International trade for imports and exports company is one of the most happening and enterprising industries in import export business of the new millennium. Trading is not something new but in import export business it has been in process since ages. It is possible because some countries have an excess supply of some goods that are in demand by other countries. International trade is becoming more and more rewarding, both in terms of profit as well as personal satisfaction. Importer business takes you all over the world and into all the product niches. Read this article till the end to know all the essentials of importing exporting business.
Players in a trade market
First of all, let us take a look at the players in a trade market. Meanwhile, you have got your importers and exporters, there’re many variations on the main theme:
- Export management company (EMC) – It handles export operations for a domestic company that wants to sell its product offshores but does not know how (and possibly does not want to know how). The Export Management Company does it all, hiring dealers, invoicing customers, distributors, and representatives; managing advertising, marketing, and promotions; overseeing packaging; arranging shipping, and sometimes arranging to finance. In a few cases, it even takes title to the goods, in essence becoming its own distributor. It usually specializes in product, or foreign market or both.
- Export trading company (ETC): Meanwhile an EMC has a product to sell and is using its energy to seek out buyers, an Export Trading Company attacks the other side of the trading coin. An ETC identifies what foreign buyers want to spend their money on and then exploits the domestic sources willing to export. It sometimes takes title to the goods and sometimes works on a commission basis too.
- Import/export merchant: Import/export merchant is an international entrepreneur who is a sort of free agent for importing businesses. S/he has no specific client base, and he does not specialize in any one industry or line of products and instead, he purchases merchandise directly from a domestic or foreign manufacturer. S/he then packs, ships and resells the products on his own. Unlike an EMC, I/E merchant assumes all the risks as well as all the profits for imports and exports company.
Circulation process in the Trade Channel
After you are familiar with the players, you will need to take a step forward in the trade channel. It is the trade channel through which the merchandise travels from the manufacturer to an end user. A manufacturer generally uses a middleman who resells the product to the consumer. Thus this process is paddling around in a three-level channel of distribution. The middleman can be a merchant who purchases the merchandise and then resells them to the final consumers, or he can be an agent who acts as a broker but does not take title to the stuff.
Your fellow supporters in the business will depend on how you configure your trade channel. Well, generally they could include any of the following:
- The representative of Manufacturer: A salesperson who specializes in a type of product or line of complementary products, say, home electronics like televisions, radios, CD/DVD players and sound systems. S/he often provides additional product assistance, such as warehousing and technical services.
- Distributor or wholesale distributor: A distributor or wholesale distributor is a company that purchases the merchandise you have imported and sells it to a retailer or any other agent for further distribution until it gets to the end consumer.
- Representative: S/he is a witty salesperson who pitches your goods to wholesalers or retailers, and then passes the sale on to you. S/he differs from a representative of the manufacturer as he does not necessarily specialize in a particular good or group of products.
- Retailer: A retailer is the tail end of the trade channel where the goods smack into the consumer.
Now, let us move forward to know the essentials.
1. Target Market
Every business needs consumers for its products and services to survive and prosper. You need to plan and target your market and determine who your potential clients will be. Decide which geographic areas you will draw from, and what specific products or services you are going to offer to draw them in.
If you have previous experience in a particular field you should seriously consider targeting that market first because you will feel comfortable with the jargon and procedures regarding that market and thus your sales will pitch and will go smoother and easier. Also, you may already have contacts in the field who can either become your first clients or steer you to colleagues in that particular area.
1.1 Market Research
You need to do market research before actually proceeding. Here is some in-depth investigation into each of these areas:
- The product or service you are planning to sell
- The end user you are willing to aim for like a mass-market consumer, heavy industry, light industry, medical or hospital use, government, business or professional.
- The country or countries you will export to or import from.
- The trade channel you are going to use (ex- direct sales, representative, and distributor or commission representative)
2. Startup Costs
One of the major requirement to have your own business is that you need money to make money or in simple words, you can say that you need startup funds. The fund requirements vary from business to business. Your basic necessities to run the startup will be a computer, printer, fax machine and modem; this is because, in this internet world, nothing can be operated without computers.
The good thing about an import/export business is that its startup costs are comparatively low as you have the advantage of home-based-ability, which cuts office lease expenses down to zero. Unless you are thinking to start as a distributor, you can get away with purchasing no inventory, which means no outlay of funds.
The following is a breakdown of everything, of what you need to do to get up and running:
- Computer system supported with a modem and a printer
- A Fax machine
- Internet/e-mail service
- Market research and/or trade leads
- A Phone or any other calling equipment
- Voicemail or answering machine
- Stationery and office supplies
- Travel expenses for conducting market research on foreign turf
If you are starting it from scratch, you can always set up your computer on your kitchen table or on a card table in a corner of the bedroom, stash files in cardboard boxes. Maybe it is not a glamorous option but it will suffice your business needs until you get your business steaming ahead.
3. Income & Billing
How much can you expect to make as an international trader? The income that you can earn depends on how serious you are and how willing you are to expand this business. Generally, annual gross revenue for the Import/export industry ranges from $30,000 to $200,000 and beyond, with an average of about 75,000 dollars. You can also work from home, supplementing your 9-to-5 income with your trading expertise or launch a full-time business that demands constant care and feeding.
3.1 Pricing Yourself
As an international trader, you are an intermediary in the buying and selling or importing and exporting, transactions and that is why you have to determine not just the price of the product, but the price of your services too. Though these two figures are separate, they are interactive. You have to definitely add up the price of your services on to the product price.
The fee for your services will impact the success of the product, so you need to decide to change your pricing structure. Do not undercharge your client that you cannot cover even your expenses and make a profit. Also, do not try to overcharge as it will reduce the competitiveness of your company and the merchandise you represent.
Import/export management companies usually use 2 basic methods to price their services – commission and retainer. Usually, people choose one method or the other based on how efficient sales you expect from the product. If you believe that it can be easily sold, you will surely want to work on the commission method. But if you feel that it is going to be difficult to sell the product and requires a lot of market research, you will ask for a retainer.
There is also another method which is to buy the product altogether and sell it abroad.
To determine what your retainer should be, you will have to consider 3 below-mentioned variables associated with the performance of your services –
- Labor and materials or supplies
No matter how exotic you want to get and where you want to take your business, your basic tasks will be obtaining merchandise (goods), selling them, and transporting them and finally be getting paid for them.
The Export Path
Once you have found a buyer for your merchandise, you are a player. So now what do you do? Follow the export path:
- Generate the pro forma invoice. Give the importer a quote on your merchandise. Negotiate, if necessary.
- Receive the letter of credit (LC) from your bank and fulfill its terms.
- Make shipping and insurance arrangements. Pack the merchandise and get it transported.
- Collect shipping documents and present them to your bank.
The Import Path
Once you have found the merchandise you want to buy and then resell, you are an import player. So now what do you do? Follow the import path:
- Receive the proforma invoice and the exporter’s quote on the merchandise. Negotiate, if necessary.
- Open a letter of credit at your bank.
- Verify that the merchandise has been shipped.
- Receive documents from the exporter.
- See merchandise through customs.
- Collect your merchandise.
As an international trader, your mission is sales and you need to take care of two areas:
- Selling yourself and your business to clients as a trade manager for their products.
- Selling the products themselves to distributors and representatives.
5.1 Hunting for Exports
Surprisingly, a small percentage of domestic producers export their wares. So your marketing goal is to convince a lot of domestic producers to export which in turn can give them huge profits. You can accomplish this goal through direct mail and cold calls.
You need to do a basic market research before you initiate contact with any manufacturer. It includes:
- What products hot sellers in your target countries?
- Are there situations or markets that would put your products in great demand?
- Who already manufactures such products?
- What will be the selling price of each product, domestically and in your target countries?
How do you go about finding goods to be imported? Here are some of the options:
- Travel abroad to look for import opportunities.
- Look/wait for foreign manufacturers to contact you from which you can import.
- Go and attend trade shows.
- Contact trade development offices of foreign embassies.
- Look for leads on the Internet and track them down and in trade publications and journals.
5.2 Marketing Plan
Whether you are planning on exporting or importing goods and services, be prepared to present your prospective client with an effective marketing plan. To prepare your marketing plan, you will need to have the information like pricing, product brochures or literature, and samples and so on.
What elements should a marketing plan include?
- Target: You need to decide that with which country/countries you are going to trade with. Check the viability of these markets.
- Sales: Explain and mention clearly at what price you are going to sell the product. Don’t forget to mention your annual sales forecast, your fee structure and the profits the manufacturer can expect.
- Marketing: Briefly touch on any special marketing technique you have in mind or promotions for the product in export and import business.