The Truth about Agency: 90% of People Get It Wrong

Mr. Zhang recently encountered a troublesome matter: The overseas goods he bought at a high price turned out to be inferior imitations after arrival. And all of this stemmed from his misunderstanding of the concept of "agency". In this era of information explosion, the word "agency" has been too many meanings. Some people use it to achieve financial freedom, while others fall into traps because of it. Today, let's uncover this both familiar and unfamiliar business concept.

In the business field, agency mainly presents three typical models:

• Goods Agency: Ms. Li obtained the regional agency rights of a certain brand through formal channels. While enjoying the exclusive right to sell, she also undertakes the responsibilities of inventory management and after-sales service.
• Service Agency: Such as travel agencies, ticket agencies, etc. They do not directly produce products but earn commissions through professional services.
• Digital Agency: Emerging traffic agencies, advertising agencies, etc. Such agencies often carry out their businesses relying on Internet platforms.

A healthy agency relationship is established on the basis of two-way selection. The agent needs to examine the qualifications, reputation, and market prospects of the principal; and the principal also needs to evaluate the operating ability of the agent. In reality, many disputes stem from the fact that both parties did not establish a sufficient trust foundation before cooperation.

Mr. Wang once represented an emerging brand, and the market response was good in the early stage. But when the brand owner suddenly increased the supply price, he was caught in a dilemma. This case tells us that: The detailed terms in the agency contract are often more important than the agency fee ratio.

• Absolute propaganda promising "zero risk, high return"
• Requiring a large amount of franchise fees to be paid in one lump sum
• Lack of transparent financial data and market reports
• The product pricing obviously deviates from market laws
• There are ambiguous areas in the contract terms

With the development of technologies such as blockchain and smart contracts, the agency model is undergoing revolutionary changes. Decentralized agency, automated commission distribution systems and other innovative forms are reshaping traditional agency relationships. But no matter how the form changes, value creation is always the core for the agency model to be sustainable.

Agency is not simply "making a profit as a middleman", but a business model that requires professional abilities and resource integration. Before considering becoming an agent, you might as well ask yourself three questions:

• Do I really understand this industry?
• What unique resource advantages do I have?
• What value can I create for the upstream and downstream?