Tips for Retail Success

From the Entrepreneur’s Perspective: Does it pay to go global?

Yes. But you need to be able to vet out credible retailers and/or distributors who are aligned with your sales channels. And this takes time – and it helps to understand how to vet. Following are some tips for vetting, other considerations for your negotiations, and why you may want to sell globally. Let’s start with the why…because the other variables don’t matter if you are not going to pursue the international market.

WHY you may wish to pursue global business

  • Increase volume/cut costs. By manufacturing larger runs to include both your national and international business you will, hopefully, see price breaks from your manufacturer. If your U.S. product category is already saturated, an international market may have a place for you that is less saturated thus giving you an opportunity to increase sales.
  • Distribute risk. No one wants all their eggs in one basket. Gaining international distribution can spread out your book of business, and this business is not as susceptible to U.S. economy fluctuations.
  • Help with cash flow. Request upfront payment terms (i.e. 50% upfront and 50% ex-factory). Our U.S. retailers have come to expect terms of 30, 60, 75 or even 90 days. Upfront payment from international distributors helps to offset the national terms and makes running your business more efficient.

VETTING

Most likely this international retailer or distributor is coming to you as a stranger so you need to learn about them before you make a sale that you end up regretting. First go to their web site to see what you can learn about them. Seems obvious, right? And then you may find out that they don’t even have a web site. Red flag. Once you move beyond this “minor” point (i.e. run fast), start asking questions:

  • What other products do they represent?
  • What channels do they already distribute to? If they have to create new sales channels, this may take too long and not be worth your time.
  • How long have they been in business? They may be a start up and have the same fire that many start ups have, so don’t disregard the age of the company but do take it into consideration as their budget and systems are not as evolved as a larger distributor and it might be limiting. Flip side: they have flexibility and can make things possibly happen faster.
  • Why are they interested in your product?
  • How will they market your product in their country?
  • Ask yourself the question: why do you want them as your distributor/retailer? The answer needs to be more than just “I don’t have distribution in this country and I need a distributor”. A bad partner is worse than no partner.

OTHER CONSIDERATIONS for your agreements:

  • Confidentiality. Yes, you want to spell out that whatever info you are giving to them is proprietary and confidential.
  • Exclusivity – they will want it, but will you give it to them? What are they going to do for you to secure it? Commit to certain volumes, maybe per quarter.
  • Diversion (when they say they won’t distribute outside their territory and do). How to minimize: custom package to THEIR market (in other words, their packaging has their native language). Keep in mind this may cost you more for design/printing, so build the cost into your pricing.
  • Volume. Give them different options: order X units get X price; order more units get better price.
  • Years of agreement. What are you comfortable extending?
  • Marketing: what will they do to promote your product? Build into your wholesale cost that they will need to market this product in order for it to sell. They know their market/culture. Provide them with marketing support materials for visuals and ideas and let them replicate the ones that will work in their country.
  • Shipping. They pay for it. Terms: EXW or FOB. Review international standards here:  http://en.wikipedia.org/wiki/Incoterms
  • You should always collect payment upfront prior to shipping – via WIRE and have them cover all wire fees to include theirs, any intermediary ones, AND yours.
  • They need to agree not to take on competing products.
  • Define your MAP policy.
  • Always get references.

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