Exporting directly to small overseas retailers is a comparatively new phenomenon, brought about by Internet. Selling directly to small US or European retail outlets even 10 years back was an uphill task because of many hurdles like lack of information on buyers, expensive communication media, scant information on overseas consumer interest, difficulty in accepting small payments etc. Trade Fairs and Buying Agents were two major avenues for small and medium exporters.
Internet, acting like a disruptive force, brought about major changes in traditional supply chain of
Exporter > Buying Agent > Importer > Distributor > Stockiest > Retailer
Seamless, easy and inexpensive communication through continents brought exporter and retailer closer, removing many myths and wrong notions. The retailer suddenly discovered how much he/she stand to gain by importing directly because of huge price difference between merchandise of local stockiest and that of exporter's. The exporter found the middlemen disappearing and was too glad to deal directly with buyer.
The phenomenon has been aptly described by many such as Sigurd Helland in Import Your Own Products And Make Your Profit Margin Miles Wider, Online Or Off and Robert Nelson in Importing Made Easy
Today, traditional supply chain is still in use for major chunk of exportable merchandise - but direct transaction between exporters and overseas retailers is growing very fast. Smart exporters have already organized themselves for serving overseas retailers - but Are you ready ? We discuss here what it takes to be successful in this new area of opportunity.
Retailer Buys in Small Quantity
If you plan to address small retailers - forget container load quantities. The business of retail is such that - large purchase can block money and even jeopardize business. The retailer may variously coin order quantity as 'first order' or 'sample order' - but it is very unlikely that he/she will ever order large quantity of one model/product. So, if your business model does not permit small order - retailer is not really your forte. Others may find Minimum Order Quantity a valuable clause in their product catalog.
Orders are More Frequent
Retailer will come back with repeat orders more often than a large importer as he/she can neither afford to maintain large inventory nor can keep rack space empty. Export orders will come as often as consumers demand, such as during Christmas season.
Margins are Higher
Silver line for exporters - you may compensate smaller quantity with higher price. Compared to the price charged by local stockiest - the retailer is unlikely to feel sizeable pinch and may not object to slightly higher price provided you communicate smoothly.
Be Sensitive to Issue of Trust
Importing from overseas country may bring excellent profit, but it is certainly more risky than buying from local distributor or stockiest. The issue of trust will always play on the mind of retailer, specially during first transaction, and he/she is likely to keep the first order as low as possible. The exporter should be sensitive to this concern and negotiate accordingly.
Prefer Air Freight
Most small retailers are not equipped to handle logistics operators and are uncomfortable with long delivery period in sea freight. Air freight, though more expensive, suits retailer's requirements better. However, the retailer may not be aware with these issues, specially the first timers. As exporter, you should quote air freight as much as possible and educate the retailer if necessary.
How to Get Information on Retailers
There are many retailers' associations in USA and Europe. You may contact them for their list of members. Easier option is to contact The Great Indian Bazaar who has compiled a directory of over 2000 overseas retailers (small retail outlets, convenience stores, drop shippers, large retail chains etc).
Exporting to small overseas retailers does not require significant investment and shipment can easily be handled through couriers. As a result, small Indian exporters and those new to export field will find this opportunity very lucrative. Margin from single shipment may not be much - but a handful of active retailers can keep a small to medium exporter busy throughout the year.
Happy and Productive Surfing
Dr. Amit K Chatterjee
FAIDA - Newsletter on Business Opportunties from India and Abroad
Vol: 6, Issue 23
; February 24' 2006