Considering becoming an imported food agent and hoping to understand its disadvantages. The best answer points out that imported food agency involves multiple costs, and market fluctuations affect profits; on the market side, demand changes rapidly, and competition is fierce; policies and regulations are complex, and the supply chain is susceptible to force majeure. Many other disadvantages also exist, such as shelf life and linguistic and cultural differences.
What are the unavoidable disadvantages of using an export agent?
Resolved
Our company intends to use an export agent and would like to understand the potential disadvantages in advance to consider them more comprehensively when making decisions. We hope everyone can tell us about the practical operational process, risk bearing, costs, etc. Experience in this area would be even better. Thank you all.
Trade Expert Insights Answers
There are some disadvantages to using an export agent. Firstly, in terms of funds, the agent company may tie up the exporting enterprise's capital. For example, after the payment arrives, the agent company, due to its own financial processes or other reasons, may not remit the funds to the exporting enterprise in a timely manner, affecting the enterprise's capital turnover.
Secondly, the confidentiality of information is questionable. The agent company will have access to sensitive commercial information of the exporting enterprise, such as client data and product information. If the agent company's management is poor or its personnel lack professional ethics, it may lead to information leakage, causing the exporting enterprise to lose customer resources or face the risk of product plagiarism.
Furthermore, communication and coordination costs are higher. The export process involves multiple steps, and poor communication between the agent company and the exporting enterprise can lead to delivery delays, errors in document processing, and other issues, affecting the smooth progress of export business.
Additionally, risk-bearing is unevenly distributed. When issues such as quality disputes arise, although nominally the agent company does not bear substantive responsibility, it may shirk responsibility during the handling process, ultimately leaving the exporting enterprise to bear the main losses.
There may be situations where the export agent company lacks sufficient professional capabilities. If the agent company is unfamiliar with the policies, regulations, and trade customs of the destination country, it may lead to customs clearance delays and incur additional costs. For example, if they are unaware of certain countries' certification requirements for specific products, the goods may not be cleared smoothly upon arrival.
When choosing an export agent, companies may lose control over the export process. As companies rely on the agent company for operations, their own familiarity with international market changes, trade terms, etc., is limited, which is not conducive to the cultivation of the company's own foreign trade talent and long-term development. For instance, some companies later wish to conduct export business themselves but find they lack relevant experience.
Export agencies may face issues with the agent company's qualifications. If the agent company operates poorly and faces bankruptcy, the export business may abruptly cease, and the company's goods, funds, etc., may fall into difficulty. For example, goods may be stranded at the port with no one to handle subsequent matters.
In terms of profit distribution, using an export agent increases costs. Companies have to pay agency fees to the agent company, which compresses profit margins. If the agency fees are calculated unreasonably, the company's costs will increase significantly, affecting product price competitiveness.
Sometimes, for their own benefit, the agent company may not handle business entirely according to the exporting enterprise's requirements. For example, in selecting transportation methods or freight forwarders, they may choose options that are more beneficial to them rather than the most beneficial to the company.
During the cooperation process, if the definition of responsibilities between the agent company and the exporting enterprise is unclear, it is easy to bicker when problems arise, delaying problem resolution and affecting business progress. For instance, when goods are damaged during transit, both parties are reluctant to take responsibility.
There may be delays in information transmission when using an export agent. The market is constantly changing, and if information such as market prices or customer demands is not transmitted to the exporting enterprise in a timely and accurate manner, the enterprise may miss the best decision-making opportunities.
Some agent companies may be unprofessional or operate improperly in the tax refund process, leading to delayed or even no tax refunds, causing economic losses to the exporting enterprise.