Indirect way of exporting is almost equivalent to domestic sales. The company will sell its products in its own country to another party which will take the responsibility of actual exportation. This can be done in two ways:
Selling to a Merchant Exporter or Export House in India:
There are many merchant exporters and/or recognized export houses in India which are willing to buy goods from the Indian manufacturers and sell them abroad. Merchant exporters or export houses sell and buy on their account and thus assume the risks involved in exporting.
An idea of the services provided by an Export House can be obtained from an advertisement taken out by a particular export house.
1. You can take maximum advantage of our intimate knowledge of export markets and exportable products.
2. Our extensive dealer network all over the world is at your service round the clock.
3. We extend pre-shipment finance to supporting manufacturers
4. We have technical exerts who can guide you on product development
5. You have access to foreign sample of exportable products
6. We have our own Shipping and Insurance Department. This means you get shipping space and sailing even to infrequent ports.
In fact, export houses can provide a variety of services. They may undertake documentation and shipping formalities. They may offer after sales services and warranties.
A merchant exporter is free to decide what he will buy, and at what price Merchant exporters are usually well financed and maintain their branches at port towns and in important centers abroad. They usually have a system of gathering market information and keep a close watch on market trends. The nature of their business makes it possible or them to assess the marketability of products and the prospects of their success. They often specialize in certain commodities or in certain areas. This method of exportation is useful when the company is small and, therefore, not in position to start an export department to look after export sales.
Selling to visiting/Resident Buyers:
Many big foreign companies have their resident buying representative in India for other countries who are entrusted with the job of procurement. Some other companies regularly send buying teams for the same purpose. The amount of business that is conducted by such buying operations is substantial. The advantage of selling in this way is similar to what had been mentioned for exporting through export houses, i.e. the manufacturer is not burdened with the problems of actual exportation. In addition, buyers often co-operate with producers in developing countries to adapt products, for instance, by providing product specification giving designs and styling guidance. Offering in quality control, and counseling on packaging, labeling and shipping.
Selling through Overseas Import Houses:
The existence of large import houses in some countries allows an alternative form of entering such markets Japan is the most important market where entry through trading houses is the easiest and least costly. These trading houses are giant companies handling both export and import transaction and have offices all over the world. These houses also have direct contacts with all important users all over the world. These houses also have direct contacts with important wholesaler in Japan. Selling through such trading houses automatically ensures that the goods will reach the important distributors and through them down the distribution system. In view of the complicated distribution system prevailing in Japan, to only smaller companies but even bigger ones have stated export marketing through trading houses. For example, Sony Trading Corporation is now marketing more then 100 products in Japan, ranging from Whirlpool appliances and Schick electric razors to Fielderest Mills and White and Mackay whisky.
Advantages of indirect Exporting:
Indirect exporting is more suitable for a small company which does not possess adequate financial and managerial resources required for making a successful entry in a foreign market. The main advantages are:
1. The merchant exporter takes care of all botheration involved and assumes all sales and credit risks
2. Export merchants usually pay manufacturers against purchase of their goods. Hence their capital is not tied up.
3. The firm does not have to spend money on market research or on setting up branches abroad.
4. They are frequently approached by buyers from abroad demand is concentrated on them. Thus merchant exporters may provide sale opportunities in otherwise out of the way markets.
5. The manufacturer is free to concentrate on production.