Article credit to Alibaba.com.
Thanks to advanced technology, it has never been easier to sell products to customers around the world.
In this post, Alibaba.com talks about everything that small and medium-sized enterprises (SMEs) need to know about starting a business that sells goods around the world, or adding export capabilities to your current business. This article will start with a basic introduction to exporting that covers the benefits of export, who can export, and different types of exporting.
From there, we will get into the real nitty-gritty of SME exporting with a list of things that you should consider before getting started and an actionable list of steps that you can follow to start your business with exporting.
To wrap things up, there’ll be some information on a powerful platform that can help kickstart the process.
Are you ready to become a master of all things exporting? Let’s go!
Introduction to exporting
Exporting is the movement of goods from a seller in one country to a buyer in another. It is a model that many businesses use to grow their brand globally.
The ability to export is accessible to most businesses with the main concern being rules and regulations that are set forth by the government. However, with the right knowledge and resources, exporting is possible for just about any business.
One of the main benefits of exporting is that it allows you to expand your customer base beyond the confines of your home country. This creates diversity in your pool of customers, which could open up more opportunities.
Should the demand for your goods in your home country drop, you will still have other customers to sell to if you export your products or services overseas. This helps to safeguard many small businesses against economic changes. It also enables SMEs to learn more about the buying trends of different countries and cater their product ranges to meet a more profitable market.
Exporting can also help improve brand recognition on a global level. If your products are well-received in other regions, you may have the opportunity to dominate markets that are far too saturated at the local or domestic level.
Buyers also benefit from exporting because it gives them access to products and materials that they may not be able to find locally, sometimes even at more favourable prices.
Who can export?
Most businesses in most countries can export their goods. Limitations arise when certain countries have laws that prohibit the export of certain items. Before opening your business to export, it’s important to research what the export laws in your country are, as well as the import laws in countries you wish to export to. As long as you plan accordingly and are willing to invest an appropriate amount of time and resources, there should be no major roadblocks in the way for most businesses.
In fact, it is often recommended that smaller businesses get into product exporting because of its many benefits.
Different types of exporting
There are several different types of exporting business models that you can choose from. The primary options are direct exporting and indirect exporting.
Direct exporting involves the sale of products directly to importers from the exporting business. On the flip side, under indirect exporting, you only sell products overseas through Export Trading Companies (ETC) or Export Management Companies (EMC) who handle all export activities for you at a fee.
5 Things to consider when you start exporting
Before you start an exporting business, it is important to determine whether or not this model will work with your current distribution business or if you are willing to do what it takes to make it possible.
In order to have a better understanding of the viability of this approach, you’re going to want to consider quite a few factors. You should pay close attention to how it would work with your product, who your target audience would be, and how the financials would play out.
After all, you’re likely going into this intending to grow your business and boost profits, so it’s important to ensure that the investment of your time and resources makes sense.
Let’s take a closer look at each of these considerations.
The first thing to consider when deciding to start exporting is whether your product solves a problem or has a use in an international market.
If it does, then you should consider the cultural significance of the product.
Let’s say you’re an Indian company who wants to sell kitchenware to the American market. A great opportunity to promote kitchen utensils and pots and pans would be in the weeks leading up to Thanksgiving and Christmas, when preparing food becomes a major priority for many families across the US. Being unaware of this major US holiday could lead to minimal international sales, as you attempt to sell products over the summer months, or in the first few weeks after Christmas.
You’ll also want to consider local restrictions on different products. The European Union, for instance, has stricter guidelines on which ingredients can go into both food and beauty products as opposed to the FDA in the United States.
It’s also a good idea to compare your product to other products available in the country that you want to export to, so you can gauge the current demand for the product.
Here are some things to consider in relation to product preparation:
- Product packaging and whether it’s suitable for exporting overseas
- International labelling and language barriers
- Product demand and buying trends
- Country-specific seasonal opportunities
2. Target audience
Exporting your product means targeting a brand-new audience, as you’ll have to determine where else in the world there is a demand for your product.
Finding demand for your goods overseas can feel a bit daunting for a small business, but there are easy ways to attract a new international customer.
One of the quickest ways to get in front of the right people is to market your business on a professional and well-known international trading platform such as Alibaba.com. The platform also provides data-driven insights on global supply and demand trends with its industry analytics and demand signal tools.
Rather than spend precious time and money trying to market your business alone online, take advantage of a well-established marketplace like Alibaba.com that will help you to quickly attract international sales and increase your brand awareness online.
Another important marketing technique to get to know your new overseas customer is to develop international buyer personas. Using customer data and buyer insights from tools such as Google Analytics, plus previous sales metrics, you can begin to build up a profile of your intended customer and tailor your marketing strategies to meet the needs of this new overseas buyer.
3. Payments and exchange rates
The ability to get paid across borders without excessive fees is important. Make sure that you have a strategy to get paid via a secure paywall that will not cost you a large per cent of your revenue. Beyond bank and paywall fees, tariffs are something to keep in consideration as well.
These costs are less of a concern on high-ticket products because you should still be able to swing a large profit margin, but the situation might not be ideal on lower-ticket items that are sold in small quantities.
Also, exchange rates fluctuate daily and so as a small business you will need to be fully aware of how the currency can impact business and international sales.
Let’s say you’re a Pakistan company manufacturing leather goods and you’re thinking about selling to customers in Europe. You will need to be aware of how strong the Euro is compared to the Rupee. If the Pakistan Rupee drops in value and your manufacturing process becomes more expensive, your profit margins may be negatively affected. In addition, if the price of the Euro drops significantly, your European customers might not be able to afford to buy your leather goods anymore, as the cost of running their business, or the cost of living in Europe has risen.
The most common destination for exported goods from Pakistan is actually the US, and has an annual value of US $3.52 billion. By expanding to Europe, should the US dollar drop in value and your US customer demand dip, you can focus your attention on your new European customers instead, who may have more buying power. The ability to shift and adjust your export strategy can be the difference between sinking or swimming as a small business.
4. Pricing structure and potential profitability
Pricing structure is another important part of a small business that should be considered before exporting and selling products or services overseas.
What might be profitable in your home country might not generate a healthy profit when shipping expenses are added, so you will need to carefully plan what you’re going to sell internationally and how much it will cost to export your products to another country.
You can also adjust your price structure depending on the demand and how populated the market is in another country.
Let’s say you sell US chocolates and you want to export it to Italy. If the competition is low in this country but demand for US products, and in particular food goods, is high, you can increase your prices and your profit margins too.
To maximize your profits in international sales, another strategy is to set minimum order quantities (MOQs). It helps you build relationships with customers that truly have a demand for your products and keep a positive cashflow.
The cost of exporting, shipping, or transporting goods overseas must be also considered before finalizing a pricing structure. You may need to find reliable, trustworthy, and reputable partners such as customs brokers and freight forwarders to help you export your goods through customs and ensure they arrive on time, but this service also needs to be affordable so that your small business is still making a profit.
5. Rules and regulations
From product standards and customs clearance requirements to tariffs and Incoterms, there is a lot to be researched before trading internationally. Rules and regulations relating to exporting goods overseas is an important thing to consider before expanding your small business. All countries typically require documentation for imported products and you need to be aware of the rules in order to trade safely and legally.
US exporters, for example, will often face additional regulations for the testing, labeling, and licensing of their goods before they can export and start selling products to international markets. This initial research phase will need to be carried out depending on which country you plan to export to.
If you’re not confident with the import and export laws of your home country and the territories you plan to expand into, you can choose to work with an established B2B trading platform or professional exporting agents to avoid trouble and penalties.
How to start exporting in 7 steps
By now, you should have a decent understanding of the “whys” of exporting, so let’s get into the “hows.” We’re going to run through the 7 steps you should follow to get started with exporting, starting with creating a plan and ending with delivering your products.
For the sake of this post, we are going to frame each step with the assumption that you have already developed your product.
1. Plan and strategize
The first step of exporting is creating a solid strategy. To begin, you’re going to want to consider the factors we mentioned earlier: product, target audience, and the financials.
If you’ve deemed that it does, in fact, make sense to move ahead, you can start working out the logistics. Figure where you would like to sell your products and how you’re going to make it happen.
At this point, you should start thinking about what type of exporting you want to do. Direct and indirect are both great options, but the direction you go will depend on your business’ goals.
As you create your strategy and hammer out the logistics, determine how much you’ll need in startup costs for rolling out this new division of your business. Some of these costs will be determined by whether you’re selling products that you are manufacturing or if you’re simply an intermediary.
2. Conduct market research
You may be very familiar with your local market, but how does this translate over to a global scale?
Really dive into the market you’re looking to enter and see who your competitors are (if you have any) and what they are doing right or wrong. See what is making your competitors successful and what has caused similar businesses to fail.
Examine both the supply and demand to identify how your product and brand would fit into the market. Leverage the free demand signal tool on Alibaba.com to get market insights.
If you are the first business of its kind to enter this market, get a feel for the future demand for your product. Chart trends that lead you to where you are in your business in the domestic market, and see how that compares to the current situation in the new market.
3. Learn about policies and restrictions
Sending products across borders comes with the issue of government mandates, policies and restrictions. This could have to do with the source of the products (meaning the country you’re selling from), materials within the product, or the product itself.
Learn about the rules about exporting from your country and importing it into other countries.
Different border patrols will be stricter or slower than others, so educate yourself so you understand what to expect.
All countries typically require documentation for imported products, and you need to be aware of the rules in order to trade safely and legally.
4. Invest in a team
In order to expand across your country’s borders, you are going to need a dedicated team to help you through the transition, especially if you have decided on direct exporting.
Depending on the size of your company and the resources you have, you may want to hire personnel dedicated to exporting to work in each department.
For example, you’ll be targeting new audiences, so hiring a marketing specialist that is skilled in reaching international markets is a great investment. Additionally, hiring someone who is well-versed on the legal side of exporting will save you a ton of headache and hassle.
It will probably make things easier on you and your existing team to extend with new hires than it would be to stack additional responsibilities onto the ones who have helped bring you this far.
Again, hiring new people may be a bit of an investment at first, but it will help you manage the transition with much more grace.
5. Start marketing
In order to reach this new audience, you’re going to need to market to them by creating ads and content that will make your product discoverable. How you approach marketing will largely depend on whether you’re targeting consumers or retailers.
At this stage, you’re also going to want to consider branding. Will your current branding get the job done? Will you create custom packaging for your new audience?
As part of developing a marketing strategy for this new audience, you’re going to want to build your digital presence online by either investing in a website or selling on a well-established trading portal like Alibaba.com that offers you an easy-to-build digital storefront.
No matter which ways you bring your exporting business online, you want to make sure it is easy for users to switch the language and have currencies easily convert to the one that buyers use.
Relevant language and currency should also be carried over in your advertisements and social content. Many international brands use English because it is the most widely spoken language internationally, but if you have the resources, you can make your content more specific to your target audience.
Discoverability and accessibility will take you a long way here.
6. Form partnerships
As we mentioned, you can go the direct or indirect exporting route. You could also do a mix of both.
If you are going the indirect route, building relationships with loyal partners early on will serve your company in the long run. Find retailers that have values and missions similar to yours. Of course, you’ll want to choose retailers whose audiences would benefit from your products.
Work out deals that benefit both of your companies so that both parties are motivated to put in the effort required for success.
Another benefit here is that you could potentially piggy-back off of a brand that is already loved and trusted in your new market. Even if you only take this approach as you’re getting started, it will help you to drive sales in the beginning before you have a ton of brand awareness.
7. Deliver as promised
One of the most important steps of this process is delivering as promised. That is how you will come out on the other side with happy customers who remain loyal to your brand.
Whether you’re selling to consumers or other businesses, make sure that you are providing a first-class experience. Prioritize your customer relations, and make things right when problems arise.
Develop a core value system based on honesty and integrity, and you’re sure to succeed.
It is also a good idea to collect reviews and testimonials whenever you can. This helps potential customers see how much your current customers enjoy shopping with you.
Starting your SME exporting business may seem daunting because it involves so much planning and preparation. However, with the right tools, you can get started relatively easily.
One of the best ways to set yourself up to start selling products overseas is by using Alibaba.com, a well-known and established international marketplace. Not only can it help elevate your small business and help reach international importers and buyers who are actively sourcing products like yours, it can also help you to overcome many of the challenges SMEs face when making the decision to export.
Here are just some of the ways Alibaba.com helps businesses like you promote their products and increase international sales:
- Financing and freight shipping services for small- and medium-sized businesses.
- Rather than pay per sale, most sellers on Alibaba.com enjoy a take rate as low as 0%, leading to a high return on investment.
- Secure payment transactions and shipment protection between sellers and buyers through Alibaba.com Trade Assurance.
- With data-driven intelligence and professional services and coaching, you will be armed with valuable customer insights, buying trends, international trade knowledge, and B2B online selling tactics that help bring your business to the next level.
Ideal for any small- to medium-sized business looking to position themselves as an international supplier, this powerful platform connects sellers from around the world to global buyers, with ongoing help and support.
To support small businesses during these uncertain times, Alibaba.com now offers manufacturers and wholesalers virtual trade shows in the US, as well as internationally, to combat travel restrictions due to the ongoing global pandemic.
Learn more about exporting on Alibaba.com here.
Article credit to Alibaba.com.