There are a number of factors or trends at play mandating that independent manufacturers’ representatives who are all ready at work on the international stage continue their efforts. At the same time, reps not involved internationally had better pay heed to what’s going on in the world’s markets as they consider whether they should dip their toes in international trading waters.

Those are just some of the opinions offered by Paul Eitmant, principal and president, IP Group International.

A consultant who deals extensively in international markets and reps’ involvement in them, Eitmant maintains that business is all about following the money, and the money today is found in international waters.

“As we look at where we are today,” he explains, “you’ve got to look back to learn where everything began. In my view, it was the electronics industry that led the way offshore. Perhaps 20 years ago, very few agencies, with the exception of the electronics reps, were going offshore. Now everyone has followed their lead. There’s certainly always been the European influence and then the doors were opened to the Far East. Today it appears that all industries have followed their lead to the extent where we’re seeing a lot of activity from Europe in the plumbing and power industries.”

So what does all this mean for today’s rep who wants to successful in the future? “Get involved!” is Eitmant’s admonition. “If a rep wants to be profitable today and if he wants to create a viable company that he can leave for a family member, sell to someone else or pass on to a future owner, he should seriously look at international trade.”

Eitmant isn’t the only one who feels that way. For instance, MANA-member John Gunn, GCA-EMS, Tampa, Florida, emphasizes that “Reps’ involvement in international business can only help them now and in the future. A large part of our business is conducted outside the United States. While we see somewhat of a decline because of economic conditions, that business only helps our bottom line. In fact, our export business to the Caribbean has recently been stronger than our domestic business in Dade County, Florida.”

Pressure to Compete

Just last month, Agency Sales magazine reported on the business trip Les Rapchak, Tech Sales Company, Toronto, Canada, completed to warn-torn Iraq. According to Rapchak, “Reps are under more pressure to compete today than at any other time. That’s why I — and other reps — have to look overseas for business opportunities. Pursuing those opportunities doesn’t come without risk, however, but if you want the greatest chance at experiencing growth, it’s a risk you’ve got to take. In this challenging economy, I don’t just want to survive, I want to thrive. As I consider the business I run, if I was not involved internationally, I would probably wind up closing my doors.”

Taking stock of his travels to Iraq and other corners of the earth, Rapchak obviously not only talks the talk, he walks the walk.

There are a couple of factors at play here, Eitmant maintains, that spur reps like Gunn and Rapchak in their efforts:

• The weak U.S. dollar — “It wasn’t that long ago, when the Euro was very weak vs. the U.S. dollar. That’s all turned around and that impacts how people conduct business.”
• Labor costs — “Consider the labor rates in China, India and other countries of the Far East and it’s no wonder manufacturers are able to achieve lower costs making their products there. Those lowered costs are what customers are looking for.”
• The cost of transportation is no longer a negative factor — While the transportation costs were at one time decreasing, they’re on the upswing now. But, with the cost savings realized by locating manufacturing overseas, the cost of transportation isn’t a factor in the customers’ decision.
• The proliferation of the Internet — “Because of the Internet, the end user, the ultimate customer for the product, is cognizant of where products are being manufactured. They’re easily able to locate cost-saving opportunities and more times than not, those cost-saving opportunities reside with products being manufactured overseas.”

Buy/Sell Opportunities

How do the effects of these and other factors filter down to impact the business lives of manufacturers’ representatives? According to the consultant, he’s seeing a growth in what he calls “hybrid” rep operations, but what MANA members are more familiar with as “buy-sell” operations. “Traditionally, reps have been working on lines that pay them X-amount of commission. If they change their method of operation, which I admit is a ‘right-turn’ for most agencies, they can experience a major increase in their margins. Basically, it necessitates the rep becoming not only the rep, but also a partner with a manufacturer. The rep takes ownership of the product, assumes control of the inventory and will hold it until sold to the ultimate end user. Many reps I’ve worked with have seen their profits quadrupled. For instance, they’ll purchase a container full of product for $50,000 and turn around and sell it and earn a 20% profit on their investment. Obviously, their profit opportunities greatly increase, but with those opportunities comes an element of risk.

“First there’s the cost of the money they have to put up to make the purchase. That’s an up-front on their part and not something they’ve had to do in the past. It amounts to them taking money they’ve already earned and acting as a channel partner with the manufacturer. Compounding the risk is the fact that often the rep has to pay for the container before it even leaves the dock. What this amounts to is a cash game, a dollar game, and not every rep is willing to take that chance.”

That’s not the only risk. “Then there are questions of delivery, quality and product liability. What happens if the rep invests the money for a shipment that arrives loaded with rust. Does he send it back at his own cost? There’s a ton of responsibility here.”

Rapchak knows about the risks Eitmant refers to. “Sure this is a risky proposition for the rep who is just getting his feet wet. I can recall one time when I was just starting out and had made the purchase of products from a source in England. I made the purchase prior to discovering I could have had a much better deal from a source in Sweden. What it’s all about is completing your due diligence before making a decision.”

Eitmant agrees when he says, “If anything, the rep should make sure he buys himself a plane ticket and takes a trip overseas to learn firsthand who he’s going to be conducting business with and what their facilities look like. Remember, whatever a rep does, it’s still a relationship or face-to-face business. Nothing replaces meeting your business partners in person. More than 20 years ago there was no Internet. Everything was done face-to-face. If I was beginning a relationship with a manufacturer or a customer, I’d get in my car, go see them and start forming a relationship. It’s not so different today. If agencies are able to form relationships with suppliers overseas, that goes a long way in strengthening their potential for success here.”

In addition to the timeworn ability to establish, maintain and nurture relationships, Eitmant stresses the importance of doing things differently in a changing world. “To operate internationally takes a whole new skill set than what the rep has possessed in the past. Today’s rep has to be able to change with a changing technology, be able to be comfortable with different cultures, and be able to alter his course quickly. The rep that can do all that has the best chance for future success.”