Exchange rates can have a considerable impact on both exporters and importers particularly if they are small and in the formative period.
Many would be importers locate an interesting product from a low production cost country and wish to create a business around it.
Before importing your first shipment you should
Check the market for competitive products
Investigate their pricing at as many levels as possible. (Eg landed cost – price to wholesaler – price to consumer and all the margins to each stage of distribution.
Gain knowledge of how the products are distributed (eg direct from the importer or via a manufactures representative/wholesaler.
Investigate your competitors policies to both the wholesaler and retailer ( eg what is their credit period – what product guarantees do they offer – do they have sales incentives for the wholesaler or retailer over and above their standard margin – what are their delivery times – do they have stocks in every state – what are their promotional activities – do they advertise or not – if using a wholesaler what incentive plans are used for motivating their sale force
Do you have a better or possibly cheaper product? Be very honest when answering this question because if you let enthusiasm cloud your judgment you could pay a very heavy financial penalty.
How good is your agreement with your supplier – are you to be the sole agent for your country – what minimum purchases do you have to make in a 12 month period – how long is the agreement for – what penalty clauses could apply to you – what guarantees do they offer re the quality and consistency of their products –
Once you are happy that you have completed your homework to the best of your ability and you still feel that your business model is suitable then test the market with your first shipment – supply only to a limited area where you personally can visit every retailer that stocks your product range and where you can gain as much feed back from their sales staff and their customers. This information should then be compared with your assumptions in your business model. If changes are required and you can make them while still maintaining your profit targets then implement then and again seek feed back. Once the retail outlet owner and his staff are happy with recommending/promoting you product then it is time to develop your role out plan. One State or even a part of a State at a time allows you to ensure that you don’t create a situation where you are unable to keep up with the demand, meet your promises to outlets or have to borrow too much money.
What has been the history of the exchange rates between the two countries- has it been consistent – are there any anticipated changes either positive or negative – what negative impact could your business model withstand – what monetary reserves would you have to cover you during an adverse period –
A business model totally reliant on imports has a far greater risk factor than if you also have a local activity which is based on a local product/service to protect your income during adverse times. Sometimes a joint venture with a company that is locally based can be to the advantage of both participants.
There are no guarantees in business however the more complete and detailed your research the greater the chance of succeeding by eliminating or anticipating the many challenges you will face.
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