The key is lining up a good local importer or distributor. Initially, employ the services of an exclusive distributor for each country you plan to sell your product in. Sell your product to these distributors as cheaply as you can so that they can price it competitively and still make a good profit. You want your distributor to market your product as well. For some products, this is as simple as having the distributor include your product in its catalog and present it at trade shows. For other products, it may involve the development of large advertising and promotional campaigns.
You want a distributor who clears your product through customs and stocks it. And you also want that distributor to buy product from you in bulk, on a nonreturnable basis, and resell it to their customers, thus assuming all of the credit risk. Of course, you need to carefully check out the credit references of any potential distributor.
The Best Way to Find a Distributor
A good method for finding a distributor is to get a recommendation from another firm in your industry that is already successfully using that distributor. If you can’t get this sort of information, or if no one else in your industry exports, you can seek foreign distributors at trade shows, through trade publications, and through international industry directories. In any event, be sure to get good references on both credit and sales before you ink a deal.
The Largest Importer May Not Be the Best for You
If you are a new, small firm, the largest importers or distributors that are handling your largest competitors may not be the best for you. They may not want to spend effort on your small line. So I would first find out who is doing well distributing other small companies in your industry. Don’t be afraid to call your competitors and ask them. Of course, this a great time to ask about how their payment history has been.
A good importer that really aggressively pushes your products is going to incur some significant costs. You are going to have to give them a great price on your product so they can make some money and have some incentive to succeed. With all of the time lapses involved—such as shipping time, clearing customs, warehouse time, etc.—an importer is going to expect a long grace period before they pay their bill. Come to an agreement with them in advance.
The importer might also push for a “consignment” agreement where they don’t pay you for your goods until they actually sell them or even collect payment for them. Avoid this situation like the plague. Offer as deep a discount as you need to, to get an importer to sell your goods, but avoid going the consignment route—that’s the weakest incentive of all.
Takeaways You Can Use
- Successful exporting is all about finding great distributors.
- Find out which distributors are working well for other small firms.
- Avoid consignment like the plague!