Despite its relatively small population, Switzerland can be an attractive sales market for Thai manufacturers. A company wishing to sell its products in Switzerland does not necessarily need to establish its own company or build a local sales team. Depending on the product, expected market volume and desired level of control, different distribution models may be suitable.
Broadly speaking, four main options can be distinguished: direct sales from Thailand, working with a commercial agent, distribution through a Swiss partner, or establishing the company’s own presence in Switzerland.
Which model is most appropriate depends in particular on how actively the Thai company wants to develop the Swiss market itself, who should control the customer relationships, and who should bear the commercial and regulatory risks.
Direct sales from Thailand
The simplest structure is to sell products directly from Thailand to customers in Switzerland.
For manufacturing companies, this will often mean selling to a Swiss importer, wholesaler, retailer or industrial customer. Direct sales to end customers are also possible, for example through the company’s own online shop. The main advantage is that there is no additional distribution partner between the manufacturer and the customer. Hence, the Thai company retains control over pricing, customer relationships and contractual arrangements.
At the same time the company must largely develop the Swiss market itself. Marketing, customer acquisition, order processing and, where necessary, customer service all need to be organised. Particularly in B2C sales, additional logistical, customs and VAT issues may arise. Switzerland also has specific VAT rules for foreign mail-order businesses.
In practice, direct sales are often combined with an agent or a local distribution partner.
Read more: Swiss sales contracts with foreign suppliers – what manufacturers should consider.
Distribution through an agent
A company that wants to actively develop the Swiss market without immediately building its own sales team can work with a Swiss agent.
An agent continuously brokers transactions for the foreign company or, if properly authorised, concludes contracts in the company’s name. Swiss contract law contains specific statutory provisions governing agency agreements.
The main advantage of this model is that the Thai company can benefit from local market knowledge and existing business contacts without having to establish its own sales organisation. The agent’s remuneration is often partly or entirely performance-based, typically in the form of commissions.
Unlike a traditional distributor, the agent normally does not purchase the products and resell them on its own account. Instead, the sales contract with the Swiss customer is concluded directly with the Thai company.
As a result, however, important risks remain with the manufacturer. These may include the customer’s payment risk, contractual administration and, depending on the chosen import structure, questions relating to customs, VAT and product liability.
Read more: Agency agreements in Switzerland – rights, commissions, termination and typical contractual clauses.
Distribution through a Swiss partner
Another option is to work with an established Swiss distributor or distribution partner.
Unlike an agent, the distributor typically purchases the products from the manufacturer and then resells them to Swiss customers in its own name and for its own account.
For a Thai manufacturer, this can significantly simplify market entry. A good distributor may already have customer relationships, established sales channels, market knowledge and potentially its own warehousing, service and logistics infrastructure.
Part of the commercial risk is transferred to the distributor. Yet, at the same time, the manufacturer gives up some control over the market. There is often no direct relationship with the end customer, and the manufacturer becomes more dependent on the distributor’s performance and the market information it provides.
Contract drafting is therefore particularly important. Matters such as the distribution territory, exclusivity, minimum purchase requirements, marketing obligations, use of trademarks, customer information, inventory, termination and the consequences of ending the relationship should be clearly regulated.
Swiss competition law must also be taken into account. In particular, restrictions on resale prices or certain territorial restrictions may raise competition law concerns. The Swiss Competition Commission has specific rules governing vertical distribution agreements.
Establishing a company or branch in Switzerland
A Thai company has the greatest degree of control if it develops the Swiss market through its own local structure.
One option is to establish a Swiss subsidiary or a Swiss branch. A subsidiary can generally be wholly owned by the Thai parent company. For ordinary commercial, manufacturing and service activities, Switzerland generally does not require majority Swiss ownership.
Having its own Swiss company allows the business to employ staff, conclude contracts directly with customers, control marketing and sales itself and build a long-term position in the market.
But, this option also involves the greatest organisational effort. In addition to incorporation costs, the company will need to deal with matters such as accounting, taxation, VAT, social security, employment contracts, local representation and, where applicable, regulatory permits.
For many Thai manufacturers, establishing a Swiss company will therefore not be the first step. Companies will often test demand through direct sales, an agent or a distributor before making a larger investment. Only once sustainable sales potential has been demonstrated may setting up a local entity become commercially worthwhile.
Another strategy may be to use Switzerland deliberately as a long-term European base or regional headquarters.
Read more: Market Entry into Switzerland: Legal Framework for Thai Companies
The distribution channel is only one part of market entry
Regardless of the chosen distribution model, one question must be clarified before the first sale: whether the product may legally be placed on the Swiss market.
Depending on the type of product, different technical regulations, labelling requirements, safety standards or authorisation procedures may apply. This is particularly relevant for products such as food, cosmetics, electrical equipment, machinery, chemicals, medical devices and other regulated goods.
It should also be clearly determined who will act as the importer of the goods. This seemingly technical question can have significant consequences for customs, import VAT, product liability, regulatory obligations and the practical handling of deliveries.
Which distribution model is the right one?
There is no single structure that is right for every company entering the Swiss market.
A company wishing to test the market with relatively low fixed costs may start with an agent or distributor. A manufacturer that already knows its Swiss customers and is able to develop the market itself may sell directly from Thailand. A company seeking to build a significant long-term Swiss or European business may later establish its own subsidiary or branch.
The important point is not to consider the distribution structure purely from a sales perspective. Contracts, import arrangements, product regulation, customs, VAT and liability should be considered together.
For manufacturing companies in particular, one question is therefore especially important:
Who sells the goods to whom – and who assumes which legal responsibilities on the journey from the factory in Thailand to the customer in Switzerland?
This question forms the starting point for the further articles in our series on distributing Thai products in Switzerland.
Note: This article provides a general overview and does not constitute legal or tax advice for any specific case.