With indirect channels, the firm exports through an independent local middleman that assumes responsibility for moving the product overseas. Indirect exporting entails reliance on another firm to act as a sales intermediary and to assume responsibility for marketing and shipping the product overseas. The manufacturer incurs no start-up cost, and this method provides small firms with little experience in foreign trade access to overseas markets without their direct involvement. However, using indirect channels has certain disadvantages: (1) the manufacturer loses control over the marketing of its product overseas, and (2) the manufacturer’s success totally depends on the initiative and efforts of the chosen intermediary. The latter could provide low priority to or even discontinue marketing the firm’s products in cases in which a competitor’s product provides a better sales or profit potential (Figure 5.1).
Source: Seyoum Belay (2014), Export-import theory, practices, and procedures, Routledge; 3rd edition.