South Africa offers foreign suppliers a variety of methods to distribute and sell their products, including using an agent or distributor, selling through established wholesalers or dealers, selling directly to department stores or other retailers, or establishing a branch or subsidiary with its own sales force.
Consumer goods requiring maintenance of stocks and industrial raw materials are often exported to South Africa through established wholesalers.
Many exporters of consumer goods sell directly to South African retail organisations – including consumer corporations, department stores, chain stores, and co-operative groups of independent retailers – which assume the functions of wholesale buying, selling and warehousing.
South Africa offers the full spectrum of retail outlets: small general dealers; specialty stores handling a single product line (such as clothing, electronics, or furniture); exclusive boutiques; chain stores (groceries, clothing, toiletries, household goods); department stores; cash and carry wholesale retail outlets; and co-operative stores serving rural areas. Large-scale supermarkets, or hypermarkets, are located in suburban shopping malls and sell large quantities of almost all consumer goods.
About 90 percent of the consumer trade inventories of these stores are domestically sourced.
Franchising is well-established in South Africa, with the sector showing strong and continued growth. Around 30% of South African franchises are non-food systems, with an emphasis on service. Building, office and home services sectors are dominant, with automotive, restaurant, health, education and training franchises also available.
For products of a technical nature, it maybe necessary to appoint an official after- sales agent in South Africa. This may be a company that does not import or market the product in question, but rather, because of its geographical reach, technical ability and goodwill in the market, acts as the certified service agent.
Appointing an appropriate after sales agent is crucial in ensuring that the product develops a respected reputation in the South African market.
The US Commercial Service’s Doing Business in South Africa – 2011 Country Commercial Guide offers more information on selling factors and techniques.
Agents & distributors
In South Africa, the terms “agent” and “distributor” have very specific meanings.
In the strict legal sense, “agent” means a person who, for and on behalf of a principal, either introduces a third party to the principal by soliciting orders from the third party, or concludes contracts with the third party on behalf of the principal. The normal reward for an agent is a commission, which is received from the principal.
Key considerations in appointing an agent in South Africa are:
- You need to appoint an agent who knows your market well. The South African business sector is relatively small, and companies have established methods of procurement that differ from sector to sector.
- You need to consider national distribution. South Africa is a large country, with nine provinces. Lacking the support of national infrastructure, smaller agents often tend to operate provincially. This means you may need to appoint an agent in each of the larger cities – Johannesburg, Cape Town, Port Elizabeth and Durban – to cover the country. Larger companies who take on agencies often have an office in each of the major centres, making any agency agreement easier to control.
- For certain products, South Africa is a trading hub for the southern African region, and you need to consider whether your South African agent should handle business in these countries on your behalf.
A distributor buys and holds stock of a product. In return, they are usually granted an exclusive right to sell the product in a particular area or to a particular type of customer. An agreement with a distributor is similar to an agreement with an agent, except that price and delivery terms will differ because the distributor is a principal.
When appointing a distributor in South Africa, the same considerations apply as when appointing an agent.
Reviewed: 31 August 2012
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