Source: Railroad Track and Switch | © Fotolia
Principally, German law places no restrictions on the means used to distribute imported goods in the country. Thus, foreign businesses can select the distribution channel/s best suited to their product and preferred degree of involvement in the German market. The most common distribution channels consist of wholesale and retail enterprises, trading houses, merchants, commercial agents, distributors and, finally, subsidiaries in Germany. Our ''business sectors'' profiles include details on the type of distribution channels most frequently utilized in the respective industry.
German wholesale and retail companies' purchasing departments source products from and have subsidiaries in a variety of locations around the world. These business partners are advantageous for companies desiring to sell goods to a German subsidiary in their home country. This option allows businesses to communicate in their own language and without having to leave the country. More information on the German wholesale and retail field is available in our respective business sector profile.
Selling to German trading houses and merchants is a very low-risk means of entering the market for the exporter, since trading houses/merchants take care of finding customers and completing the sales themselves. It may, however, take some effort to convince the German business partner to take on the risk of stocking his/her goods. Assistance in finding potential German wholesalers, retailers, trading houses and merchants is available from the Federation of German Wholesale and Foreign Trade (BGA).
German Commercial agents and (sole) distributors sell products for one or several companies on a commission basis without actually stocking the goods themselves. This method of distribution is attractive to both parties. Companies only pay a commission when sales have been made and agents/distributors are not required to keep expensive stock on hand. Further information on finding a commercial agent in Germany is available from the German CDH (National Association of German Commercial Agents and Distribution).
For long-term market penetration, many businesses choose to set up a subsidiary in Germany. The subsidiary has the advantage of being located in Germany and, thus, being easily accessible to wholesale and retail customers in the country and the Single European Market. This accessibility and the opportunity to conduct business in German, increases the company's attractiveness for potential customers. Establishing a subsidiary in Germany is more complex than setting up any of the other distribution channels, however, Germany Trade and Invest's free investor consulting services can greatly simplify the process.