When initiating an export plan, conducting a product selection exercise is a key element. In reviewing market selection, suppliers may have considered product suitability as one aspect, understanding on a basic level what markets were best suited for the supplier’s current product lines. Before deciding to ship products overseas, however, a more in depth product review should be conducted. Market research and contacts with foreign partners, buyers, customers, and others should give a supplier an idea of what products can be sold and where.
What is Selling Today
As part of a study, suppliers should first review what it is they have for offer and how it is selling today, both domestically and internationally. A ranking of the most popular items (by sales dollars and by units) should be performed, and a comparison done on both lists. It may be that the most popular products for export may not be the same as the best sellers in the supplier’s home country, depending upon buyer tastes and other factors.
When reviewing one’s product assortment for export, there are a myriad of factors to consider. An important factor internationally is product size. One needs to consider whether the size of the product is appropriate for global markets. It may be too large (for homes, kitchens, ovens, bathrooms, etc.) in certain countries. For cost considerations, if the product is quite bulky, a container load may contain mostly air, costing too much to ship across the waters and prohibitively increasing the landed price of the product. On the flip side, if the product is too small, it may require a customer to purchase thousands of units to affect an efficient purchase, which may or may not be a reasonable expectation.
Packaging is another important element to the product export decision. Knowing whether one’s existing packaging is suitable for the targeted markets is key. For example, Japanese consumers tend to prefer certain kinds of packaging, leading many U.S. companies to redesign cartons and packages that are destined for the Japanese market. A major factor to consider includes language and knowing whether the target countries require outer packaging or instructions (within) to be in a local language or even multiple languages. In some case, English will suffice. Label markings/icons may also be an issue. There could be special label markings required in the target region, such as for metric measurements versus imperial, child safety, age appropriateness, suitable appliance use, food safe icons, etc. Researching and understanding these labeling requirements in advance is a necessity.
Product compliance is not only a very important factor for legal reasons, but also could potentially be a very expensive one if not already compliant in the target markets. Understanding the specific compliance requirements in the country(ies) or region(s) one is targeting before shipping any product is crucial. Many markets (including the entire EU) have food contact testing and certificate requirements for plastics or silicone materials that come into contact with food. Germany, as a country, has even more strict testing requirements than the larger EU regulations for many materials including aluminum products (bakeware). For any products that might be considered “toy related”, the EU has a Toy Directive that comes with rather strict compliance and labeling regulations. Of course, for suppliers with electrical products, meeting the necessary electrical standards required by each country or region will be necessary.
Understanding or determining what type of warranty, if any, will be offered to foreign markets is also important. If there is existing warranty language on one’s current packaging that will not or cannot be changed, this warranty may need to be honored. If so, a supplier will need to have a warranty plan in place that might include local representation and servicing. Levels of expectation and rights for a warranty vary by country, depending on the country’s level of development, its competitive practices, the local standards of production quality, and other factors. Product service guarantees are important because customers overseas typically have service expectations as high as or greater than those of U.S. customers.
There may be reasons why best-selling products domestically are not suitable for international markets. It could be product size, color, function, or other cultural reasons. For example, in some countries certain colors are associated with death, so selling products in these colors would not be advised. Understanding these reasons is important. Then determining whether one is willing to modify a product or package to meet local requirements, and at what cost, is also important. The extent to which a supplier will be willing to modify products sold for export markets is a key policy issue to be addressed by management. Some exporters believe that their domestic products can be exported without significant changes. Others seek to consciously develop uniform products that are acceptable in all markets. It is very important to conduct research and to be sure of the right strategy to pursue.
When reviewing product selection for export, a supplier shouldn’t try to sell everything in one’s assortment from the beginning. Instead, taking measured and well researched steps towards product sales is advised. As the rule goes, 80% of sales will likely come from 20% of the products.
Brought to you by the International Business Council, a special interest group of IHA members, dedicated to helping its membership market and sell their products internationally by sharing information, providing networking opportunities and offering programs to assist, support, and educate.