By Ellis Anderson
You have a product that’s been selling in the United States exclusively. Over time, you get a few inquiries from companies located outside the country interested in selling or distributing the product. You’re concerned about selling overseas. You’re cautious because you’re unfamiliar with the requirements and customs. Selling overseas has the obvious advantage of increasing sales because of the vast world market. There are other advantages of selling internationally that are subtler. If you sell only in the United States, your business rides the ups and downs of the national or local economy. But, on a global level, one region or country’s market may be up while others are down, giving your business a more stable average, if you’re in the right areas at the right time. Keep in mind, though, sales overseas may tend to be larger but less profitable because the customer will want to place large orders to get volume pricing and reduce shipping costs. They also may tend to be less profitable because of discounts and greater work required to complete each sale. There are risks and rewards but, if done correctly, the rewards far outnumber the risks.
To have any success in international sales, your product must be universal in appeal and function. Using the Internet, you can quickly get an idea of what’s being sold overseas. In the United States, we live in a sheltered market, rarely seeing competition that exists outside our borders. Take a long hard look at these competing products and make changes to your product to make it more competitive with those you see. Needs and priorities will be different and, even though your product is superior in every aspect except price, your customer simply may not care, focusing only on cost and basic function.
It’s not uncommon for interested parties to request samples with the expectation that they will be supplied free. Unless the item is very inexpensive don’t provide free samples. If they cannot or won’t make the initial investment to evaluate the product, they probably aren’t the right distributor. If you have a group of products, it’s useful to create an “Evaluation Package” that contains a sample group of products. If they’re serious, they won’t object and this gets them a good, broad sampling of your products. Even though you’ve attached a single price to the group of items in this package, you must show on your invoice an individual price for each line item. Otherwise, they may have problems retrieving the shipment from their customs agents. Unpriced line items cause problems and delays.
Shipping and documentation
Once you’ve received an order, you must provide a simple and economical method of getting your product to the customer. The invoices must be clean and clear and, usually, five or six copies must be provided. If the customer has shipping instructions, you must follow them to the letter or they’ll have problems that cost them money and quickly strain the relationship. You’ll need to establish a good working relationship with a shipper or freight forwarder. They’ll become an important ally. It isn’t uncommon that the customer may have an account with a shipper that they want to use. They probably have excellent rates with that carrier, so use them and ship on their account. You may find your accounting software won’t allow the country fields or long names and addresses required for international invoices. If your software provider doesn’t have a way of modifying the software you may have to do the invoices on a word processor. The documentation required can be time consuming but can’t be avoided, so come up with an efficient way of providing it. There are seminars readily available on export shipping and documentation. The U.S. Department of Commerce or your state export agency should be able to provide you with that information. Freight forwarders sponsor many of these seminars and attending them helps you establish relationships.
There are many methods of payment in international sales that can be confusing. Letters of credit (LC), sight drafts, date drafts, time drafts, standby letters of credit, cash against documents (CAD) and wire transfers are all terms you’ll learn. Each has its own risks, benefits and costs to both you and your customer. If your bank doesn’t have an international department, you should look for a bank that will at least handle your international transactions. Initially, you can sell on a prepaid or credit card basis, but it won’t be long before your distributor requests terms of 30-to-180 days. Before offering terms you should consider letters of credit, especially for larger transactions.
There are many companies that offer credit insurance at a reasonable cost. The Export-Import Bank has good programs for smaller exporters. Insurance gives you confidence that you’ll get paid and, in many cases, the receivables from insured accounts can be used against a line of credit with your bank. There are insurance agents, paid through commissions, who would be happy to help you send up insurance with Export-Import Bank. A good credit program can dramatically increase international sales. If set up well, it can be very secure. There are many books written exclusively about international payment terms and it’s important you have an understanding of them. Payment methods and terms are also usually covered in the export seminars.
In real estate the motto is “Location, location, location!” In export sales, it’s “Distributor, distributor, distributor!” Even if you do everything perfectly and have the ideal product, your success will depend on your distributor. Ideally, you’ll have a distributor in each country with offices or sub-distributors in each major city or market. It’s important the distributor already be in the business or a related business and should already represent related or complimentary products. Advertising in trade publications can be very effective because the best distributors subscribe to those publications.
The distributor may request changes to the product or approvals. These changes may be important for sales or even required in that country. The distributor may request exclusivity but that isn’t required in most countries, except a few in the Middle East that require the distributor or representative be registered. Avoid exclusivity. Work on a handshake, but treat distributors as if they were exclusive. Once you’ve agreed to work with one, don’t be tempted to go around them. Direct all inquiries to them. If you’ve made the wrong choice, you can change later—but if you don’t support the relationship, sales will suffer. As your relationship and sales grow, you’ll need to travel to visit them or participate in trade shows together. Many of these distributors will become friends and these relationships can be very rewarding. One of the pleasures of international sales is traveling the world meeting these friends.
A few don’ts
You may be asked to participate in business practices that are questionable and even illegal in the United States, even though they may be common and accepted in the country where you have a distributor. Once you’ve gotten your name out in the world market, you may also receive letters, faxes and emails from someone claiming to be an official from some corrupt government who has hidden away millions of dollars and needs to get it out of the country. If you’ll send him a letter of authorization and your bank information, the communication reads, he’ll deposit the funds into your account and you get to keep 30 percent. Don’t even think about it! If you do, he’ll get 100 percent of your account.
The world market can be very profitable and personally rewarding. If your product has international potential and you jump in and learn, you’ll find a market many times greater than the traditional U.S. market.
About the author
Ellis Anderson is the founder of Pura Inc. of Valencia, Calif., as well as the inventor of several water treatment devices. He’s currently the project manager for Hydrotech/Pura. He has been recognized for international sales by the U.S. Department of Commerce in its publication Export America and by the Export-Import Bank in its annual report. Anderson can be reached by email: [email protected]
Marketing for Exports
Your biggest challenges in growing through exports will be marketing! How and where do you spend your time and money most effectively? The advent of the Internet has changed the international marketing challenge dramatically, making it far easier to show your product to the world. Your marketing tools should include advertising and literature, a website and trade shows.
A triple e-approach
Your website can be structured so it has three tiers of information. The first level would show just enough information to prompt questions and requests for more information, probably less than you might include in your literature. The goal is to initiate a contact. If you give them everything at once, they may make a decision that your product is wrong and never contact you.
Once received their inquiry, you should answer their questions and redirect them to the second tier of the where find more complete information. This second tier of information would simply be an additional set of pages containing more detailed information that are separately organized and NOT linked to the first tier.
The third tier would be a set of pages that contain information specifically for dealer and distributors. This tier could be password protected if the information is sensitive. It’s important that each tier NOT be linked to the next tier so that the search engines don’t find the second and third tiers, skipping your introductory information where you prompt them to contact you. Your marketing and literature would always refer to the first tier of information.
All printed materials and advertising should point to your website and include an email address. It’s also important in all published materials that you use your regular phone and fax numbers and not toll free numbers. These numbers are useless for your international customers and can be confusing to them.
A well-designed website will attract customers and provide information. When done properly it can become the focal point of your international marketing program.
Trade shows can be very expensive! Pick only trade shows that are appropriate for your product and focus on the markets where it’s used and that have a strong international attendance. Trade Shows that cover many types of products usually aren’t productive, even though you may see hundreds of people. One economical alternative to attending a trade show is to participate in a “catalog” show. The U.S. Department of Commerce or your local state government may rent a booth in a large trade show where they distribute literature. These shows place your information in trade shows that would probably be prohibitively expensive.
Magazine advertising in trade publications that have international distribution will be your most effective means of getting international leads. Trade magazines for the niche markets can also be very effective. Niche and commercial markets are in large part universal. If your product solves a problem experienced by a particular industry, that same problem will probably exist in that industry worldwide.
There are also magazines created specifically for international marketing. One of these is Commercial News USA, which is published by the commerce department. This magazine was very economical, but the price has increased dramatically in the past few years. It’s published quarterly, has a very strong international distribution and distributed by the embassies. Still, it’s a shotgun approach that can produce hundreds of leads, but very few will be really qualified.
Another publication by the U.S. Department of Commerce is Export America, which contains valuable information on exporting. You should contact the commerce department’s local office and your local or state international business offices to see what programs they might have for exporting. Often, they sponsor catalog shows, seminars and trade missions that can be very beneficial for very reasonable prices.
Another aspect of the U.S. Department of Commerce is that you may be able to find funding—either directly through it or a state or local program—to translate your brochures and catalogs into the language of the country in which you’re seeking to do business. These grants may be supported as well by the state office of the Small Business Administration or your area chamber of commerce.
U.S. Department of Commerce http://www.doc.gov/
Small Business Administration http://www.sbaonline.sba.gov/
Export Import Bank (EXIM) http://www.exim.gov/
International Chamber of Commerce http://www.icc-ibcc.org/
International Business Resources http://ciber.bus.msu.edu/busres.htm