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A manufacturers' representative (rep), also known as independent sales representatives or sales agent, is an individual, sales agency or company that sells a manufacturer's products to wholesale and retail customers.
When a manufacturer hires a manufacturers rep firm, this usually means that a contract is signed between the two companies, which empower the rep to sell, or solicit sales for, the manufacturer's products as an agent in a defined territory. The products are usually ordered directly from the manufacturer, who then pays a sales commission to the manufacturers rep firm. The commission rate varies according to the market and the product type. It can be anything from 1% to 50%, although a more typical commission rate would be 10% to 25% for low-cost or consumer products and 5% to 10% for high cost or industrial products.
When is a manufacturers' rep used?
A manufacturer representative is the most widely used type of agent. These types of reps are typically used in the following situations:
- When there is lack of a sales force for the manufacturer. The manufacturer's rep will do all of the selling.
- When introducing a new product into the market.
- When there is a new market the company wants to enter, but the market is not fully developed for their own sales force to be used.
- When it is more cost-effective than using the company’s personnel. The sales potential may not justify the cost of using the company’s sales force, or the company may want to reduce the fixed cost risk of an internal salesforce.
- When a retail buyer requires dedicated sales and marketing support from a manufacturer.
- Manufacturers hire representatives that live in the geographic location of the territory that they sell to.
Manufacturer representatives generally represent more than one manufacturer. One of the reasons they can represent more than one manufacturer is the products are related or complementary, but not competing. Many manufacturer reps are able to manage various lines through the use of cloud-based sales platforms, such as RepBox. These reps will know their market and products well since they typically work in a specific industry and geographic area. Manufacturer's reps know the market well because they attend conferences, conventions and trade shows in order to maintain knowledge of new products and developments in their industry. Many of these reps sell more technical or scientific products which require a high level of product knowledge.
Companies seeking manufacturers' representatives often use the directories of manufacturers' representative associations, though connections are more often made in person at major trade shows. Many representative associations are vertical, or industry-specific, and one, the Manufacturers' Agents National Association is a horizontal, industry-independent association. There are also more modern, algorithm-driven services like Replogic.com that match companies with representatives based on specific areas of expertise and focus.
- Edwards, Paul & Sarah. "Starting a Business as a Manufacturer's Rep". entrepreneur.com. Retrieved 7 March 2013.
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