How to Dodge Distribution Difficulties
By Cheryl Lockhart
It happened again. I ran into an old friend while registering for the World Masters Games last month and as we were catching up, she complemented me on a necklace I was wearing. When I told her I bought it in South Africa on my last trip there, she exclaimed, "You have to start importing these. You'd make a fortune!"
The Great Import Plan
This is a refrain I've heard over and over again and while there is some truth in it, you can make money being an importer, there is a certain amount of naiveté in the plan. First of all, most people don't take into account the shipping costs, tariffs and insurance involved - though some do sneak through customs with suitcases brimming. But the biggest flaw in the Great Import Plan is distribution. Canada is a vast but sparsely populated country. In order to sell necklaces, or whatever, you need some method of getting it to the people of Lunenburg at one end and Nanaimo at the other. Even if you are only targeting your local market, you need exposure to lots of customers to make the venture profitable. Do you open a retail store? Hit the Farmer's Market? Find a distributor?
Before I go on, I bet you're thinking, "I thought this article was all about exporting?" Well, it is. This little scenario is exactly the same dilemma facing exporters - getting your product to the people that need it and will buy it.
After in-depth market research you may be 110% convinced that everyone in Italy will be clamoring for your product and you may have it all figured out with respect to shipping but the big question is, how do you get it into the hands of your customers? Open a retail store? Sell in local markets? Find a distributor?
Finding an effective market entry method that meets your needs is probably one of the most important and time consuming methods of exporting, yet, in my opinion, it is one that companies concern themselves with the least. I've seen companies make mistakes in foreign countries equivalent to giving a mom and pop shop in Flin Flon, Manitoba exclusive, nationwide distribution rights to sell African jewelry. Sure, they might sell a few pieces but it's not likely they are going to penetrate major urban centers. And as far as I can tell, the only reason companies make this error is because they are lazy in conducting their their due diligence.
Star qualities of a distributor
So don't sign an agreement with the first person to approach you (I call it "accidental exporting" and there are a lot of unscrupulous people out there that do just that - then never deliver, waiting to be bought out of a contract). Be active in finding a distributor that meets your needs and avoid the temptation to sign an agreement with a distributor merely because they are the biggest, most persistent or super-enthusiastic. At a minimum, consider these qualities when evaluating a distributor:
- Proven track record in a similar line, but no conflicts of interest with competing products.
- Mix of product lines that complement your product. Check to ensure that they actually do represent those products.
- Established distribution networks and strong contacts with key buyers. You may have to appoint several distributors in a country like Italy where business is done regionally and there is little consolidation.
- Solid financial history (be sure to do a credit check) and sufficient cash flow in order to extend credit to customers, as well as a willingness to invest in your line.
- Appropriate staff (in terms of numbers but also marketing savvy) to promote your product.
- Storage facilities, showrooms, shops, service workshops and after-sales service as required by your product.
- Knowledge of local import procedures and regulations.
- References from other suppliers and customers.
- Personal rapport - and this may end up being the most important factor in your success!
Finding a distributor
Finding a distributor that meets all of your criteria can be difficult. I suggest that you interview at least five potential partners (preferably in-person) before you appoint a distributor. Unfortunately, there is no one way of finding an overseas partner and it is a time consuming process. Many companies have good luck approaching the Canadian Trade Commissioner service in their target market, though results can vary from country to country and I always caution that this should be only one source of information. Other options include chambers of commerce, asking for referrals from other Canadian exporters, checking with your end customer to see who their distributors are, trade associations and trade shows. Also, your local library (the Business Link in Edmonton is an excellent resource) will have books such as "The International Directory of Agents, Distributors and Wholesalers."
Show me the money!
It's not always possible to sign-on with the largest distributor in a country. Sometimes it is necessary to work with a smaller partner, with the agreement that they will grow as your company grows. It's like the movie "Jerry Maguire" when Cuba Gooding Jr.'s character, Rod Tidwell, signs on with Tom Cruise's agency, even when no one else would take the chance. By the end of the movie, when Tidwell's football fortunes were rising, so were Jerry's - they grew together. Plus, Jerry was able to devote all of his time to Rod. Wouldn't that be great for your product?
The important thing is to have a systematic method of evaluating each prospect. At a minimum you should prepare a detailed questionnaire that addresses all of the issues I identified above. Companies that take the time to fill it out will be serious. You would be amazed at what a great filtering tool this is and it will help you to more objectively evaluate prospective distributors.
Bronze medal success
As for the Masters Games, I'm happy to report that my basketball team won the bronze medal in our category. I'm in the front row, center, looking a little goofy (there were a lot of people taking photos, it was hard to know where to look). It was a true international event (we had an Aussie on our team) with over 5,000 of 21,000 athletes from outside of Canada, proving that sport is a common unifier regardless of citizenship, language, religion or political beliefs. It was so much fun, we're thinking of going to Sydney in 2009!
Copyright© 2005.
About the Author
Cheryl Lockhart of International Strategies Ltd. assists small- to medium-sized Centerprises navigate the complexities of global business development. To learn more about exporting and gain access to additional FREE e-zines, visit her web site http://www.intl-strategies.com
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What Everyone Should Know About How To Buy Wholesale
By: Melanie Burns
Finding a supplier for the product you want to sell, at a price that you can profit from, can be a big task. The best suppliers for your online sales or auctions do not advertise their services and often cannot be found online.
Those that you can find online tend to be middle-men. It is often difficult to get a good enough price to make any real profit online.
Let me tell you about my simple 2 step system to find an untapped source for wholesale suppliers. This is so simple that it's often overlooked as a source for product. This system involves thinking outside the box and not letting policy stop you. (continued below)
The First Step to find a supplier is to find someone that already sells or has access to what you want to sell. This could be a website, an eBay seller, a manufacturer, a wholesale outlet, or a regular store in your city. This is the easy step. You know what you are looking for and you can search on the internet, not for a wholesale source, but for anyone already selling what you want to sell.
Another valuable source for a local supplier is your local phone book. The yellow pages are the best way to find local sources. This should be the first place you look. Doing business locally with someone that you can meet face to face is a big plus for your business.
Another potential source for your product is to find a distributor who would be willing to private label a product for you. You could get a very high quality product for a much lower price than if it had the name brand label.
The Second and Key Step is to convince the source you found to become your supplier.
Manufacturers and wholesale sources often have minimum orders that might be beyond your reach if you are just starting out. Online retailers, eBay merchants, and retail stores may be your best bet. Try to find a small store who is looking to expand.
But remember, you are dealing with a human being and they can be convinced to do business with you. Just be sure to sweeten the deal for them. One way is to offer the person you are dealing with at your new found source, a percentage of your profits from the products he supplies you.
Be sure to project it out for him. If he can see the benefit of working with you even though it causes extra work for him, you can be successful in making a deal.
You could offer him 20% of the profit from sales of his products. For example you could show him that you project to make at least $100 profit from each product, and you expect to sell 40 of them per month. The $4000 a month means an extra $800 per month in his pocket. You still make a nice $3200 profit for the month in this example.
On top of that, he will be ordering more products from his supplier and may be eligible for a higher price break from them. This way, his reward for the effort to work with you, is making money on both sides.
There are many benefits you can offer your potential supplier, but no matter how you look at it, the main thing it comes down to is MONEY. What's in it for your potential supplier to do business with you? If can you show him that, you have a better chance of making a deal with him and starting your online sales.
NOTE: When looking for suppliers around your city, don't go trying to impress the big stores with your $800 or even $3,000 extra income per month proposal. Try going to the little stores that are looking to expand their business, they are the ones that are usually more open to new opportunities.
The big stores are making hundreds of thousands of dollars per month in profits, so an extra couple of thousand would probably not impress them the least bit.
So now you see that by thinking outside the box, you open the door to many possibilities and increase your ability to make money online with your products.
About the Author:
Copyright © Melanie Burns
This article is free for reproduction but must be reproducted in its entirety including live links and this copyright statement. Subscribe to the iBusiness How2 Newsletter to receive hot tips, how to's, internet business tools, and relevant product reviews by sending an email to: newsletter@internet-business-how-to.com
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