Barriers of Exportation: A Brief Overview
For years the world has progressed towards free trade, with international purchases no longer being limited to larger organisations. For any SME, when starting your journey towards exportation, there are many factors that should be considered to ensure the process is as smooth as possible.
With the rapid growth of globalisation, more than ever products are being purchased internationally and shipped across borders. Alongside the development of the internet, international trade is no longer limited to large companies with many small and independent businesses finding new customer bases in other countries. However, exportation can be a complicated process stifled with barriers and legal requirements. Throughout this article, we briefly highlight some of the difficulties you may face when starting international trade. This list is not exhaustive, rather it is the main points we at Commercial Cross have encountered over the years.
Developing a Customer Base… Again.
The first step of any sale, international or local, is finding someone who wants to buy your product. When expanding your business into a foreign market it can be like starting from scratch. Most companies – particularly SME’s – don’t have international brand recognition, so you will need to advertise and attract new customers (discussed in more detail below).
Depending on whether you choose to sell entirely through e-commerce or through a retail store will have several pro’s and con’s. Through e-commerce, you have a wider potential customer based as it is practically unlimited, however you will also face higher competition to grab consumers attention, and in some cases may be required to acquire new technical skills as an organisation (see below). If you opt for retail, you may find it easier (debatably) to pull potential customers (quite literally) into your store and have more opportunity to promote your products in unique ways. However, this also comes with higher costs, the difficulty of setting up a shop abroad and a range of obvious issues.
Selling internationally, there may be issues with language barriers and time-differences. Unless you are a native speaker, you will be required to have staff fluent in the language to handle not only customer issues and set-up but B2B relations, writing promotional materials, setting up and many other things. With time differences, unless you are a 24/7 business, contacting and handling customer complaints in swiftly may become more complicated. To take it one step further, if you are looking to set-up meetings and work with other organisations, scheduling these becomes more difficult and you may have to work both out of business hours and in a narrower, limited time-frame.
Furthermore, if you intend to sell your products through e-commerce sites, it’s important to know whether the country you intend to export to supports your current ones. For instance, in China both Amazon and eBay are prohibited, meaning that if you want to sell through e-commerce you will need to understand and operate their versions in Alibaba and WeChat. These sites work quite differently that e-commerce sites in the west, so developing an understanding can be more difficult (and knowing Mandarin to understand the site itself, google translate won’t get you far).
While it can be difficult, we don’t want to put you off! With the right plan, staff and connections it is a manageable endeavour which offers incredible potential for your business. The set-up is the hardest part, after that running it will slowly become standardised.
Packaging and Shipping… and Packaging… and Shipping… and…
So, you’re all set-up online. Now what? When an order is place, there are a few things that need to be considered - firstly, packaging. While this may not seem to be that different from sending a product in your own country, think of the distance that package must travel. For instance, when we sell any products that are powders to China (for instance milkshake etc.), we found that we needed to use airbags instead of just bubble wrap otherwise when travelling by plane the packages could pop and destroy the product.
Furthermore, you need to consider the possibility that when setting up your product on e-commerce there is no limit to how many orders may be placed at once. Is your business equipped to handle a large order quickly enough?
When it comes to shipping, labelling a package varies in difficulty depending on what is being sent. Some considerations may be needing to identify the product on the label, equipping passes for certain product types for tariffs, taxes and legal requirements, ensuring the right name and address is on (especially if the language is not in the English alphabet like mandarin), weight allowance etc. After this, who is going to ship the package? Different distributors offer different deals not only in price, but sometimes in tax. Will you be required to pay tax or is it being shipped to a tax-free zone?
It can be tough to sort out, but again once the details are sorted out it will become standard practice for your company. It’s no different than adding a new process or delivering products for the first time, it just takes a little trial and error.
International Trade Law… Fun
International Trade Law differs from country to country, so we will be brief. In certain areas there are specific rules and regulations which all products must adhere to. For instance, when selling through retail most countries require the product labels to be translated into the native language. Laws might be more niche for instance in China all cosmetics sold through retail must be (controversially) tested on animals first. However, there are ways around some of these laws, namely through e-commerce. Most laws only apply to retail distribution and not e-commerce, so if you are sending a product directly to the customer you may be able to ignore many of these. We only have experience in shipping to China however, so there may be other countries where this is not the case.
Wherever it is you are shipping, you should conduct some research into the laws and regulations for the area. Also, consider any tariffs or taxes that should be included in your price calculations. There is a lot to consider here, but with the right strategy and sales method you can work around it.
Customers, Culture and Concerns
Going back to the start of the piece, we touched on the idea of developing a new customer base when expanding into foreign markets. While this piece has primarily been focused on the logistical concerns of international trade, you also need to consider the cultural and social aspects of a country. Different practices and products will be used so when advertising your product, you must consider how it will fit into the market.
For instance, in China (elaborating again, it’s our speciality), cosmetics do not follow the same trends as in the West. Cosmetics are relatively new in China so there isn’t the same history and preference for certain brands that we have here allowing for newer and more unique brands to get their foot in the door so to speak. Furthermore, skin-whitening products are (unfortunately) popular, however haircare is a largely over-saturated market featuring heavy competition from big brands. Whatever your product is, there will be an existing culture around it.
The generational gap within China is also more noticeable than in the West. Having undergone a dramatic revolution over the past thirty years there are vast differences in the purchase habits between generations due to the rapid speed of development. Points like these should be taken into consideration when developing your market strategy – what works here may not work abroad.
This isn’t limited to just customers – your B2B relations may differ, particularly between Western and Eastern cultures. For instance, the idea of Guanxi is a cultural business point in China where people and businesses help one and other out mutually – a sort of ‘you scratch my back” policy (to but very loosely). Furthermore, there is a drinking culture when it comes to securing business deals in China, with deals often made over high-percent wines. If your liver isn’t up to it, this is the type of cultural information you should have before making any deals (so you have time to hire an intern to take your place).
While this can all look a bit daunting, it is important to remember the potential of international trade. You will be opening up your potential customer base to potentially millions of new customers and with the right strategy and planning, it could vastly expand your business beyond people who walk past the shop window.
Now for the sales pitch: Here at Commercial Cross Ltd., we specialise in exporting unique, western SME products for you. We can handle all of the above including sales and customer service for no additional cost than if you did it yourself. We know many SME’s are limited in time to set up complex plans, and we want to help you expand your brand for as little hassle as possible. For more information visit our website at http://commercial-cross.com/