The Internet has made the world a true global marketplace, but it is still easy for web retailers and wholesalers to forget what lies beyond their domestic borders. Large web resellers are equipped with resources and overseas subsidiaries and partners, so that exploring foreign markets is a natural progression, but what about small web companies? How can they compete in international markets, and what are the hot regions? This story examines how small web resellers can jump into foreign markets, and what pitfalls to avoid.
In a general sense, foreign markets are not entirely different than in the U.S.: a visitor finds a company's website and places an order. Companies such as UPS and DHL ship overseas daily, so sending products is not a problem.
Issues can arise with payments, fraud, customs and language barriers, among other things. However, based on forecasts, web resellers should strongly consider adopting a strategy to expand or begin taking overseas orders.
According to estimates by Internet Retailer magazine, JupiterResearch and Forrester Research, online sales by U.S. companies to European customers was a shade under $100 million in 2006, but is expected to skyrocket to more than $200 billion within three years, as an increasing number of Europeans gain Internet access. The European currency, the Euro, remains strong, and web security issues are being addressed.
Lisa Middleton, the founder of IgglyBiggly.com, a casual clothing company that sells brightly colored flip-flops in a clear plastic tote bag, said one of the fastest growing international markets is China. The Chinese government has slowly relaxed its grip on its citizens, which has helped to increase the middle and upper middle classes. "I have read where women make up a significant portion of the Chinese online market, which is good for us," Middleton said.
Ecommerce research company, eMarketer, places the United Kingdom as the number one foreign market for U.S. online resellers, followed by Japan, Germany, Australia and France. The researcher agreed with Middleton that the Asian markets, especially China and Japan, are among the fastest growing. Specific revenue estimates were not available.
To consider partnering with an Asian reseller to help facilitate sales, check out Wholesalecentral.com's new directory of Asian Sources. The listing carries a group of more than 20 product categories that contain information on companies that deal with specific items. The link is located on Wholesalecentral.com's home page, at the bottom of the main window that shows wholesale suppliers by category. In addition, Wholesalecentral.com has a help center that not only offers resources for buying merchandise directly from Asia, but also information on international trade laws and other related issues. Visitors can access the help center through the Asian Sources page.
Playing It Safe
Donny Lowy, owner of Closeout Explosion, estimates that 10 percent of his company's revenue is derived from sales to foreign markets. The New York based company specializes in selling urban apparel, but also sells comic books, DVDs, greeting cards and collectibles. He said hip-hop clothing is the most sought after merchandise by resellers in overseas markets. "All over the world, name brands sell because customers recognize them and trust their quality," Lowy said, adding that U.S. based online resellers often receive the same level of trust from overseas resellers, because American companies themselves offer, "products that have a great reputation for high quality."
In addition to running his company's website at Closeoutexplosion.com, Lowy is considered an expert author by Ezinearticles.com, where he has written more than 200 articles on various aspects of online selling, particularly on auction websites such as eBay. Lowy preaches that online companies, especially small ones, use a lot of caution when exploring foreign markets.
He said first and foremost, try to speak directly with an overseas customer, because a conversation can help give a seller a gut feeling about the buyer. Even one short conversation can leave enough of an impression about the trustworthiness of a buyer. It may not stop a transaction from going south, but it can help in easing the seller's mind; but if that impression is at all negative, consider not doing business with them, Lowy said.
Instances of fraud among foreign customers is high because criminals know that tracking them down will be difficult at best, but more likely, impossible. For example, Jacpa Ceramics, a wholesaler of candles and incense, simply will not accept credit card orders from outside the U.S., because as president Jack Dollen said, such orders cannot be easily verified. According to the National Consumers League and published reports, several international markets lead the pack with high volumes of fraudulent orders, such as Africa, South America, Eastern Europe and the Middle East.
If a U.S. reseller is confident the foreign business/customer is legitimate, the two parties have to agree on the method of payment, and Lowy recommends avoiding credit card and Pay Pal exchanges because a seller's protection (should the sale go wrong) is limited. He also said online resellers should avoid accepting checks or money orders from foreign customers, because it can take days or weeks for a bank to determine whether the check is legitimate.
International money orders should only be accepted if they are drawn by American Express or directly from a foreign government, Lowy added. His preferred method of payment is a wire transfer, he stated, because, "Once the funds clear into your account, they cannot be revoked." As another layer of protection, use a separate bank account for wire transfers only, and then move the money between that account and the business account, he suggested.
Staying Out of the Game
Not all U.S. online resellers want to play in overseas markets, even if they try to take precautions. Eon Bettencourt knows enough about online sales to foreign markets that he has decided not to pursue them. His self-named clothing manufacturing company was located in South America, where he is from, but he moved it to the U.S. eight years ago, in part because he was running into problems with international sales from the reverse direction. "I was finding that I was not getting paid, primarily by U.S. resellers while I was in South America, so I set up shop here to be able to better handle such situations," he said.
Bettencourt Manufacturing specializes in hospital and medial uniforms and scrubs, but it also sells other clothing items, such as athletic tracksuits, and most scrub sets consisting of a shirt and pants wholesale for about $10 per set. Bettencourt said that he avoids selling to foreign markets. He does sell to large retailers only in Canada and throughout the Caribbean and Americas because of the headaches.
"I just never really knew whether they were good or bad," Bettencourt said of the legitimacy of many overseas customers. "You can try to establish a rapport with foreign customers, but that can take a very long time, years."
He said the only way he would consider dealing with overseas resellers is with bank issued letters of credit, where the foreign customer sets up a legitimate bank authorization. Under the terms of such agreements, a bank would hold the appropriate funds in escrow until the products are placed on a ship, Bettencourt said, before they are released. Banks might charge a fee for the service, often a percentage of the transaction.
The problem, he said, is that foreign customers would always tell him that they did not want to go through the process and expense of setting up letters of credit, nor did they want to go through the hassle of some of the other methods of legitimizing the transaction. Among the other options, Bettencourt said, are obtaining a bank issued insurance policy securing the transaction, which many banks do not even offer; hiring a commission agent to oversee the deal from the foreign side; or contacting the U.S. consulate in that country and asking it to verify a customer's information. That process can take months to resolve because the consulate has to conduct an investigation.
"I cannot begin to count how many phony letters and requests I have received from that Nigerian scam," Bettencourt said. "And now they are moving to other countries in Africa, especially South Africa."
For more information contact:
Bettencourt Manufacturing Inc.
500 Farmers Market Road
Fort Pierce, Florida 34982
75 Broad Street
New York, NY 10004
Jacpa Ceramic Craftsmen & J.C. Crafts
416 South Clare Avenue
Harrison, Michigan 48625
Closeout Explosion Inc.
1375 Coney Island Avenue, #111
Brooklyn, NY 11230
475 Park Avenue South, 4th Floor
New York, NY 10016, USA
400 Technology Square
Cambridge, MA 02139
111 Pickwick Lake Drive
Sheffield, AL 35660
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