International distribution strategy & market entry plans

A clear market-entry strategy defines where to compete, how to reach customers and which investments to make before entering an unfamiliar foreign market.

Which country to select as your next export destination?

If you want to export to new markets, then you first need to select the right countries to do business in. This can be a country where you get enquiries from, but it is wise to look broader.

These are the three steps that I always recommend:

find out what need drives your sales;
find the country where that need is large and still growing;
check the competition.

International market entry Strategy

The main challenges in market entry in a new country are:

Cultural differences
Legal and regulatory hurdles
Establishing distribution networks
(Unknown) competition
Financial risks
Communication barriers

Below I will focus on the third point: establishing distribution networks, or the way how you will reach your customer. The options that you have depend on your product and your target group.

Convince foreign distributors with numbers, not with stories

In the past 15 years me and my colleagues have approached hundreds of agents, distributors, importers and retailers worldwide for brand owners aiming to sell their products abroad. In 2012 a call was enough to get a meeting. Today, you first have to send your pitch — and then hope that someone will answer.

The distributors needed to reach your clients already work with your competitors. They have invested in marketing, stock and sales, and they are making money. Asking them to switch to you means asking them to start all over again.

My experience is that if you only send a website or product catalogue, answers are rare. Numbers make the difference. Show expected volumes, margins, sales effort and investment. Show that there is a business case for them, not just for you.

Indirect export: distributors, retailers or online

If you have a consumer product that you can’t sell directly from your home country to your end customer, you need at least one step in between. This can be a distributor (who also acts as wholesaler or importer), a big retailer directly, or it can be a large web shop. Let’s look at the pro’s and con’s of each option.

Distributors

Distributors are used to import, store and physically distribute a product.
They normally don’t invest in promoting your product to consumers.
They are the best chance to get your product in the market so that you can gather sales data.

Large retailers

Retailers are very risk averse, may ask for a listing fee before they put your product on the shelves.
They can help you promote your product in their stores and in their magazines, but will also ask a fee for this.
They are the quickest route to the mass market, if you can convince them.

Online

Specialised web shops may have a greater interest in your product than general web shops.
They can experiment more easily with pricing and ways of promoting.
Volumes may be lower, but working with web shops is still a good way to collect reviews and get brand awareness.

Direct export for B2B products or customized offerings

For a B2B product that is not a commodity or for customized solutions the story is different. Here sales needs to be done in alignment with the department that actually delivers the service or that determines the price case by case. Also then you have three different options.

Agents

Agents represent you in the country and have a limited negotiation room.
They often sell not only for you, but also for other parties.
A good agent already has a network in your target market and can start selling directly.

Local offices

Local offices are a costly option, but give you full control on your sales.
You have to send someone over and hire local staff and office facilities.
This gives the opportunity to do local marketing and business development from within the country.

Distance selling

If you product can easily be delivered and serviced from abroad (like software) this may be a good option.
Video conferencing is more accepted now and can limit travel.
Lead generation may be done with SEO, advertising and email marketing.

Where it all starts: select a target group

As counts for any country: you first have to define the target group that you want to sell to. If these are businesses, then you can reach out directly through emails and targeted advertisements, e.g. on LinkedIn. If this arouses interest and gives a sufficient response rate, then you may have found an easy way to get the market’s attention.

If your target group is more diffuse, or is a consumer group, then you have to rely more on advertising such as on Facebook or Instagram.

The business case for your exports

If you plan to expand you company abroad, you will also have to take into account the investments that go along with it. A new market entry may easily costs you 100,000 USD in investments, let alone the working capital.

How to determine how much money you need? And how quickly will your earn back that investment based on your revenue growth projections? Read more…