If you are exporting your products, have you thought about how they will be sold once the get to their destination country? There are three main ways of selling exported products:
(i) Direct to Companies
This involves selling directly to companies that wish to import your products, which will then use them, or sell them to the general public.
E.g.: Company X exports 100 computers at £150 each directly to Shop A; Shop B; and Shop C in France, who then sells them to the public at (the equivalent of) £200.
Direct selling allows you good control over where your products are sold; however, it relies on you having enough staff to deal with both UK and foreign orders. As a small business, the costs of employing more staff may limit the income you can gain from exporting; although if you are only dealing with small numbers of orders (I.e.: One big order not four little orders) then direct sales could prove quite cost effective.
The other drawback of direct selling is that the marketing of your product must all be carried out from the UK, making customer relations more difficult.
(ii) Distributor
This involves exporting your products to a distributor, who then sells and delivers to the shops.
E.g.: Company X sells 300 computers to Distributor Y at £140 each. Distributor Y then sells 100 computers at £160 each to Shops A, B, and C, who sell them to the public at £200 each.
Using a distributor allows you to sell to a range of buyers when you export; there is no need to spend on extra employees to deal with individual sales. The main drawback of using a distributor is that they will take a percentage of each products cost, meaning that the profit you make from each item is lower.
Using a distributor is common for smaller businesses that do not have the capacity to sell in more than one country. The lower profit costs are often helped by the improved sales that an effective distributor can bring, although the vast majority of the marketing will still be left to you.
(iii) Country Expansion
This involves opening a branch or company division in the country you are exporting to. This allows you to deal with all the sales and marketing directly.
E.g.: Company X opens a division in France (e.g.: Company X France) which then sells 100 computers each directly to Shops A, B, and C at (the equivalent of)£150 each.
Expanding into a country will allow you to keep more of the profit than you would get through a distributor, and allows you total control over the sales and marketing of your product.
However, expansion is hugely expensive, and is a huge risk to any company. The vast majority of small companies would not be able to sell enough goods to make even a small country expansion cost effective; and are better off using direct sales or a distributor.
(iv) Licensing
This involves the export of your product to a licensee, who then sells and markets the product, in return for a large share of the profits. This may involve you exporting the parts, and the licensee constructing the product and packaging in the specific country.
E.g.: Company X sells 300 computers to Company Z at £120 each. Company Z then pays for the marketing of the product, and sells 100 units at (the equivalent of) £150 each to Shops A, B, and C.
The main drawback of licensing is that you are left with little control over how your product is marketed or sold. You make less money off each unit, but you will also save on the costs of marketing and expanding abroad.
Licensing is usually only possible where the product is unique or manufactured directly by the company; products that are bought in cannot usually be licensed out.
Small businesses are not generally likely to use licensing for exports, as the sales are not usually big enough to attract licensees. The exception to this is with new inventions or products, where the small business or individual that creates the product cannot afford the costs of production, and licenses it out to another company (or a separate company in each country).
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