Vorlesung 4 Indirect Sales Channels

Advantage of direct sales:

• Better control on all sales activities

• Direct access to customers – intimacy to (strategic) customers

• No or less dependency on partners

• Higher quality assurance at technical complex solutions & services

• Higher competitiveness at price sensitive market segments

Advantage of indirect sales:

• Flexibilization of sales costs, No fix sales salary costs

• Selling costs only in case of real business

• Better coverage of an industry or geography (national or international)

• Possibility to cover a multitude of customers

• Self-employed tradesperson who is commissioned to broker transactions for another or several other companies or to conclude transactions on their behalf (e.g. travel agents)

• Works in another's name and for another's account (§ 84 (1) HGB)

• Legal status of an independent entrepreneur

• Receives a signing fee or commission (usually a freely agreed percentage of turnover)

• For business transactions: Does not have to be a natural person; can also act in the form of a company (agency)

• Single or multi-company agent (if contractually agreed)

• In the case of multi-company representation, usually called broker (= brokering of business for several companies by 1 broker)

• Brokerage contract: Legal basis from civil law: provisions on §§ 652 ff. BGB or commercial brokerage contract (§§ 93 ff. HGB)

—> The commercial agent's claim to profit for his entrepreneurial efforts usually consists of a basic amount ("fixed fee") and a commission based on turnover.

Points in need of regulation

• Application and amount of the basic amount

• Advances on commissions

• Turnover commission: Definition then a turnover is considered to be made → (e.g. formal purchase, shipment of goods or payment)

• Del credere commission (Delkredereprovision) according to (§86 HGB, Abs. 1, S.3) → Agent is responsible for receivables and incoming payments

• Expenses

—> Types of commissioning

• Activity provision: Co-causation of the representative must be given for the conclusion of the contract

• District commission: Customer has its registered office in the district of the commercial agent

• Follow-up commission: After termination of the contractual relationship between provider companies, customers conduct further business

• Commission agents work in the industrial goods sector mainly in specific industries or regions:

• Trading in raw materials (e.g. coal, metals, ore, timber, agricultural products)

• Export jobbers: brokerage of entire shiploads

• Broker: case-by-case brokerage of transactions such as foreign sale of larger lots of used machinery of a company on an individual basis

• Consignment - special form (usually in foreign trade) = transfer of goods ready for sale from a supplier (consignor) to the commission agent (consignor), with the order to sell these stock goods to various foreign countries.

• New commission-like structures: online shops / affiliates (key word advertising, e-mail marketing etc.)

General:

• Commission business has become less relevant in practice due to the more preferred forms of contract by manufacturers: Commercial agents, franchisees, authorized dealers

• In the industrial goods sector generally only used on a case-by-case basis

• In the consumer sector: art trade, ticket sales, antique trade, used car trade (=> avoidance of VAT liability, as car dealers sell vehicles they have taken in part-exchange on behalf of a customer)

• In the financial market: brokerage of bank securities

—> 3PL 3 rd party logistics provider – a preferred route to market for producer

• Vendors use third party businesses to outsource elements of the vendor‘s ´/ producer´s distribution and fulfillment services

• 3PL typically is specialized in warehousing, stock management and transportation services.

—> 3PSCM 3 rd party supply chain management provider

The services go beyond logistics and include value-added services related to the production or procurement of goods:

• services that integrate parts of the supply chain

• localization of packaging

• badging of products