Too often we deal with clients looking to collect on unpaid invoices to distributors/customers in Korea and resolve IP and other disputes between these distributors/customers because of clients rushing into relationships without vetting out the anticipated distributor or having a very poorly drafted distribution agreement.
Many distributors in Korea are fantastic, while, others are nothing more than order processors -they, simply can’t or don’t want to sell. Additionally, in these tough economic times, too many companies, in Korea, are struggling to stay afloat. If your distributor doesn’t know the market, you will find yourself with unpaid invoices from customers and issues with your distributor.
Do yourself a favor and consider the following before engaging a local company to distribute your products.
10 Ten Things to Consider Prior to Doing Business with a Distributor in Korea
- Has the Korean distributor worked with other foreign companies? If not, you are dealing with a very inexperienced distributor. Ask for references.
- Has the Korean distributor worked with major Korean companies? If not, you may be talking to the wrong distributor. Ask for references.
- Is the Korean distributor solvent? Does he/she have an office and staff? Too many distributors in Korea are nothing more than a man with a briefcase and a mobile phone. A successful distributor, normally, has an office with staff.
- How long has the distributor been in business? Sometimes you can find distributors with, only, a few years experience with access that you may need, however, this is the exception and far from the rule. This exception is, normally, in products that may be new to Korea.
- Has the distributor provided you with a marketing and distribution plan? If not, he may be just an pamphlet pusher and order taker.
- Does the Korean distributor have a capable sales force? Don’t just talk with the company’s CEO – talk to the day-to-day sales staff.
- Did the Korean distributor provide sales targets for the short, intermediate and long-term? If not, he may, again, be just a order taker.
- Have you conducted a background check on the distributor and the distributor’s management? This should be performed by someone who is intimate with the realities of doing business in Korea.
- Have you drafted a distribution agreement that is tailored to the Korean market? Yes, your overseas agreements are not good enough for Korea.
- Have you done a market study by a professional in Korea and does the distributor seem to understand the market that you now understand from the study? Get the market study done by someone on the ground in Korea and coyly review the market study with the distributor in order to gauge his understanding of the market.
Other posts that may be of interest:
- Doing Business in Asia: Due Diligence, Agreements, Attorneys and Street Smarts
- Listen to My Mother: JVs in Korea (Translated from Korean)
- Debt Collection Cases in Korea on the Rise: Due Diligence Brother
- Korea Due Diligence: Not So Different from China
- Korea Outsourcing: Legal Basics
- Protecting your Intellectual Property in Korea
Sean Hayes, IPG’s Co-Chair of the Korea Practice Team, may be contacted at: [email protected]
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- Basics to Successfully Outsourcing Production of your Product to Korea: Korea OEM Basics
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- Termination of Commercial Agent/Distribution Agreements in Korea: Korea’s Agent Compensation Rule
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