So you’ve found an international customer (whether that’s an importer, distributor, agent, retailer etc), you’ve successfully negotiated the deal with a seemingly sizeable enough profit margin (yippee!) and now it’s just a case of getting the order processed and out of the door.
Simply enough it seems…Until your customer starts asking for translated labels to be stuck on EACH individual product, translated and printed marketing materials to support their promotion, expensive delivery options, payment via a letter of credit and a list of legalised documents you’ve never heard of that will cost you hundreds of pounds a pop…
Suddenly the profit is as good as gone and the hard work navigating these unfamiliar but often necessary requirements makes selling to that new export customer a real (and expensive!) headache. However this doesn’t have to be the case and some forward planning on your behalf can put you in the best possible position to avoid or anticipate these additional aspects of exporting. So here are Bolst Global’s three top tips to do so:
1. Check all requirements as early in the sales process as possible
When negotiating on an export deal it is easy to focus just on the actual sales price you are giving your customer and the delivery responsibilities. For example will the goods be collected from your warehouse, be built in to the sales price if they are asking for a delivered price, or shown as an additional transport cost on the Proforma invoice? Of course this is important to ask your customer and relatively easy to factor in appropriately.
Where companies do fall down though is in not considering any labelling or translation costs to their bottom line. Same for export documents. All of which are often legally required and therefore must be adhered to- unless you want a problem for your customer as the goods arrive at the border for clearance (which can turn into a far bigger nightmare from my own experiences I can tell you!)
So have some upfront conversations with your customer about their labelling/translation/document needs as soon as you can and then account for them, ideally before giving any pricing so that these costs can be factored in to the overall price you offer – whether that’s build in to the standard unit price or as explicit added costs that is part of the negotiated deal.
Payment terms also have an impact on your bottom line and evidently your cash flow too, particularly if you are a small business. In an ideal scenario you should always ask for payment upfront via Proforma and most export customers are happy to do this, especially at the beginning of the relationship to build trust and confidence. However depending on the size of the order and country requirements or customer preferences then some customers may insist on staggered payment terms (i.e. 50% upfront, 50% before release of bill of lading when the goods are being shipped) or even the dreaded letter of credit where bank charges are unavoidable not to mention the cost of the admin cost needed to see through the transaction via this payment method. Be aware of this.
2. Don’t be afraid to push some of the responsibilities onto your customer
One of the best ways in which you can reduce down unanticipated hidden costs when they cannot be avoided is to see how far your customer is willing to share them with you.
This is also important as it helps to distinguish what a customer may wish to have as part of a deal as opposed to a non negotiable legal requirement.
So if labelling in their local language is a must then can they assist you with the translation? And/or the additional cost of the labour for the labelling? What about paying for the printed translated packaging upfront for their order and then offsetting this cost with each subsequent order?
If they need marketing materials then again can they do the translation? And how about the printing of the materials locally, if you provide the artwork?
When it comes to the export documents then can they accept an EC certificate of origin instead an Arab one? (It’s half the price) Or you split the costs of the legalisation between you both- either in the first or subsequent orders?
Do ask the questions here to see what is possible! They may be the customer but that doesn’t mean they aren’t willing to assist, particularly more often than not when you are working on developing a partnership.
3. Renegotiate the deal if you need to!
For many companies I see a fear in doing this (aren’t we just too polite sometimes?) because they do not to jeopardise the sale or come across as amateur in their handling of international customers.
But if after weighing up all of these additional costs this piece of business and any subsequent deals are no longer favourable for you and means you won’t be able to give the customer the necessary support and time that they deserve then the best thing you can do for everyone involved is go back to the table and renegotiate the price and package that is viable for all parties.
It isn’t easy but from my own experience I can say I’ve gained more respect for it than lost customers. It can be done in a number of ways:
- Increase the unit price
- Reduce down any free of charge stock originally offered
- Asking the customer to order larger quantities than agreed to withstand these hidden costs
- Change the Incoterms (ie. The shipment terms so that they can pick it up instead if you delivering)
- Add the document fees to the deal
In essence there are many possibilities here and it boils down to understanding the customer’s needs, their way of doing business and having the confidence to ask – you might be surprised at what you can manage to agree with them!
Thanks for reading and happy exporting everyone!
For any further export support or advice in relation to any export customers you have or are looking to find then please contact us below: