regular business transactions, and from 10 to 25% for occasional transactions.
- From 1 to 4% in the case of bulk materials (iron ore or coal).- Up to 40% in the case of medical, laboratory, scientific analytical instruments, and software products.
- Breach of Contract
- It depends upon the terms and conditions of the contract. But, in case the local agent goes to court, it may be time consuming for the foreign company and favorable results cannot be always guaranteed.
- Finding a Commercial Agent
Infobanc, Agents in India
Setting Up a Commercial Unit
- The Advantages
- Setting up a commercial unit in India should be considered in case the foreign company has long-term business interests in the country.
- Where to Be Vigilant
- State government support and flexibility, cost and availability of power, law & order situation. Other factors to take into account include labor availability and cost, labor relations and work culture, and proximity to resources and/or markets. In the area of labor law, an employer with more than 100 workers cannot fire them without permission from a government labor commissioner -- something usually not so easy to obtain.
- Different Possible Forms of Settlement
- A Representative Office
Most of the foreign companies initially establish a presence in India with a representative office that is not directly engaged in commercial transactions in India to obtain market information, provide necessary promotional & service support, and explore further opportunities for business and investments.
A liaison office is not allowed to undertake any commercial activity and cannot earn any revenue in India.
- A Branch Office
A branch of a foreign company is limited to the following activities by the RBI: representing the parent company and acting as its buying/selling agent; conducting research for the parent company, carrying out import and export trading activities; promoting technical and financial collaborations between Indian and foreign companies, rendering professional or consulting services, rendering services in Information Technology and development of software in India, and rendering technical support to the products supplied by the parent/group companies.The branch office is allowed to repatriate the profits generated from the Indian operations to the parent company after payment of taxes.
- A Company
It can offer an effective means of guaranteeing better protection for proprietary information, obtaining credit, and penetrating the Indian market more effectively.
For setting up of an office in India, a foreign company needs an approval of the Reserve Bank of India (RBI).
A foreign company also needs to register with the Registrar of Companies (ROC) within 30 days of setting up a place of business in India.
- Evolution of the Sector
However franchising in India is in its early stages of development, accounting for only 3% of India ’s total retail market. Today, India has around 40,000 franchisees, growing at a rate of 40% per annum. The annual turnover from franchising is approximately USD2.7 billion and total investments made by franchisees are approximately 1.1 billion USD.
Some of the challenges faced by the franchising system in India are:
- Lack of Legal Framework: no specific law on franchising.
- Expensive Real Estate: retail space is extremely expensive and the quality is relatively poor.
- Understanding local Culture and Tastes: “Indianization” of products is vital to a franchise success.
- Resistance to Fees & Cap on Royalty: The foreign franchisers should also be prepared to face stiff resistance from prospective Indian franchisees toward the franchisee fees/royalty payments, which are considered high.
- Some Big Franchises
Hertz, car rentals
Avis, car rentals
Kentucky Fried Chicken, restaurant
Domino’s Pizza, restaurant
TGI Friday, restaurant
Ruby Tuesday, fast food
Subway, fast food
Baskin Robbins, fast food
Pizza Hut, restaurant
NII, computer training schools
Apollo, Hospitals for healthcare
- For Further Information
FAI, Franchising Association of India
The official directory of FAI
Franchise in India
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