Preparing to Sell Overseas
Selling overseas is similar to expanding into a new market domestically in that your success depends on research planning, and timing. If you have the right offering, pinpoint a high-potential customer base and then find the right partners to help you roll out your plan, then tapping consumer or business markets overseas has the potential to benefit your business tremendously.
Use the steps below to prepare your business to start exporting.
In order to export, you may need to develop new promotional material, translate existing documents, modify products or packaging, travel internationally, or obtain additional financing. Given the necessary commitment, exporting is not something to undertake if your company is struggling with the task of managing its US operations.
Before you get started, talk to business owners who have successfully entered foreign markets to gain insight into what lies ahead. Their input will be most valuable if their products are similar to yours. Your chamber of commerce or trade group may be able to connect you with these business owners.
Before you can send products overseas, you need to determine their classification, for two reasons. First, it will help you locate the relevant U.S. and overseas government data that can help you understand potential market demand. Second, it will help you determine what tariffs apply to your products once you begin selling overseas.
In the U.S., products and services are classified using Standard Industrial Classification (SIC) or the newer North American Industry Classification System (NAICS). Outside the U.S., businesses and products are classified using the Standard International Trade Classification (SITC) system, or the Harmonized Commodity Description and Coding System, a.k.a. the Harmonized System (HS).
Locate Potential Overseas
The largest markets for U.S. products are currently Canada, Japan, and Mexico, but these countries may not necessarily be the best markets for what you have to sell. To determine the best export markets for your business, use the following resources to learn about the full range of possibilities:
The U.S. government: The U.S. Department of Commerce offers invaluable advice and information to new small business exporters, much of it free. The Trade Information Center lets you connect directly with export experts who specialize in specific regions or countries throughout the world. If you're not yet ready to speak with someone directly, the Trade Information Center's Web site has a database of reports on the business and political climates of different countries, as well as industry-specific reports and economic trends. You can reach the Trade Information Center online, or by calling 800-USA-TRADE (800-872-8723).
State and local governments: Nearly every state has its own export or international trade office that offers country specialists, libraries, finance programs, and export counseling. They are often associated with the state's department of commerce, economic development, or industry, and can be located by consulting the government pages in your local phone directory. In addition, local port authorities and trade centers also may offer export training programs and foreign market research assistance.
Foreign government offices: The U.S. embassies and consulates of foreign governments often have economic development officers on staff who assist American companies that want to do business in their countries. Embassies are generally located in the Washington D.C. area, while regional consulates are often in larger cities (such as New York, Chicago, Atlanta, San Francisco, and Los Angeles). Independent international trade groups (such as the Belgian-American Chamber of Commerce, Japanese Chamber of Commerce of New York, or the Peruvian American Association) also may have low-cost research and information available. Many of these groups belong to the Federation of International Trade Associations.
After locating potential markets for your products, you'll need to verify whether your product would sell in those locations. There are a number of issues to consider, including the quality of your offering compared to what people in that country already use, the price your product or service could fetch in that market, and the availability of customers.
One way to gather more information on your potential markets is to participate in a federal-or state-sponsored trade event or trade mission. These shows are matchmaking sessions that allow you to meet with foreign business prospects. Some events are held domestically and attended by overseas agents and distributors. Trade missions, on the other hand, are essentially government-sponsored road shows, where owners of small and medium-sized businesses can meet with pre-screened prospects in promising export markets. The Commerce Department also regularly exhibits at overseas trade shows, and it may be possible for representatives to distribute your brochures or marketing materials. Full information on U.S. Department of Commerce trade events is available on the Trade Information Center Web site.
Determine Your Sales
Once you have zeroed in on target markets, you need to determine how you will sell your products or services overseas. While it is possible to sell directly to end users, this is often not a cost-effective option for small businesses, since it requires understanding the target market, the culture, local regulations, and the like. Instead, many smaller companies use intermediaries who are familiar with overseas markets. These options include:
Commissioned agents or sales representatives: Agents and reps act as "brokers," finding specific foreign buyers for your product or service in return for a commission. While they do the selling, they often will not fulfill the orders or handle details such as collections or shipping.
Export Management Companies (EMCs): EMCs act as an outsourced export department, both representing your product to overseas buyers and taking care of all aspects of the export transaction. Among the functions EMCs perform are:
- Conducting market research to determine the best foreign markets for your product
- Attending trade shows and promoting your products overseas
- Assessing distribution channels
- Arranging export financing
- Handling export logistics, such as invoicing, insurance, customers documentation, etc.
- Advising on legal issues such as compliance issues and trade regulations
EMCs tend to work on a commission basis and represent products of many companies. However, a growing number of EMCs now take title to the goods they sell, making a profit on the markup. This carries the possibility that your products may be priced incorrectly, which can affect your competitive position in the market. Be sure to discuss issues related to pricing at the outset of any negotiation.
Export Trading Companies (ETCs): ETCs perform many of the same functions as EMCs, but they tend to be demand-driven, simply fulfilling orders instead of actively marketing a product or service. Most ETCs will take title to your goods for export and will pay your company directly while handling shipping and invoicing. While you may give up control over how your product is priced and serviced, this arrangement does eliminate many of the potential risks associated with exporting.
The views and opinions contained herein are not necessarily those of American Express and are intended as a reference and for informational purposes only. Please contact your attorney, accountant or other business professional for advice specific to your business.
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