Expanding Distribution under fair Conditions in Southeast Asia

Trade agent offers reasonable costs for market entry to European medium-sized businesses

The distribution of German products into Southeast Asian markets is not an easy task for mid-size enterprises. One must overcome legal hurdles and establish a solid presence, all the while being sure to avoid expensive trade margins. The Thai-German trading company Sanet Trade & Services in Bangkok, however, makes what sounds like trying to square the circle become possible, offering tailor made solutions for almost every type of market entry.

The ten ASEAN member states, centered around the “Small Tigers” Singapore, Thailand, Malaysia, Vietnam, and the Philippines, are expected to be the most stable growth region in the world during the next two decades.

Companies in all of these countries are looking to acquire German and European technology for their production, which is often already quite sophisticated. While their respective governments do indeed share this goal, they much prefer receiving direct investments into their countries. Most of the time foreigners are forbidden from setting up commercial establishments or engaging directly in distribution, often including sanctions against foreign parent companies in the form of taxation penalties or even jail time. “We can handle trade on our own” is the philosophy behind such measures.

Whoever wishes to do business legally is faced with the dilemma of having to either invest millions of Euros to get a trade permission or pay high margins to importers. To remedy this, the trading firm Sanet Trade & Services under German co-management offers interesting solutions for a diverse range of objectives. This has been recognized by nearly a dozen renowned German mid-size enterprises which are managing the markets in Thailand or in ASEAN together with Sanet. Based on this success, Sanet is now also offering comparable partnerships in Vietnam, Indonesia, and Myanmar.

A particularly interesting model is the “Business Unit” at Sanet’s trade agency, which is set up specifically for each manufacturer (“Principal”). It includes the hiring of an employee given special training by the Principal for the exclusive distribution of their products. The trading company also foregoes the usually high trade margins or bonuses of between 15% and 30%. Instead, the Principal and his Asian agent reach an arrangement regarding the direct costs of that employee as well as an agreement on a fixed commission which may by all means remain in the only three-digit range (Your Business Unit).

The negotiation of fixed remunerations or commission rates will depend on the additional agreed services expected from the Thai trading partner.

For example, if someone requests market research on customer or revenue potential, they will pay for this separately as a one-off service. The agreed-upon fixed commission will not be affected even if the knowledge gained leads to a rapid growth in sales.

Sanet also offers to provide technical services and advice at fixed rates to those who may be interested. Sanet employs German and local engineers who take care of the negotiation for special-purpose machines or complete production lines according to the highest standards, with top customers like automobile manufacturers or tier-1 suppliers.

Other companies have also employed the Thai partner company as a regional sales manager, which continues to lead as the most qualified trading partner in the entire Asia-Pacific region. Sanet works in close cooperation with the Principal in Europe in order to set up and maintain sales networks.

The regional Sales Managers share their experiences with customers, which they have gathered under the “roof” of Sanet Trade & Services.

One minor drawback of this system is that Sanet Trade & Services is not orientated towards taking on inventory risks and offering direct logistic services. Thus, anyone relying on stock keeping and short-term on-site delivery will need to work together with Sanet to find a logistics service provider.

Most importantly, however, Sanet Trade and Services’ future-oriented model is doing away with high trade margins, the minimization of manufacturer profit, and the limitations on companies’ capacity to compete.

This is being replaced by fixed calculable amounts which are comparable with having a company representative or one’s own presence on-site. It also entails close professional cooperation with one or more employees hired specifically for the customer’s company, a trade organization with a solid network in the target country, and close contact with the SANET ASEAN ADVISORS, a network of consultants which faithfully handles market research, personnel recruitment and business plans, as well as direct investments and restructuring.