The 2018 IBC Global Forum in Toronto opened on Sunday afternoon September 23 with a one-hour session packed with information on Export 101: Understanding the International Business Plan. This session, 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.
Michalowski outlined a list of factors to consider in order to understand retail requirements and consumer needs in countries other than your own:
- What is selling today in this country? Study competing products for your items.
- Size Matters: on the retail shelf and in the consumer’s home.
- Packaging: How many languages should be translated and placed on the packaging to comply with local needs? Local rules might require that fonts and treatments are uniform for multiple languages. Be sure to include proper measurements for each country.
- Compliance: for electrical products, food-safe materials certification.
- Warranty: repair and replacement centers, instructions for assembly and use.
- Modifications of your existing products.
With nearly 200 countries in the world, carefully choose the countries that are right for your products and where to start for the best chances for success. Rather than responding to customers who ask to carry your products in countries unfamiliar to you, it’s wiser to develop a strategic and proactive approach to exporting. Begin by researching a market-by-market review.
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? When entering a new market, be aware that frequent travel will be necessary.
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 decisions 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: determine commission structures, risk allocations
- Using an Export Management Company: turnkey approach adds costs and reduces risks
- 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.
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 a 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. 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 include 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. New tariffs may affect market conditions in the countries you had planned to enter and affect your profit margins.
Export Mechanics and Compliance
A tip sheet that outlined the vocabulary for international rules for the interpretations of the most commonly used international trading terms. The visual chart highlighted the spectrum of responsibilities and associated costs.
More knowledge will reduce or remove uncertainties arising from differing interpretations. Managing compliances requires careful preparation, including product compliances for types of materials used, product testing required, electrical voltage and packaging requirements—language, labeling, measurements.
Be sure to vet the customers who approach you: check U.S. regulations on sanctioned 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.
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, Birmingham and London in the UK, Frankfurt, Hong Kong, Guangzhou and Berlin.
Join a Trade Organization
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.
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/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 missions to France and Spain will take place soon.
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.
In closing, Michalowski encouraged participants to gain corporate “buy-in” for an international business plan by includingrepresentatives from
- Senior Management
- Category Management
- International Sales Team / Reps
- Order Department
- Credit Department
- Export Logistics
- Warehousing & Distribution.
Export 101 basics are available on IHA’s IBC page as well at the IBC blog series. Visit both to learn more about how to development your international business plan and the many opportunities IHA offers to help you develop your international sales.