The major reason for these occurrences is the client to quickly rushing into “opportunities” without vetting out a distributor and poorly drafted distributions agreements.
Many distributors in Korea are fantastic, others are mere order processors and some are downright criminals. It is not too difficult to avoid the latter two if you consider, at least, some of the following:
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, likely, dealing with a very inexperienced distributor. Check, also, if the distributor was educated abroad. We find that those with, only, locally experience have a near impossible chance of succeeding in satisfying the needs of foreigners.
- Has the Korean distributor worked with major Korean companies? If not, you may be talking to the wrong distributor.
- 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. Look for high turnover.
- 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 Articles that May be of Interest:
- Selling in South Korea: For your Sales & Marketing in Korea – Distributor Needed? by Tom Coyner
- Distribution Agreements are Your Friends in Korea
- Korean Small Business Partnerships/Joint Ventures: Pubs, Distributors, Exporters, Boutiques, Franchises and Basic Manufacturing etc.
- Basic Agreements for Doing Business in Korea
Sean Hayes may be contacted at: [email protected]
Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. He is ranked, for Korea, as one of only two non-Korean attorneys as a Top Attorney by AsiaLaw.
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- Distribution Agreements in Korea: Crawl before you Walk
- Expiration Versus Termination of a Distribution Agreement in Korea: Korean Distributor Basics
- Termination of Commercial Agent/Distribution Agreements in Korea: Korea’s Agent Compensation Rule
- Basics to Successfully Outsourcing Production of your Product to Korea: Korea OEM Basics
- Establishing Business with Korea via an Agent: Korean Agency Law Basics
- Korean Franchise Law Basics for Franchisors
- Starting a Business in South Korea: Top Posts from the Korean Law Blog
- Starting a Business in South Korea
- Do you Sell Buggy Whips? Succeeding in a Competitive Korean Market