What is the right exporting channel for your business?
Planning on selling to customers in an overseas target market? There are many export channels to choose between – but which ones are right for your business?
The direct route or the indirect route
Generally speaking, there are two ways your business can go – direct exporting or indirect exporting (or both). No matter which route you take into a foreign market, you’ll need to:
- Do your research.
- Test the waters.
- Settle on the best distribution strategy for your business.
Exporting to customers directly provides you with greater control over your export process, potentially higher profits, and a more personal relationship with your overseas buyers. However, direct exporting requires more time and resources than indirect exporting.
Selling over the web
The Internet has made direct selling to anyone in the world the norm. Many businesses now have their own websites – or at least a presence on the web – where they can sell their products and services.
Will you use Internet-based selling (either on your own website or via an online retailer) to international markets? If so, your business will need to:
- Ship its goods directly to each customer.
- Comply with all applicable export regulations.
Another option is to use sales representatives.
- Local salespeople – based in your target country, these local sales representatives speak for your business in their local markets. They typically work for a commission.
- Call center agents – your business might be able to export with the help of locally based salespeople in your home country, like through a call center.
You’ll still need to get your products into the hands of consumers after the sale is made, typically via direct shipments.
Setting up an offshore store
It may make sense to set up an offshore branch or to buy an offshore distributing business, giving you a foothold in your new overseas market.
The biggest advantage of setting up an offshore branch is having a local presence. However, you’ll incur costs associated with opening and operating a remote branch – and you’ll still need to export your goods in accordance with all applicable export regulations.
Selling your goods through an intermediary can be a cheaper – and faster – way to get your offerings into new markets. Intermediaries are usually distributors or agents based in your overseas target market.
Although indirect exporting is usually faster and cheaper than direct exporting, you may need to help support the marketing efforts that get your offerings to intermediaries. Intermediaries will take a margin on your profits and you won’t have any direct contact with end users.
Indirect exporting options include:
- Export merchants – wholesale companies that buy unpackaged products to resell overseas under their own brand names. Export merchants assume all risks, typically preferring to buy stable commodities as a result.
- Selling to an existing exporter – can you use the services of a local exporter to ship your goods and distribute them to your new target market? If you can find an intermediary, it’s likely you won’t have to pay international freight or must deal with customs issues.
- Licensing – allows your goods to quickly enter a foreign market with few capital requirements. With licensing, a licensee receives the license to sell your brand, products or services. Make sure you have exclusive property rights before entering into an international licensing agreement. Specialized legal counsel is recommended.
With so many export channels available, diving into a foreign market can feel overwhelming. Start by determining whether a direct or indirect exporting approach (or both) is best for your business and go from there.
As you evaluate your options, you may need to test the waters in order to find the best way to get your goods or services to the end user. After your initial export channel is up and running, you can then consider adding more.