Local establishment, distribution and sales channels

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There are a number of different ways to sell one’s goods and services in other countries. Selling via agents and retailers is a relatively inexpensive and simple way to enter a new market. E-commerce may be easier and less expensive than selling items in a retail shop, for example.

But keep in mind that you may need to be accessible in markets where you have many or large customers. For example, you can choose to establish yourself via a branch or subsidiary, forming a joint venture, or via franchising.

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E-commerce

If you are going to launch your webshop abroad, there is a lot to prepare and think through. In particular, you will need to become acquainted with the market you want to sell in and then adapt your webshop to local requirements and conditions.

Business Sweden’s e-commerce guide provides information on relevant local laws, regulations, purchasing behaviour and trends in 21 e-commerce markets within and outside the EU. The guide is provided free of charge, but you will need to register.

Read more about Business Sweden’s e-commerce guide (in Swedish)

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Agents and resellers

Using an agent or reseller is a cost-effective way to enter a new market, especially if they are specialised in your industry. The disadvantage is that you have no contact with the end-customer and it becomes harder to learn more about the export market. If your joint cooperation is successful, you can consider forming a joint venture.

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Agents

An agent represents your company in the export market. Usually you pay agents commission on the sale. You own the product and you are responsible for costs incurred by the agent.

Keep in mind that in some countries agents are regarded as being employees and in such case you will have an employer’s responsibility. If you want to avoid this, you should make use of resellers/retailers instead.

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Reseller/retailer

A reseller/retailer purchases your products from you, sets their own price, and sells them in their sales channels to their customers. Resellers/retailers ordinarily maintain a stock and therefore take a quite different financial risk than the agent.

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Agent and reseller agreement

It is important that you clarify the rights and obligations with agents and/or resellers in an agreement, which is best in writing. In the agreement, you should specify details of

  • commissions
  • prices
  • division of responsibilities
  • cancellation of the agreement
  • which country’s law will be the governing law of the agreement
  • which court should decide, in the event a legal dispute arises.

It can often be a good idea to use a lawyer with knowledge of international trade to draft the agreement. A lawyer can assist with dealing with issues of exclusivity and selective distribution agreements. These issues may arise when using a reseller.

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Branch

If you open up a branch, you have a permanent place of business in the foreign market. A branch is not an independent legal entity, but rather can be regarded as a part of your Swedish company located at a distance. Even though it is not an independent legal entity, you will need to register the branch in the country it is located in. As the branch is not a legal entity, you will report the financial results as a branch of your Swedish company.

As a rule, you also need to file reports and pay taxes on the branch’s business operations in the country it is located in. This tax is then deducted from your tax liability in Sweden.

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Subsidiary company

A subsidiary in a foreign market is a legal entity and is subject to the laws of the country of establishment. Subsidiaries are normally taxed in the country in which they operate.

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Joint venture

A joint venture may mean that working together you and your foreign partners start-up a new company for the purpose of selling your product(s).

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Franchising

Via franchising you can expand with less risk of losses and with less capital expenditures than if you were to sell abroad entirely on your own. The franchisee in the new market often has more knowledge about the market than you yourself have; plus they contribute with capital. Therefore, often one can expand quickly via franchising.

An important part of establishing in new countries is to protect your intellectual property rights. The objective is that no one should be able to copy your product or service. Depending upon your particular business, you may need patent protection, trademark protection, or design protection.

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