International trade is simply too big to ignore. According to the World Bank, international trade was 62.27% of world GDP in 2019; according to MacroTrends this was 64.29% for the UK. (Of course, for some business sectors, international trade simply is not feasible e.g. hairdressers. but if you are a manufacturer of any kind or provider of electronic services you should at least consider your options.) For other reasons see the sub-section: Why Export?
Breaking into international markets:
There are two schools of thought as to how to break into export markets:
The good news is that the 2 approaches are not mutually exclusive. However, if you are new to exporting, we would definitely recommend starting with the eMarketing to the world approach. It is a lot cheaper, requires fewer resources and you have a wider catchment area; you may well be surprised by the results. (If you get orders or enquiries from countries which you cannot serve, just simply send a polite "Sorry, but .... email.")
Whichever approach you are thinking of following, do check out the following 4 resources, to see if your company is ready to initiate or expand direct exports.
There are also a number of chapters in "The Essential Guide to B2B eCommerce" which deal specifically with international trade. For your free copy, just click here.
If you have never exported before, this prospect can still be daunting. It is not unreasonable to think that trying to export is simply too difficult and risky. In fact, eCommerce can open up a global market for your products and services
Common misconceptions are (in no particular order):
Well, some of the above concerns may well have been largely valid in the past. However, the good news is that B2B eCommerce resolves all of these. In fact, you will see below that exporting actually reduces your risk. So, taking these concerns in turn:
That may appear understandable, given the seemingly large UK market, but it’s a very short sighted view. The UK market, large as it is, accounts for just a small fraction of the world market. In effect, non-exporters with exportable products are saying "I'm not interested in the additional sales that exports could bring." Yet, if a new sales order came to you, say from Yorkshire instead of Germany, would you also say “No, I’m too busy?” Not likely. The “too busy” retort masks the same fears about exporting reflected in the other excuses.
If you are one of the 90.2% of UK SMEs selling only to the UK market, in effect, you are forfeiting a huge potential to increase your sales and profits. One might well ask, “What are you thinking?”
If you sell only to the UK market, your sales volumes depend upon the health of the UK economy. If you develop export markets, however, should the UK market falter for any reason there is the possibility that these can take up slack you experience. By serving a wider portfolio of markets, you actually reduce your risk profile.
There is no doubt that many more UK non-exporters have the potential to export, especially those with already strong domestic track records and nationwide distribution. If you have survived and succeeded in the UK, one of the world’s most competitive marketplaces - you could likely compete anywhere - now is the time to try.
False! In the UK over 98% of the exporting firms are SMEs. Many have fewer than 50 employees with annual sales in the £1-10 million range. It is true that large firms typically account for far more total exports by value, but SMEs dominate the exporting population in the UK and most other countries.
Traditionally, it was absolutely true that you had to dedicate significant time, effort and investment. This is now no longer the case. (However, this does not mean that you do not need to dedicate careful thought to developing your export plan.)
Be mindful, however, that when you open yourself to the world, not all responses will reflect serious interest. Some may be scammers or fishers for free samples and proprietary information.
The world is large, with varied needs and interests. If your product is bought domestically, it might well be wanted and affordable somewhere else in the world. What makes your product sell in the home market can help it sell abroad. Price is important, but it is not the only selling point. Other competitive factors are needed: utility, quality, service, credit, consumer taste - these may override price differences.
Traditionally, companies have been advised to choose a specific country and then conduct a focused export campaign in that country. This means risking success on one market – and entering a market using traditional means requires a not inconsiderable investment of time and money. It may even be necessary to exhibit at trade fairs – when costs can easily run into tens of thousands of pounds. eCommerce allows you to promote your products and services to the world – and see who comes to you. You can do all of this without leaving your office.
It is true that exports require extra documentation and that you may have to adapt your packaging and labeling. However, your freight forwarder and/or customs agents can advise you what is required.
You must certainly allow for language differences; especially on your website and in your product\service collateral. If you require interpreters for negotiations, these can also be easily and cost-effectively arranged – using online video conferencing. However, solutions can be easily, quickly and cheaply implemented.
Tosh! There are online broking services where you can ask for competing bids for your business.
You should certainly be aware of them. In the main, they are relatively minor issues. However, these are not problems that you have to solve by yourself. (Again, see International Logistics.)
There are indeed tax considerations when exporting; but they are not necessarily onerous. The main one to take into account is that you will have different responsibilities for VAT depending on whether you sell to other European Union countries or export your goods outside of the EU. (See International Logistics and Brexit.)
You should certainly cover payment and currency risks. However, they are risks that have been faced and resolved by countless companies; so, there are no reasons why you cannot face and resolve the same issues. (See: Reduce Risk.)
One of the commercial risks you have to cover – whether you are engaged in just domestic trade or overseas trade – is the danger of your IP being stolen. The issues you should consider are covered in the Reduce Risk: IP Section.
While trade laws do vary by country, most are straightforward and non-threatening. For advice and help with contracts etc., consult a lawyer specialising in international trade (See: Foreign Legal Advice). For recent UK legislation, you can check the Official Home of UK Legislation.
More reasons why you should consider exporting. It's not just that there is a big market "out there":
In addition to generating extra sales, as already pointed out, exports reduce your business risk – if one market goes down there is the good chance that your other markets will at least remain stable if not actually increase.
If your domestic product is seasonal, you can sell it to countries with coinciding seasons or, better yet, whose seasons start when yours ends.
If you have idle capacity for any reason, this can be re-directed to supporting your exports.
With increased export production and sales, you can achieve economies of scale and spread costs over a larger volume of revenue. You reduce average unit costs and increase overall profitability and competitiveness.
Exports extend product life cycles. As technology advances and tastes change, many products become obsolete or lose their appeal, particularly in highly industrialised markets. But these products may still be valued elsewhere. Over half the world's economies are less developed. They may not need or can't afford your latest model. They may even prefer less costly, earlier versions or used or reconditioned products. Pursue exports in markets that still value goods no longer in demand in the domestic market.
Going international can yield valuable ideas and information about new technologies, new marketing techniques and foreign competitors. The gains can help a company’s domestic as well as foreign businesses.
Export Readiness Assessment – from the Suffolk Chamber of Commerce
This self-assessment provides a quick, basic assessment of your export capabilities. It will also remind you of some issues you will need to consider as you plan your export development. (Your results can then be used to identify the specialist help in the categories you need it most.)
If you are trading with, or thinking of trading with, the EU, you will need a GB EORI and an EU EORI number for:
Furthermore, if you are a regular trader of goods between Great Britain and Northern Ireland then in addition to a ‘normal’ EORI you will require an XI EORI registration.
N.B. If you do not register for your EORI number(s), you may have increased costs and delays. For example, if HM Revenue and Customs (HMRC) cannot clear your goods you may have to pay storage fees.
Practical advice for exporters from the UK government.
The UK Government's: Selling Overseas: A Guide for Beginners
Guidance for UK companies on how to get ready to export.
This sets out:
Here, we have concentrated on eCommerce and how you can begin exporting without leaving your office. But once you have your “foot in the door” in order to exploit your opportunities to the maximum, you may then indeed want to establish a direct presence in a country. Only by visiting and then establishing yourself in an export market can you demonstrate your commitment to that market – and fully learn the requirements of that market.
In this case, we would suggest that you consider (at least initially) appointing an agent or distributor. They know the market and have contacts with the end-users. As your representatives in the market, they develop and send you sales orders, arrange for payment, prepare required import documents, and clear the delivered goods through customs. Many are equipped to stock, install and service the goods.
You can search for possible candidates in the resources listed in the Commercial Contacts and UK Support sections of the relevant Country Profile and\or using the Kompass Directory).
If you do decide to go down this road, please take special care to appoint suitable overseas agents and distributors. Some may already represent your competitors, or be so busy they cannot do justice to your products. They may lack the qualifications and/or capabilities claimed, such as the ability to stock, install and service your goods.
A final caveat: Before signing any agreement, you should take legal advice See: Foreign Legal Advice.