Introduction to exports
Not winning in the export game? You are not alone.
Why do so many companies fail at exports? A lot of companies fail at it because they have a “moving boxes” mentality and not a transparent export model.
Is there an export model that is preferable to another? Not really, but the latter is crucial because it will define how you will enter a geography or market.
Identifying a winning export model
Fundamentally any company must have a clear idea of its top priorities in terms of markets and product lines. Identifying an export model is about the decision of how you will enter those different geographies.
There are four ways in which we can access a market.
The first one is the classic commercial agent. You can define one per geography. You can have five different geographies within a market. And this would be typically the setup in which you sell directly to the client through this commercial agent acting on your behalf in that geography.
You can also find an ally in that geography. And that is a model where you look for a local manufacturer, so somebody already distributing and selling in that country will make the sales for you. You can go for a classical distributor. That would be the professional third-party distributors. Or you can also try and have your structure in that country.
Now, each of these different models has pros and cons that we’ll be looking at now. When going into geography, it would be best to consider the brand’s market maturity. How mature is your brand in that market? How fast can it change? So if a brand is non-existent but could quickly win the export game, you should start looking for a model in the middle, whether an ally or a distributor directly. And you might want to start with something other than an agent. All those considerations are what you should have as you go and look into what model you want to export into the geographies.
Benefits and Drawbacks of export models
Exports through Agents
When we think of an agent, we think of the classical agent acting on behalf of a few brands doing the commercial work for you in geography. There are pros to using this kind of model. This is something quick to set up. It does have a variable cost. And you can scale it up quickly, as most countries have professional agent registers. Brokers, however, might not be ideal. If you need more than one, you must start managing two to five agents in the demanding country. And also, relying on external brokers poses a consistency issue because agents are typically independent freelancers who will be applying their sales methods. Many of them have many, many years of experience. But there’ll be varied in how they deploy your brand’s message. You must ensure they focus correctly on your brand because they will distribute other products and brands. And not all of them will give them the same margin or the same return when it comes to the bottom line. Also, it would be best if you thought about the logistics because, usually, logistics are outside their control. They will be more focused on just getting that order, and a third party will make that sale for you, which is what you’re looking for in the first instance. You are now in a country, and you’re excited you want to get that first sale. But this ensures that the first sale comes at the right margin, at the right delivery time, and the correct delivery cost. And that that client or many others can reproduce it in the future. Agents can also be an excellent way to sustain specific channels or regions of the market. Some agents are very specialized in one particular critical account or channel. Some agents know the substantial key account in a specific country very well because they’ve been working and building relationships for many years. So, it is sometimes an excellent model to choose if you’re looking for a particular specialization in a country.
Winning Exports with Partners.
An ally is usually a manufacturer, which sometimes can be perceived as a competitor, and they manufacture and resell your products under license. They already know the trade because they are already present in the market and have the logistical capability. And you know where they are present. So, therefore, you know exactly where they have the commercial reach you seek. And this is quite a key element in choosing an ally. If, for example, you are a drinks company looking to enter the on-trade market, look at where a specific brand is distributed and whether they reach the clients where you think your brand should be available. Therefore you know which other right allies you want to sell together with. This also has a secondary advantage: you could build a relationship to benefit from another revenue stream in your home country. So, this model can make you not only sell your brand in the geography where you plan to export but also open up a new revenue stream in your home country. Suppose you are, for example, looking to sell into a particular geography, and you have a good relationship with another manufacturer who does something complementary or similar to you in your category. In that case, you can bring that brand to your home country and benefit from another revenue stream in your home country. You can also find out that it has some difficulties. So you know you must find the right balance between them and your brands. Therefore, you need to look for all the companies to see exactly where they are in their product portfolio or how you can fit in with them. It would help if you overcame that psychological barrier that might come from reaching agreements and sharing information with With what are perceived as competitors. But think about that most of the time, those competitors are local competitors who have been in the market for many years. If they benefit from distributing another complementary brand, they will also find that it’s a good revenue stream. There is, however, always the difficulty of making sure that they have experience with third-party distribution is not the same as selling your brand with your team that is engaged, that brings on someone else’s brand, that you don’t know how long you’ll be managing it and selling it and how it might affect your brand. It’s worth spending a reasonable amount of time selecting the right partner and allowing each other to discuss how you want that relationship to look.
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Exporting through Distributors
A classical distributor would be a company dedicated exclusively to importing and distributing third-party brands into a particular geography. They will have a total logistical solution, usually are very professionalized, and know how to handle the logistics in the country. Depending on the category and the market, they’ll have their logistical vans and their logistical reach. Some might use other parties to distribute, but they will have very tight control of those costs. One of the pros and advantages of a professionalized distributor is that it will have reasonably standard conditions across the brands, so you know that you’re dealing with a fair market value. You are dealing with a company that is used to doing this. So often, you need to make sure that you are the right fit for them and that they’re not too big for your brand, or your brand might not become too big for them. That is quite important to assess at the beginning. It will help if you double-check what other brands they distribute to ensure they fit with yours. This will give you a good idea of measuring the right fit if that distributor, the one for your brand, well check what else they distributed. You might know some of the brands. You might see how those companies behave in your home geography; therefore, you can understand how they might choose a distributor. One of the issues when you are dealing when you are finalizing with the distributor, will always be the contract. It is essential to have a good agreement that protects you and the distributor from any actions in the foreseeable future. It is worth spending time on this. And it is worth making sure that you cover all points. Contracts are made so that they help during the length of the agreement but also at the exit of the contract. So make sure you consider what will happen during a separation, which will occur at some point. We all go into markets with huge expectations. And we’re very excited that we’re going to get new sales and find new things. But we must remember that those relationships hardly ever last for life. So let’s ensure you look at that contract from our professional point of view. And that both parties understand what needs to happen during the contract. But also, after the contract is broken. Remember that a distributor will do the commercial work for you and build your brand in the coming months or years as they distribute that brand. So it would be best if you considered your value chain and the cost of exiting that contract in the future.
Own direct structure
Depending on your brand’s market maturity, you should look at some of these models and use them more or less. Your structure typically comes from having a mature brand in geography and a market. And it means that you will manage all aspects of the sales, marketing, logistics, and finance in that geography. Therefore, you will have complete control of your brand. And you will have full visibility of the value chain from the landed price into the country to the logistical costs to the sales price and the sales structure into the final clients, including any A&P budgets or any discounts that might happen. So this gives you much more information than just selling into the market and knowing the final retail sell price. However, this means that all logistics do become your responsibility. Therefore, you need to know how it’s managing that whole country before you start doing your structure. You need to keep up with local knowledge. Remember to consider the local expertise you need when you go abroad. There are always differences between geographies, even within cities in the same country, on how even platforms and timetables and, you know, timings on different things work. But also when it comes to market adaptations of your brands and products. So when building your export/ import structure, make sure you build it with a team that has local experience. Some companies tend to send people from their home headquarters that know their brand well. There’s no doubt about that. But they might need to learn how to adapt it to that local knowledge in that geography. So make sure you bridge that gap, adding people that have that local, consumer, and customer experience. Also, it would help if you managed how important the head office works. So there needs to be a clear understanding and a good setting of expectations. You will be running a full p&l, so you will be responsible, as well, for managing that in a country. And sometimes, you need to consider that you cannot replicate exactly what it looks like in your head office. So allow for some differences and do allow for adaptation into local geographies. The cost of hiring personnel might be different and might be substantially different in one landscape than in another export market. So make sure you consider that when you set up your structure. That said, it can be highly beneficial to mature brands that can adapt to their geography faster and quicker. So as a summary, we have seen four main ways to access a market. You can choose to do it via an agent, having the benefits of it being a quick decision and a variable cost, taking into account that the logistics might be an issue and that if you need to scale up, this might not be the quickest model to do so due to management. There’s a lot of training involved. And make sure that they focus on your brand. You can also do it via an ally. And allies can also be quick and accessible to find out they are variable cost, they will include all your logistics, and they know the market well. But always ensure you find the right balance between their brand and yours. You can go via the classical distributor model. They’ll look for professional management of third-party distribution. Here make sure you look for the right brand mix. Make sure there is a good fit and that you negotiate a good contract. Thinking of always going in but also going out of it. Or you could go on your structure directly to a country where you would have complete control and visibility of the value chain.
In conclusion: winning in the export game
You will need to have a dedicated team, and you will need to think hard about your adaptations, the local logistics, and the local knowledge. Different margins might move from one model to the other. But that should not be the only driver in your decision. You should take it into account. But also remember all the pros and cons that each different model might bring to your brand and your company, and this moment today, you will be able to adapt and recalibrate as you grow. So remember, you need to find what works for you soon to grow that brand exports in the geographies you have selected.