It’s easy to jump-over in running an export business, without a clear strategy, thinking to earn money right away. But, obviously, it’s prone to loss and catastrophe. So, pause a bit and discover the best practices for exporters — to address shipping risks, delivery delays, customer claims, taxes, fines and penalties, alike. And here’s the simplified export strategy you must know today.
Selling your products worldwide allows you to pinch the billion-dollar market for your niche, but the industry jargon and complexities in different stages of international commerce, and logistics might slow-down your business.
This simplified export strategy talks about specific points on what to check regarding your product, the market, competitors, government requirements and processes – applicable to both newbies and adults in the field.
1. Align Your Product
Aligning your product to the market trends is fundamentally correct. But, the first commandment that’s worth to consider is not just about navigating towards market-flow, and knowing the solution you’re bringing to the market, but also your personal connection as an entrepreneur or employee, on what you do.
I’m really passionate about
As study shows, highly productive people are doing the things they’re passionate about. Imagine this, running an export business requires an enormous amount of work in completing the puzzle for growth, and success. So, even your product has the capability to make a difference to the world, but if you’re not taking it seriously – tendency is missing precautionary measures just to short-cut certain processes which potentially cause business setbacks. Thus, more room for errors.
My options
Meaning, in checking on what you’re really passionate about, your options can be either stop or continue. If you stop the product that you’re exporting now, and find the ones that you’re truly passionate to pursue, then tell yourself not to procrastinate. It’s definitely worth it.
On the other hand, you may continue with what you’re currently exporting, and teach yourself to love it, then you’re also in good tract.
Quick Thought: To be highly-productive, find your passion, and assess if your business or job aligned with what you love to do most – this way, the challenges in the process becomes part of the business, not an obstacle to address. So, you can do things in pressure with pleasure.
2. Study the Restriction
Selling your products within your country is entirely different when exporting it to foreign market.
In this stage, you need to check the laws both in your country and your customer’s. Restrictions to certain products are implemented, generally, to protect the domestic industry. Sometimes, for national security.
Restriction in my country
Restriction of products to exit your country comes from various reasons. These are to ensure the products are safe for human consumption, for food and beverage. The voltage, electronic frequency or wave have complied the standards for home use, for household electronic products. Things like that.
To ensure your product is allowed for export, check what category it falls. Is it related to textiles, construction materials, machinery, vehicles, electronics, food and beverage? Or, others.
Each country has its own list of regulated commodities. To know whether your product is restricted or not, check with the corresponding government agency.
Like, Food and Drugs Administration (FDA) for food and beverage products; Telecommunication Commission for electronics; Department of Agriculture for agricultural goods. Check the equivalent office in your country.
For additional advice, consult your logistics provider. It helps.
Restriction in the foreign market
Same goes with the country of your target market, you need to check if there’s any restriction of your item to enter that territory.
The example of this restriction can be in a form of higher tariff rate. Some countries are imposing higher tariff to certain products to protect their domestic industry by discouraging foreign supplies, like yours. In this instance, your product becomes expensive in those countries due to higher customs duties or taxes.
Another form of restriction is non-tariff measures. Some countries are specifying the allowable quantity to get-in the market. This is done to limit the importation within the year to balance the demand and supply system. And, the domestic produces will not be affected by the imported ones.
Other restriction
Also, you need to check if certain product specification is required before it is admitted for importation, like Halal Certification for consumer goods to Islam nation. Standard Certification requirements for some household products, things like that.
Lastly, check if no Intellectual Property Rights issues. Or, geographical limits if you’re a distributor, if yes – clearly talk to your principal on what continents you’re allowed to sell.
Quick thought: Checking restriction from both your country and customers isn’t one-time. To stay updated, subscribe to concerned government agency newsletters, and websites that publishes contents about your product. You can also message us. At the same time – talk to your logistics provider, and principal, for insights.
3. Understand Incoterms
In international business, setting your export strategy with right International Commerce Terms (Incoterms) will boost your success in the long run.
Incoterms is a universally accepted set of rules developed and published by International Chamber of Commerce (ICC) to identify the responsibilities and liabilities of buyer and seller. It also determines how much is the total invoice value of the goods.
In its latest version, Incoterms 2020 is consisting of 11 terms.
Commonly used Incoterms
Among these terms, the commonly used are – free on board (FOB), free carrier (FCA), cost and freight (CFR), carriage paid to (CPT), cost insurance and freight (CIF), and carriage and insurance paid to (CIP). This is a huge topic, but we only tackle here the most important ones.
The best Incoterms for me
As an exporter, either CFR, CPT, CIF or CIP is recommended to be your first priority Incoterm. This suggested Incoterms will be the first terms to use in your initial quotation. If the customer is asking a revision using their proposed Incoterm, that’s the time to prepare another offer.
The purpose of identifying CFR, CPT, CIF or CIP as your handpicked Incoterms is to have long-term positive impact in your reputation as an exporter to the shipping industry. Over time, you’ll earn good credit and standing in the community which will lead to haggle lower rates in the future. The reason is – this Incoterms are prepaid. You’ll be the one to settle.
I should not prioritize these terms
Although, there are other Incoterms that are prepaid as well, such as delivered at place (DAP), delivered at place unloaded (DPU), and delivered duty paid (DDP), but the risks of these terms are higher on your part than the four previously introduced Incoterms.
There’s so much information to tell, but above simplified guide is enough for you to figure-out the most important points to consider in export business about Incoterms.
Quick thought: Prepare your quotation in advance, using either cost and freight (CFR), carriage paid to (CPT), cost insurance and freight (CIF) or carriage and insurance paid to (CIP) Incoterms. Although, you have an in-place costing using these preferred terms, but inquire rates from your logistics provider for the other terms. Just in case, your prospect client is asking. And, do not hesitate to ask clarification from your logistics partner regarding the scope of their service, your responsibility and liability as seller, per Incoterm.
4. Develop Marketing Strategy
Marketing strategy for export is more complex than for your own country, as you’re selling your product across continents, having diverse culture and trends.
Well-thought export marketing strategy is about what country you focus on. How you enter the market. What you consider in pricing. Means of advertising and promotions. How you deal with competition.
We have International Trade Agreement
Although, you’re surely offering your products worldwide, but targeting certain countries is a recommended strategy – in formulating your marketing pitches. Identifying target market is essential to set a tone from pricing, competition research, and advertisement.
In identifying your focused market, you need to consider international trade agreements. These agreements are about trade facilitation – allowing free flow of goods and services among contracting countries, which includes lowering tariff rates on certain products. Your country can be a signatory of these types of agreements.
To do this, check with your contact Logistics company if your country is having any trade agreements. And, inquire the tariff rate of your product on your target market. Most likely, importers from these countries are also looking for suppliers from your country because they know that they’ll be paying lower or zero customs duties. Meaning, lower investment on their part. Of course, quality, features and brand reputation of the product also matters.
Their norms and traditions
Once ideal market is spotted, research and surveys can be of great help for you to understand the market. This way, you’ll learn how and what they know about your product. Also, consider the religion, tradition and stories that might be your key element in marketing.
As popular quotation goes, sell the problem you solve not your product. Study and craft your message in such a way that it touches their needs.
Ways to enter the market
There are various ways of market entry strategy. The applicability of each strategy is depending on the nature of your product.
Your market entry can be thru online, joint venture, alliances, subsidiary company, distributorship or franchise. It depends on the nature of your business, as well.
Market entry strategy is a huge topic, but to answer which is the fastest one – it’s thru online, obviously. Setting up a well-designed website, posting your product to Alibaba, AliExpress or eBay is the perfect way of entering the market thru online. But to ensure growth, again, the best market entry strategy is always based on the nature of your product.
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Our best price
Pricing strategy is about understanding your position in the market, in terms of competition and demand. Also, knowing the market buying behavior.
If you’ve just entered the market, offering discounts and bundle pricing is a great tactic to persuade customers to try the product. But, sometimes offering higher prices as you enter the market would draw a premium feel about the product. Choose and observe the two-pricing model.
Ultimately, you can only maximize profit if doing the process right from the start. Otherwise, you’re forced to raise your price to compensate your cost, which is one of the main purposes of looking for a simplified export guide.
Latest promotions and branding
The personality of your brand influences the perception of the market. Nowadays, promotions and branding are not limited to billboards, radio, television ads and joining trade fairs only. But also, digital marketing is said to be equally effective with those traditional way of advertising.
Depending on the nature of your product, you need to carefully tailor your online promotions using the right keywords and reaching the right market demographics.
We have what you need
Research what social media sites or search engines are dominating in your target country. For social media, it can be Facebook, Instagram, LinkedIn or maybe others. While, for the search engines, it can be Google, Yandex, Bing, Yahoo or others.
One thing in common, they all give you options to choose the right keywords your market is searching in order to find you. And, targeting the appropriate age bracket, social status or industry, to filter your promotion directly in front of the right audience.
Lastly, using social influencers like blogger or vlogger is also popular today. Build relationship with these guys, and ask them to promote your product for a fee or any monetary exchange.
Once you’ve convinced your customer to try the product, keeping them to buy again is another story.
Quick thought: Focus to potential market that has International Trade Agreement with your country. Although of course, you’re exporting to the rest of the world. And, implement digital sales and marketing as it is the fastest way to enter the market. But, if you have enough resources, engaging in joint venture, alliances, subsidiary, distributorship or franchise model is worth checking for faster market saturation.
5. Establish Selling Channel
You may choose to directly sell your products to customers or indirectly, thru retailer or dealer.
After developing your marketing strategy, identifying the right selling channel is the next. Below are strategies on how to sell your products:
- Online – sales and marketing are mainly done thru online
- Joint venture – establishing separate business entity with other company having the same or similar products to yours
- Alliances – partnering with other companies having the same or similar to your products
- Wholly-owned subsidiaries – establishing a business in your focused-country owned and controlled by you
- Distributorship – finding a marketing and distributor company to sell your products
- Licenses and Franchisees – similar to distributorship, but in this strategy, your brand and identity is carried by your licensee or franchisee
Above list is mentioned in the marketing strategy section as it is vital to identify what specific strategy is most applicable to your niche.
If you’re a start-up company, be truly careful in every step of the way. Start small while trying to hit big. But if you’re an established company trying to expand to another country, then this is not an issue for you.
Quick thought: Generally, while dreaming big, start small by selling online. And choose the right channel for your product, eventually.
6. Prepare Export Documents
Selling your products in the domestic market requires certain number of documents for tax purposes, transportation and shipping.
In export business, it’s a lot more complicated. Not just preparing documents for your own taxation, and shipping, but also for the customs duties and taxes at the destination country.
The catch is, check if your product falls to general cargo, perishable, dangerous goods, refrigerated or live. Only the general cargo requires the basic documentation, while the rest of categories has an additional set of requirements.
I know export forms
The standard export forms start from quotation, proforma invoice, commercial invoice, and packing list.
- Quotation – when your customer is inquiring about your product and its price.
- Proforma Invoice – when you’re sending the offer based on the customer’s response of your quotation, stating your preferred Incoterm, as discussed above. And, asking for their purchase order.
- Commercial Invoice – stating the final price, terms and conditions.
- Sales contract – not all merchants are having this document, but to establish a clear thought on the kind of business you’re dealing with, it is recommended to prepare one.
- Certificate of Origin – not all customers are requiring Certificate of Origin (CO). But, because part of your marketing strategy is to focus on market that has International Trade Agreement with your country, it is an added factor if you can provide CO to your customer.
There are two type of CO, general and preferential. In order to avail the lower or zero tariff rate, preferential CO is required. You can ask your logistics provider for the application in your country.
I have complete documents
In international shipping, you can’t just ship anything without undergoing the required procedure. There are documents that needs to be secured from your company as an exporter, also for the products you’re selling for export.
- Permits, registrations and licenses – consult your logistics provider what are the requirements based on your niche.
- Bill of lading – this will be issued by your logistics provider, as proof or contract of carriage. This becomes available once you’re in actual exportation of your product.
- Shipper’s Letter of Instruction – this contains all information regarding the shipment.
The key element here is right coordination. As you’re finalizing the sale with your customers, ask them what are the requirements of their country. This includes the labeling, markings, packaging, and et cetera.
Also, allow them to confirm all the details reflected in the documents to avoid typographical errors. Any error could lead to delivery delays or even penalties before it reaches to buyer’s hands.
Quick thought: Preparing export documents is about proactivity. So, engage your logistics provider with your buyer to thoroughly coordinate in checking details, and securing registrations, permits and licenses. Lastly, prior to your first sell – it’s highly recommended to prepare a standard format for your quotation, proforma and commercial invoice.
7. Find Reliable Logistics Partner
Undeniably, logistics companies have also specialties. The capability of your partner to efficiently execute your logistics requirements, is based on their experience in the industry.
The next qualifying factor is the size of the company. You may consider the multinational logistics partner as they have strong network of offices in different countries, using latest technology to manage your shipment. Or, the middle size partners who usually able to adjust their service based on your needs. And, having lesser complex procedure in terms of entertaining your concerns. Lastly, it can be those small logistics companies who treat you as their king.
Finally, the rates. Send inquiries up to five logistics providers at least, and compare their rates. And, observe how they handle your other concerns.
Your logistics partner will be the one to guide you through, on how to do the following:
- Packing, labeling, and marking
- Prepare your goods for shipping
- Tariff rate determination
- Export permits and licenses for the company
- Export permits and licenses for the product
- Customs and border clearance requirements
Quick thought: Ask upfront if your logistics provider have enough experience in handling the same products with yours. And, choose logistics company that displays more human in dealing your concern, not robotic.
8. Outline Risk Management
“The biggest risk a person can take is to do nothing”, Robert Kiyosaki said. Here, we will talk about the risks every export business is exposed of.
Pay me know
Surely, the most important part of export strategy is getting paid. It’s a common practice to require an advance payment prior to ship-out. Normally, exporters are collecting at least 20% of the total selling price, while the remaining 80% should be paid upon confirmation of bill of lading. It can also either 50/50 or 30/70, depending on your agreement. This way, you’ll be free from risks of not getting paid.
Shipping damages or loss can be recovered
Purchase an insurance policy for your shipment with third-party company, covering from your door to buyer’s door, except if the Incoterms is Ex-works. This is optional, but it’s the best way you can do as fall back to recover damages – as long as the cause of incident is within the insurance conditions.
Though the logistics chain players like freight forwarder, trucker, broker, shipping line and airline have their own insurance in-place, but sometimes you need to file a suit and conduct investigation to determine who’s really responsible.
Unlike having your separate insurance, you’ll get paid the soonest. And, the insurance company runs after who’s party is responsible.
Shipping delays, and penalties can be avoided
Shipping delay is part of the shipping industry. This happen due to various factors, like weather condition, preparation of documents, system slowdown, road traffic and port congestion. Even, due to economic and political conflicts.
Here’s a thing, some buyers overseas are imposing penalties if you’re not able to deliver the shipment within the committed time. The place where delivery happens is based on the agreed Incoterms though.
Worst case, if the reason of delay is the documents, either lack or there’s an error, you’ll be paying not just the penalty from your customer but also fines, surcharges and penalties from Customs authorities. And, additional fees of demurrage from shipping lines and storage fee as port charges.
Quick thought: Double-check all export documents, and details on it, apple to apple. Also, procure insurance in every export transaction, and verify with insurance company if you have questions on the conditions of the policy. Lastly, add the insurance premium to your pricing.
Yes, I got your back
Depending on the nature of your product, a clear outline of its warranties is a great help when needed. If you’re the manufacturer of the product, then you know everything about it better than anyone else. But, if you’re the distributor or dealer, have a crystal-clear knowledge with your principal regarding warranties.
Know the conditions when warranties are forfeited or no longer applicable. Identify the parts that’s replaceable or not, things like that.
State one to two sentences about warranties in your invoice. And, define everything in your sales contract. During pricing preparation, anticipate the shipping and all cost for replacement parts, if necessary. Or, mention to bill separately for sending technical support team, when warranty assistance is needed. In this case, your business income is safe.
Another hack in your export strategy, is prepare tutorial videos available online for your client’s reference, it must be simplified or limit the usage of deep technical terms.
Quick thought: Educate your customers in advance about warranties, to avoid disappointments. And, include the possible cost of warranties in your pricing preparation, if possible.
Dealing with exchange rate
The universal currency used in international trade is US Dollar. But, there are also buyers who prefer to purchase using their local currency. Now, you may use the standard which is USD or also reflect the client’s currency. Whatever you’ll be using, add the local tax of your country first, as part of the total price, if required, before you convert into foreign currency.
Study the movement of your local currency against USD, and consult your bank if they have any pattern to forecast the exchange rate, as your safe conversion rate during invoice preparation.
Quick thought: Carefully adjust your pricing based on exchange rate movement pattern.
9. Ensure Record-keeping
Normally, government laws are mandating the businesses to keep records in all its transaction for tax verification and business legitimacy.
In export business, record-keeping is a must, not just for compliance in your country, but also to help your overseas customers. Records verification or audit could happen anytime with all your buyers abroad.
Failure to comply proper record-keeping will surely result to fines, or penalties – on you or your clients.
10. Define Account Management
The challenges of finding clients has the same weight of maintaining them. It’s an effort of cultivating their trust on you and keeping your customers believe that they need your product.
In keeping your customers support, you need to address concerns like return of products, replacement, repair or refund. Depending on the nature of what you’re selling. In other words, it’s about satisfying the commitment you’ve stated according to warranties.
Also, aside from those technicalities about after-sales stuff, establishing relationship with your clients is the ultimate recipe for effective account management. Importantly, exceeding your promises at times is a great way of building rapport, through gaining their trust and loyalty.
However, in managing international trade accounts, there are barriers to address. These are language differences, religious belief, cultural and traditional manners which potentially has conflict with yours. The key here is do not overboard on what they believe in. And, respect everything they have.
Quick thought: Gather information about the product performance, and conduct a scheduled survey asking for clients’ feedback. Each country may have different taste. And approaches may vary in different products, but the formula is the same – listening what your clients need.
Wrap up
You have been exposed to various technical terms about product restriction, Incoterms, and export documents. Right now, you have the right insights to generate sharp-questions in hand to get the answer that’s best for your business.
Also, you’re now aware on how to qualify a reliable logistics partner. And, realize to better involve them in drafting your risk management plan for returns and replacement costing. This is important as developing your marketing strategy, establishing sales channel, and record-keeping.
Lastly, we’ve talked about finding your passion, as the critical spell to self-fulfillment and defining success.
Congratulations, you now have the powerful tool to counter-check your export business plan.
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Content in this article is based on real-life best practices and research by the author, which do not necessarily reflect the stands of supplychainpedia.org. Some photos are taken from Sebastian DC and Alex Pudov album on Unsplash.