Even though trading between foreign countries is complicated, there are now solutions that simplify this process.
Michael Dupont looks like a great customer and falls within the traditional demographic of your customer base. He's in his late forties, owns his house, has two children in high school and has more than $10,000 a year of disposable income. He has a passion for home theater, and his wife has an interest in gardening. There is a good chance you can entice Mr. and Mrs. Dupont to purchase something from your new spring product line.
You have a high average order value, particularly from this demographic, and the products purchased tend to have larger margins. There are 2.7 million similar households. That's just over 20% of the population. Although your data shows that your most profitable customers have things in common with the Duponts, it also shows that your brand pulls nascent demand from different demographic clusters — potentially doubling that to 40%. It seems like a reasonable business growth opportunity.
Now, where is this land? How much ground or water separates my distribution center and these potential customers? What language is spoken there? What is the local currency? Are they protectionists or free traders? I know my product mix would be appealing to the Duponts, but will my prices? How much will it cost to deliver products? Will delivery attract duties or value-added tax? Considering exchange rates, will pricing be more or less attractive? What are the trends in their currency? Will prices rise, decrease, or stay stable over time?
The demand is there — it just depends on the number of hurdles I put in the way of the deal. My product mix will meet customers' needs. It's a high margin line, so even if I have to play with prices, I could stay competitive without sacrificing too much. How much will the Duponts have to pay to have the goods shipped to them? Where do brokerage costs factor in? Are there any potential surprises affecting the Duponts' chance of buying?
Handling Logistics, Exchange Rates
My success depends on three things: consumer prospecting, the cost of logistics, and the exchange rate. Having control of these three factors is integral to providing consumer certainty and service. Not only do you know where things are, but you know what they cost. Let's examine the logistics chain — parcels start at your distribution center, are dressed for an international delivery, and are forwarded to an aggregation facility. Aggregated freight is moved between lands, cleared by customs, and then delivered by the most competitive domestic agent. In parallel, the financial transaction unfolds. Foreign funds are collected from the foreign customer; fulfillment costs (shipping, taxes, duties, etc.) are incurred in potentially other foreign currencies and your domestic costs in domestic currency.
The process seems complicated, and it is. Fortunately, innovation can solve this set of challenges for you. Companies are building software that ties together best-in-class service providers in different lands. Through Web services, each disparate land is exposed to you in a consistent, familiar interface. Extend your company's existing applications to use these Web services, and add the international dimension to your domestic operation. Scale quickly; explore new lands and the trusty Duponts, no matter where they call home.
Many American retailers have expanded their businesses using innovative technology services, such as Canada Post Borderfree (www.borderfree.com) or E4X (www.e4x.com). Through a suite of technology and logistics solutions and a seamless partnership, Borderfree and E4X allow Canadian consumers to purchase American goods by replicating the domestic consumer shopping experience. Leveraging market expertise and a suite of Web services that combine marketing, e-commerce, and fulfillment services emerging, selling effectively into international markets is closer than you may think.