The 2017 IBC Global Forum in Miami opened on Sunday afternoon September 17 with a one-hour session jam-packed with information for new exporters. This session, Export 101, geared for new Global Forum attendees and those who are new to the export business, also served as a refresher for experienced international marketers.
Led by IBC Board member, Paul Michalowski, senior vice-president of business development at Honey-Can-Do, the presentation acted as a primer for many aspects of managing an international operation. Paul discussed product selection, market selection, supply chain management, international marketing opportunities, sales channels, pricing strategies, exchange rates and the mechanics of export compliance. His outline provided a rich menu of topics for Global Forum participants to discuss for the next two days.
Each section presented numerous questions a company should consider before jumping into international waters. For example, starting with the very basic–product selection.
Participants heard a list of factors to consider that would occupy many hours of staff discussion before taking the next steps in entering a new market.
- What do you have to sell? Why would you sell it (or not)?
- Is the product appropriate demographically and culturally for the end user?
- Is the product size appropriate? Homes in many markets are smaller than in the U.S.
- Can it be easily and inexpensively shipped?
- What if the products leave storage containers with a lot of air space?
- Is the packaging appropriate? Language? Does it need over-stickers? Do you need to indicate your distributor’s name?
- Is the product the correct voltage? Do you have the necessary certifications?
- How will you fulfill warranty claims? Is an in-country service center needed?
- What needs to be modified?
Think of the 194 countries in the world. Where to start for the best chances for success? Rather than responding to customers who ask to carry your products in countries unfamiliar to a supplier, it’s wiser to develop a strategic and proactive approach to exporting.
Many international export strategies begin with close geography or common language, supply chain and packaging efficiencies. For instance, a U.S. company might choose Canada or Mexico for such reasons, since U.S. packaging often already includes information in Spanish. A maker of cooking and food prep products should consider food preferences, size of typical kitchens and electrical standards. Review the retail landscape to learn about key retail organizations, their regional competitors and their strengths. Consider the costs of travel. How far is the target country from your home? How often are you able to travel to that country and how easily?
Review each market and choose a country or region that scores highest for size and market attractiveness. Choose three countries for your best opportunities. IHA trade missions can help you understand a market and meet buyers for a quick market interest assessment.
One of the first decision to make when choosing to sell into a new market/region is how to go to market. The amount of resources a company is willing to allocate to international sales will be a determining factor for which sales channels to use. Also consider tolerance for risk, the nature of the products, business conditions in the selected overseas markets, and previous exporting experience.
Michalowski offered four basic avenues, each with numerous decisions to consider. Each choice will impact your costs, margins and your relationships with retailers.
- Selling Direct to Retail
- Using a Distributor
- Using a Sales Representative
- Using an Export Management Company
- Selling Direct to the Consumer
It is important to determine the right sales channels, keeping a long-term perspective in mind, so that suitable pricing strategies can be generated before offering selling prices to any customers.
A supply chain is an integral part of international sales process planning because it impacts both the cost of the item and the time it takes to deliver a product.
Michalowski outlined four primary supply chain alternatives and framed the discussion with the example of a company whose product is made in China and whose primary (or domestic) market is the U.S.
Domestic Warehouse—Factory to U.S. Warehouse
Those new to exporting typically begin by shipping international orders from inventory that is housed in the domestic warehouse.
There are several advantages and disadvantages:
- May be the most cost-effective, as the initial orders might be small.
- Extra freight and duty charges to get the product from the factory to the U.S. and then ship from the U.S. These costs may be less than opening a second warehouse.
- Buyers can consolidate an order, choosing for all SKUs available, but costs are higher due to repeat handling and shipping of products.
China-based Warehouse—Factory to Local Warehouse
Select products earmarked for international sales can be housed in a warehouse located in China. Appropriate product selection is key as it is not cost-effective to house every product the company sells.
Handling and shipping costs are kept to minimum when managed by a Chinese-based warehouse, but there will be added costs for storing products there.
Direct Import—Factory to Retailer
In this model, a foreign buyer purchases a product that is shipped directly from the factory, saving the supplier both transit time and transportation costs. This option may limit the product selections. The sales company never takes physical possession of the products. This opens possibilities for the factory name and location to be disclosed and can impact trust building with your retailers and factory.
Foreign Warehouse—Factory to Warehouse in Foreign Market
Holding inventory in a warehouse located in a foreign market near retail customers allows for flexibility in servicing the region. For examples, a warehouse in a trade zone such as The Netherlands provides the capability to pick and pack orders for distribution in the European Union. This option increases flexibility to sell smaller quantities to small retailers. Added costs for storage must be considered.
A product supplier might use any or all four of the supply chain models to service varied customers in different markets.
Factors to consider when setting prices included your company’s export objective, market dynamics, costs associated with exporting the product, and sales strategy. Understand your true costs in order to set correct prices. Prices might be bottom-up—based on your costs, or top down—what the market can bear. Supply chain alternatives, sales channels, currency selection, exchange rates, collection/payment, letters of credit will all impact your pricing strategies.
Export Mechanics and Compliance
Learn the vocabulary such as international rules for the interpretations of the most commonly used international trading terms. More knowledge will reduce or remove uncertainties arising from differing interpretations. Managing compliances requires careful preparation, including product compliances for types of materials used, electrical voltage and packaging requirements—language, labeling, measurements. The international political landscape also presents issues for U.S. companies to be aware of governmental prohibitions on practices or countries.
While analyzing all the other aspects of exporting, it’s crucial to find customers. Networking, face-to-face contacts and relationship building are critical in any business plan.
The U.S. Department of Commerce, through the U.S. Commercial Service, offers programs and resources to U.S. companies interested in growing international sales. These services are limited to export-ready U.S. companies seeking to export goods and services of U.S. origin or that have at least 51% U.S. content to utilize this service. www.export.gov
Trade publications reach industry segments through their printed magazines and online through their websites and newsletters. Each publication is organized into two main departments: editorial and sales. Build relationships with editors for free editorial coverage and reach buyers through paid advertising.
In addition to the International Home + Housewares Show, held in Chicago every March, important fairs for marketers of home goods occur in Paris, London, Frankfurt, Hong Kong, Guangzhou and Berlin.
Joining a trade organization allows you to leverage the knowledge and resources of a larger entity. Being an active participant provides numerous networking and educational opportunities, allowing you to learn from industry peers.
Michalowski often gave examples from the experience of Honey-Can-Do, attributing much of the company’s success to the impact of participating in IHA’s international trade development programs.
The International Housewares Association (IHA) is committed to maximizing the success of the home products industry on behalf of its membership by:
- Providing a world-class home products marketplace
- Facilitating global commerce and the buyer-seller interface
- Increasing consumer awareness and interest in home products
- Gathering and disseminating essential marketplace intelligence
- Educating and supporting key constituencies to improve their success
Michalowski outlined the many programs and services IHA offers its members:
- International Home + Housewares Show—the world’s leading trade fair for branded home goods.
- International Business Council (IBC) —this special interest group of IHA members offers programs to assist, support and educate its membership in growing international business. The annual IBC Global Forum conference brings together sales managers from housewares companies for education and networking. Sessions led by key retail and distributor buyers provide valuable practical information on selling in varied markets.
- Pavilions—IHA offers its member company turn-key exhibiting opportunities at global trade fairs.
- Trade Missions –IHA sponsors five-to-10 day events that occur several times per year in specific countries or regions. IHA organizes one-on-one retailer and distributor meetings and tours so that participants gain a thorough understanding of key markets and develop personal networks of prospective home and housewares retail partners. Recent trade missions have introduced members to Australia, Southeast Asia, India, Brazil, Colombia, Mexico and the U.K.
- Trade Publications and Press Events—IHA maintains relationships with many trade publications, and provides lists by country to its members. At its annual International Home + Housewares Show, IHA offers its press room and detailed guidance in how to reach the media. IHA also manages annual press events for member companies to connect with media editors directly. Each year, two events are held in New York and one in London.
Export 101 basics are available on IHA’s IBC blog. Take advantage of the many opportunities IHA offers that can assist you in growing your international sales. To learn more about how to develop your international business plan visit www.housewares.org/ibc.