Are you thinking about expanding your business internationally? Often, businesses facing increasing competition or pricing pressures domestically may find the competitive landscape different in international markets. Demand for products “Made in the USA” often present companies with the ability to increase price and margins overseas while tapping into “unmet” needs. Here are ten things to think about.
- Identify countries where there is demand for your products: If you already have international sales, begin by analyzing your domestic sales that have been shipped outside the U.S. Do certain countries rise to the top? You can also research which products are selling in large countries with robust e-commerce markets such as China, Japan, South Korea or the larger European countries. Review the various online marketplaces (TMall and Rakutan for example) to see if similar products are offered, and selling on these platforms.
- Pick a country which you believe can scale: Take the top countries from #1 above and then make sure the country is large enough with a big e-commerce market. There is publicly available data on the size and growth rates of e-commerce in most countries. If China and India come up as your top two… then choose China because of the size of their e-commerce market.
- Don’t assume your US based business practices will work in other countries – be sure to adapt to each countries cultural differences. Many companies have failed because they took the same approach to marketing that worked in the U.S. Every country has specific holidays which are ideal for promotion or unique “copy” approaches that have unique meanings to consumers.
- The regulatory environment is different in every country… don’t go in without understanding how this will impact your business: You will need to know the guidelines about customs, taxes, product registration requirements and much more – hire an in-country lawyer! Your U.S. Counsel will be able to find and vet one for you.
- Don’t do it alone – find an “in-country” partner to take the lead: You will never be able to become an expert in every country (or even one or two countries). Spend the majority of your efforts upfront, identifying and interviewing potential “in country” partners. It seems that this should be number four or earlier on the list.
- Minimize your risk – Start small: Even if you have 1000 SKU’s begin with 10-25 to test the waters. There are multiple reasons for doing this including validating consumer demand, and understanding pricing parameters.. It is also important to work out the kinks related to getting your product into the country without issues which can often be a challenge.
- Select an international partner who can “Own” all aspects of the business: This includes registering and paying for the registration of the products on your behalf (if necessary);getting the products from your warehouse – through customs – to their warehouse in-country; managing and paying for all marketing efforts, customer service, distribution, and much more Your partner needs to deeply understand the culture, the regulatory environment,, and how to navigate it AND must understand the marketing landscape (see #9 below).
- Inventory forecasting is CRITICAL: Running out of a product in the US is not a big deal as you can replenish stock in days. Running out of a top seller in China however poses much different challenges as, it can easily be weeks or even months before you can get it in-country, through customs and in your partners’ warehouse. Planning here is crucial and must be a hands-on exercise that you have to be actively involved in.
- Understand how consumers shop in each country: The U.S. e-commerce space is driven by individual company websites along with Amazon. In most other countries, e-commerce sales are dominated by “marketplaces” like TMall in China or Rakutan in Japan where an overwhelming percentage of sales occur. Marketing partners must have excellent relationships with each of marketplace.
- Over communicate: Stay active with your partner in each country. Finding the right partner is not enough. Once your partnership has been established it is imperative to maintain an ongoing “active” relationship with your partner. At a minimum, hold weekly reviews to discuss upcoming marketing promotions, sales results, inventory status and any open issues.
There is real “demand” internationally for “Made in the USA” products. The international competitive landscape can also be less crowded than the domestic market. That being said – any company expanding internationally will have to carefully navigate the many potential pitfalls that await them if they are not diligent. The list above highlights some of the keys to success.