Now that you are thinking about exporting, but before you spend a lot of time on that export plan or for that matter a lot of money, you need to find answers to several questions and your answers need to be consistent among themselves.
Well, okay, we should also include the more basic "Why should I export?", but since you already decided you want to consider exporting that should be taken care of (but I like to periodically revisit this question so we make sure everything is still aligning). Here they are:
What should I export (and CAN I export it)?
Where should I export?
How should I export?
Who will sell my export?
"What should I export?" may seem like a simple question if you already have a product and it's successful in your home market, but it isn't really that simple. You need to make sure that there really is a demand for your product in the new market, that the product is appropriate/adequate for the new market, that you can actually get the product to the new market at reasonable cost, that you have a way to sell there AND can support the product in the new market, and that you can get paid for the product (and get the money back home safely). I suppose to be complete you should also ask when is the best time to hit the market because many products have seasonal fluctuations that could impact your success entering into the new market.
What does "appropriate/adequate" mean?? Let's take a simple example. If it's an electric device, being appropriate could mean that it operates properly at the voltage and frequency of the market. While the US is 120V 60cycles much of the rest of the world uses 220V 50cycles and even if the voltage and frequency are right, the Plug may be different. Being adequate could mean that it meets government and agency requirements and has the right certifications, which may mean that you need to alter your product, get new certifications, change all of the labels, etc. to make your product appropriate and adequate for the market (which can be very expensive!!). Yes, you say, but my product is so desirable that customers don't care that they need to buy an adapter or that all of the labels and instructions are in English - that might work for a while, but some customers will object to being "second-class customers" and your revenues, customer loyalty, etc. will be less than if you make the product appropriate and adequate from the beginning.
"Where should I export?" is also not a simple question, though many people simply start with the country they come from or where they have connections or where some customer has requested to buy product or maybe a "distributor" has come forward and offered to sell their product. But actually none of these reasons, by themselves, should justify spending money to export to that country. An evaluation of the export location should show that you have a market demand, that your product is appropriate and adequate for that market, that you can get your product there at a profitable cost, that you have an effective way to distribute and sell the product and that you can get your money.
"How should I export?" requires a balance of shipping time, shipping costs, customer expectations, profitability, and more. For example, Perishable products can only ship by sea under specific condition, not all of which are particularly good for the customer (like shipping very green bananas), but air may be too expensive. Similarly, some products the customer wants as quickly as possible meaning it must go by air because sea could be several weeks. Size and weight of the product may require sea shipment or very expensive air cargo and a profitable solution needs to be identified. Shipping in containers is often a better option but the container size can put constraints on how much product can be shipped for a given cost (big, bulky items may not fit well in a container or the carrier for that matter and "wasted" space will cost money).
And then there is the question of understanding and managing risk and cost involved in the shipping of your product and these risk and cost conditions should be carefully negotiated with the buyer and clearly specified and documented with INCO terms (INternational COmmercial terms published by the International Chamber of Commerce) in all the appropriate documents. Unclear details about the shipping terms can be disastrous and very costly, so make sure you understand and management - get help if you are not sure.
"Who will sell the product" also has a wide range choices that must balance cost, risk, time and effort and may directly impact the eventual success or failure of your product in the new market. There are many choices but they include:
selling it to someone here in the US who will then take your product to the new market and sell (fairly simple but not much control of what happens to your product in the new market);
"piggy backing" with another company already exporting to your new market who agree to sell your product in the new market along with their products (again can be relatively simple, but you are dependent upon the company giving you the help);
using a foreign distributor (can be complicated and costly so needs to be done carefully)
Putting in a sales force and or sales office in the new market (getting expensive and requires management commitment and resources)
setting up a factory and making the product IN the new market (reduces shipping costs, but can meet restrictive "Local Content Requirements" AND costs a lot of money and requires lots of company resources)
Until you have thought about these questions and developed at least a basic set of answers that are fairly consistent among themselves, you are probably not ready to start writing an export plan and even less ready to begin exporting to that new market. Contact us to get help preparing to export your product.
Why Should You Export (or Not)?
A Good friend who travels a lot sees a product similar to yours selling for double the price in Country X and excitedly tells you that you should sell your product there – you could make a killing there by selling at double the price! But should you?
The reasons for considering exports as a way to grow your business are well documented elsewhere (Export.gov, National Export Initiative) and include the fact that 95% of consumers live OUTSIDE OF THE UNITED STATES and therefore can only be reached by exporting.
But realistically you need to know a bit more about the market for your product in Country X before you decide to jump into that market. Most people are surprised to learn that the product sells for that seemingly high price because it MUST in order to cover the additional costs of shipping, duties, tariffs, taxes, and so forth and not because the other company selling the product is greedy and making a lot of profit.
So in this case the reason to export to Country X might be because you can reach another portion of that 95% and significantly increase Revenues (hopefully at an acceptable profit) and not because it seems like you could make a much higher profit on each product unit sold.
We will discuss this further in other articles, but do consider that the decision to export or not while very important to your business, can be complex as there are even more things besides price that you need to consider before making your decision.