Stay in the Global Game

Typically, importers and exporters take a 10-15% markup over cost—called the cost-plus pricing method. This is the price a manufacturer charges you when you buy products from them. In other words, if your supplier charges you $1.00 per unit for his product, you might mark it up to anywhere from $1.10 to $1.15 per unit, especially when you are moving millions of units. That markup becomes your profit or commission. A retailer walks a tightrope when it comes to marking up a product to create profit and has many issues to consider.

Your Costs

When the product is already priced high, keep your markup low. If a major manufacturer—these generally achieve considerable economies of scale in production—is able to give you a low offering price, then you can afford to set your commission slightly higher.

Be careful here, though as this scenario can be deceptive. If your cost is inexpensive to begin with, it might mean that the product is a mass commodity rather than a specialty item. The market may already be flooded with suspiciously similar, me-too items. If so, you have to keep your profit margin very tight to stay competitive.

Stay in the Global Game

Price your products to stay in the global game. If you are up against the unlimited global competition, make sure you're offering comparable prices along with some extra form of value for your customers. This value could come in the guise of customer service after the sale or in offering free shipping.

In a mood to see what you can get away with? I'm not here to stop you, but realize you may be making a big mistake from which you won't be able to recover—losing a customer altogether. You may really need income and feel you've nothing to lose, but don't forget the priorities of a successful global marketer, the customer relationship comes first.

Product Uniqueness and Quality

If the product is a market first or unique item, you can afford to charge a higher price. Also, consider the product's quality. If it is marginal or outstanding, price it accordingly.

Sometimes you can price higher when a product is new to market just because your customers need and want novel product offerings. However, novelty also has its downside. A new-to-market product doesn't have the brand recognition, image, and popularity that overseas customers tend to look for when they want a product with sure-fire consumer appeal.

Product Positioning

How you position the product determines the price at which you will sell. Look at the product's pricing in the equivalent sector of the domestic market. Use this price as a guide to your overseas profit margin.

For example, if your price for a product is $1.00, you are targeting the upscale specialty market overseas, and the suggested retail price in a local upscale store is $8.99, you can take a higher profit margin.

Import Customer Contacts

Your pricing scheme will also depend on who is calling the shots, you or the customer. It makes a difference if the customer requested the item or if you approached the customer with the product.

A customer who has asked you to source a product is usually more receptive to a slightly higher price because they really need the product. Don't lose your head here, though. Never, ever get greedy. Your customer knows a rip-off when they see one.

If you sell directly to a customer, you can afford a higher profit margin. If your product is handled by a series of intermediaries—say, an export trading company, an importer, and a wholesaler—before it gets to the retailer and end-user your margin will be less. Remember that each of these "middlemen" will tack on their due percentage. If you price high at the beginning, your product will be priced right out of the market by the time it gets to an end-user. In this case, nobody wins.

Your Exporting Star Power

Perhaps you are a star in your niche market. That makes a world of difference. No matter what you are offering, your fans will buy your product at any price just because it's yours.

The more popular you are, and the more difficult it is to get your product, the higher you can price it. Mainstream pop culture is the best marketing tool there is—look at Mickey Mouse and Lady Gaga. Consider yourself fortunate, and go for it.

Testing Your Product Pricing

Test your price out on your customer, with whom you have hopefully cultivated a strong relationship and to whom you've presented your product's positive sales attributes. See what reaction you get and then negotiate from there. If you priced the product with only a slim margin for yourself—so slim you cannot afford to go any lower—and your customer still balks, consider re-negotiating with your supplier.

Oftentimes, if you explain that the only way to sell the product overseas is to price it more competitively, they will agree to go back to the drawing board and see if they can rework the numbers. Don't pull this too often, though, because if you continue to have price problems the supplier will catch on sooner or later that you haven't properly checked out what the foreign market will bear.

So you have a great product ready to import or export. Now all you need to do is get it in the hands of a few good customers, and you are off to international trade nirvana. Wait, not so fast. How do you know the product will sell? Will you make money selling it? How should you price the product? All importers and exporters must face these questions at some point if they want to achieve success in the global marketplace. Here are a few solutions to guide you in the process.

Have a Quality Product or Service

Start with a product or service that you know will sell—if not everywhere, at least somewhere. You will improve your odds of picking a winner if you cultivate a knack for tracking trends, spotting potential trends or even creating game-changing trends.

Remember the popular line of stuffed animals called Beanie Babies or the Cabbage Patch dolls? Had you realized those products’ export potential early on before they became best-selling products, you would have made yourself a millionaire four times over in a very short period.

The same holds true for Japan’s Hello Kitty line of products, which is based on a fictional character produced by the Japanese company Sanrio in 1974. Had you found that product early on and asked for exclusivity from Sanrio to market it in the United States, your company name would be mentioned here as a success story. That’s the kind of foresight needed to pick import and export winners.

Track Your Financials

No matter what form of business you run, you don’t want to wait until you get to the end of your calendar year to find out where you stand in terms of profit and loss. It’s best to prepare monthly financial—income statements, balance sheets, and cash flow statements—as you go.

If you haven’t made a sale yet, you are probably asking yourself at this point why you need to keep these detailed financial records. It’s simple: Even though you may have minimal sales, or none at all, in the first few months, you are still spending money. You have expenses. And sooner or later, every business needs working capital to grow.

Another situation that requires monitoring expenses would be one in which, after running your company for a few months, you decide to go to a bank for a loan to help grow your business.

Before the bank decides if you’re a good credit prospect, it needs to see some details on your company’s financial history—namely, your year-to-date sales, expenses, profit-and-loss statement, preferably prepared by your CPA or a reputable accounting organization. This not only helps you control costs but also tells you at a glance if you are making money or losing it and where adjustments need to be made.

Develop Competitive Pricing

Whether you are importing or exporting, you must develop competitive pricing that includes your profit margin or commission, whatever the case may be. Consider the following criteria to determine just how high or low you can go on your markup:

Uniqueness: Are you first to market—then price higher.

Quality: Is the product quality upscale or marginal—price accordingly.

Your Cost: If it’s high, keep your markup low.

Newness: Price higher on newer and lower on established.

Customer Contact: Did the customer ask for your product or did you approach the customer?

Product Positioning: Place it in the best light to determine the price at which you will be able to sell it.

Direct:

You can afford a higher profit margin.

Competition:

Price to play (compete) in the global game.

Government Policies:

Can have a direct and indirect impact on pricing policies.

Are you associated with an internationally known celebrity? Consider yourself fortunate to be working with a celebrity, and go for the higher price.

The Balance Small Business

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IMPORT/EXPORT BUSINESS GETTING STARTED

How To Start An Import/Export Business

Image shows eight icons: a logo that says "barb's beauty", two arrows going in opposite directions with a stick of lipstick over them, a circle with silhouettes in it, a few parcels, a price tag, a hand holding money, a delivery truck, and two hands holding a heart. Text reads: "How to start an import/export business: select a business name and set up a website or blog. Pick a product to import or export. Find the right market. Source a supplier. Price the product. Find customers. Transport your products. Provide great global customer service"

Image by Theresa Chiechi © The Balance 2019

Setting it up and mapping it out

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BY LAUREL DELANEY

Updated September 18, 2019

So you want to sell to the world? You’ve come to the right place. Thanks to the Internet, setting up an import/export business can be ridiculously simple and very profitable. Here are ways to make it happen.

Select Your Business Name and Set up a Website and Blog

Without a website or blog, you can't have a networked import/export business. Get yourself a platform that allows you to develop a presence online and grow your business beyond your wildest imagination. The goal is to balance the flow of communications, sell products online (or offline) and build your customer base to drive profits for your international business.

First, remember to register your business name with a reputable web host because your domain name is what customers use to find you and your business.

And it can’t hurt to consult with an international lawyer, banker, and an accountant for advice on establishing a virtual import/export business and keeping it in the best legal and financial position possible.

A couple of places to get started with a website are Network Solutions, Go, Daddy, Intuit, and Verio. All offer domain name registrations and affordable website hosting packages with easy-to-use site building capabilities.

To create a professional blog, which allows a continuous flow of engaging communications, try Blogger, Typepad or Wordpress. These services will enable you to create a blog in minutes with stunning designs, reliable hosting and on-demand tech support.

Now you are ready to share your business expertise and capabilities and sell to the world.

Pick a Product to Import or Export

When it comes to importing and exporting, you cannot be all things to all customers. Decide on something and stick with it.

You have two viable reasons for choosing a product to import or export: you know it will sell or you like it. Hopefully, you can meet both criteria. That’s an ideal business model. Would you buy it if you saw it in another part of the world? Then you are on to something!

Find the Right Market

You’ve selected product; now you must look for someplace to sell it! You will improve your odds of picking a winner if you cultivate a knack for tracking trends or even spotting potential trends. Getting in on the ground floor and importing or exporting a product before it becomes a super-seller in a country could be the business breakthrough of a lifetime!

Do your homework and research the market beforehand to locate the best potential foreign market for your product or service.

Two places to check are The World Bank’s "Ease of Doing Business" and globalEDGE’s "Market Potential Index."

You might also check with local government officials to best determine sources for conducting market research. For example, in the United States, there are the Department of Commerce International Trade Administration’s Data and Analysis and the U.S. Census Bureau Foreign Trade, which governs the reporting of all import/export statistics. These resources are helpful for determining where in the world products and services are moving to and from, and why and how to get in on the action.

Source a Supplier

Once you have a likely import or export product in mind, learn everything there is to know about it. If you were its creator, how would you improve it? Go to a manufacturer and suggest product improvements to turn a mediocre product into something slightly ahead of its time. Your suggestions might mean the difference between a Sony Walkman and an Apple iPod.

The easiest access to reputable suppliers might be Alibaba, Global Sources, and Thomas Register. There are others, but these three are considered the holy grail to finding high-quality suppliers, manufacturers, exporters, importers, buyers, wholesalers and trade leads.

In continuation of our first installment which covered how to start and map out an import/export business, here we provide the sales and distribution aspects of establishing an import/export business.

Price the Product

The business model for an import/export business is based on two critical elements within the international sales operation.

Volume (number of units sold).

Commission on that volume.

The goal is to price your product in such a way that your commission (markup on the product to customers) does not exceed what your customer is willing to pay and offers you a healthy profit. Typically, importers and exporters take a 10% to 15% markup over cost, which is the price a manufacturer charges you when you buy a product from them.

The more you sell, the more you make. Keep your product pricing separate from logistics because, at some point, you combine the two to determine a landed price per unit. A good transportation company can assist here. Don’t let this part intimidate you!

Find Customers

Provided you have done a good job with search engine optimization on your blog or website, customers will find you. But don’t rely on it. You should also go hunting for customers! Check with local contacts, such as trade organizations, Chambers of Commerce, embassies and trade consulates. They generally have a good sense of who’s doing what in the international marketplace. They can offer contact lists specific to your industry and also suggest trade shows that are taking place locally and internationally that might help you connect with customers in a faster and more efficient manner.

Excellent service on the exporting end is the U.S. Commercial Service (CS) Gold Key Matching Service. The U.S. CS can help you find potential overseas agents, customers, distributors, sales representatives, and business partners.

At the same time, work your social media and networking platforms (your blog, Facebook, LinkedIn, and Twitter) by posting information about your product or service and asking specific questions about your audience's needs. This gets the conversation going and keeps it going while making sure it's related to your business. The point is to keep your business on the minds of potential customers worldwide.

Transport Your Products

Your next step is to focus on logistics — transporting the product to where you will be selling it. By now, you have located a customer who loves your product, solidified the terms of the sale with them and established a means for getting paid. Now you must move your product.

Hire a global freight forwarder who serves as an all-around transport agent for moving cargo, typically from a factory door to another warehouse. Their service saves you a lot of time, effort and anxiety for a very reasonable fee. Based on information you provide, they take care of all shipping arrangements, which includes but is not limited to handling documentation, arranging insurance, if requested, and determining necessary licenses, permits, quotas, tariffs and restrictions (country regulations), which can be one of the most complicated aspects of importing/exporting for a newbie international trader.

You can find freight forwarders online under “transportation,” or check listings in trade magazines or other international handbooks. Pick two or three that seem like a good fit for your product or shipping destination.

Two well-known companies that are eager to work with brokers, consultants and small businesses are UPS and Fed Express. Either can also assist with getting paid, a critical part of the international sales process.

Provide Great Global Customer Service

The relationship between you and your overseas customer shouldn't end when a sale is made. If anything, it requires more of your attention.

Think of your after-sales follow-up on your import/export business as part of your product or service offering. The first step is to say, wholeheartedly — whether in person, via Skype, by email or telephone — "Thank you for your business!" For more on this, learn how to provide great global customer service.

Congratulations! You have officially learned the fundamentals of how to establish an import/export business. Now start booming and make the world your business!