International growth is becoming the key driver of growth for many direct selling companies that have stalled or gone stagnant in the domestic market—international business is increasingly becoming more crucial for survival and growth.
Here are the three How’s and the five questions of How to grow internationally.
HOW SHOULD I GO INTERNATIONAL?
1. Go where your distributors lead you.
According to The World Federation of Direct Selling Associations, 79 percent of global revenue is generated in the top 10 countries (in order): China, United States, Korea, Germany, Japan, Brazil, Mexico, France, Malaysia, Taiwan. Don’t make the mistake of just picking a market because it is big. International success does NOT work like the movie Field of Dreams “If you build it, they will come.” To be successful, you have to have the network—the players on the field must come first.
2. Low initial investment.
Things have drastically changed in the last ten years—it is so much easier to go international! Websites can be quickly tailored to local language, local payment types, local currency and to calculate your international duties and taxes. Every market has personal consumption rules that allow shipments for personal use. Unless you are going to have distributors set up in country stores or hold large inventories, just encourage your distributors to refer their customers to their personal websites. When customers are purchasing from a U.S. entity and the U.S. company complies with the personal import rules, there is no need to register products or set up an entity in the many markets—saving substantial time and money. Companies should consider waiting to go “On the Ground” in the country until they hit a million dollars in sales a month.
3. Do a product regulatory review for the international market(s).
Countries have unique requirements on certain ingredients, potential permits for certain products, and personal import limits. Examples of personal import limits can be 60- or 90-day supply of a given product, a dollar amount value limit on daily shipments and even a dollar amount per month or year. A good strategic shipping partner or licensed broker in a specific shipping market can quickly help you review your products per market and advise you.
“Don’t make the mistake of just picking a market because it is big.”
WHAT QUESTIONS SHOULD BE ASKED?
1. Should we ship DDP (Delivery Duties Paid) or DDU (Delivery Duties Unpaid)?
It may seem to be a simple question, but there are a number of factors. Your product may only clear customs into some markets if it is DDU. In some countries, consumers are very used to paying duties when the product arrives. Still, in others, they are not at all. In many international markets when products are shipped DDU, it is hit and miss on which packages get stopped or not for paying duties and taxes—sometimes 80+ percent go into the market without customers having to pay. Either way, you will want to inform the customer of the duties and taxes—whether included in the check-out price or give them the amount they should anticipate paying upon arrival.
“International is the key to growth and survival in this new economy—it is easier than it has ever been, but you need to make sure you ask the right questions.
2. How do I pay my distributors in a country?
There are a number of ways to pay distributors in international markets. You will want to find a good partner that understands the direct selling industry that can transfer money directly to your distributor’s bank account or to a personal payment card in the market.
3. How do I accept payments?
You will want to find a credit card processor that will enable you to authorize in local currency. Generally, you will need an international entity to authorize and settle in an international market, but most processors can allow you to authorize in the local currency and then settle back into USD. Consider authorizing in local currency but settling back to USD to start—but you need to make sure you understand not only the interchange fees but the foreign exchange and cross-board fees that will apply to your transactions. You will also want to find a partner that can offer local payment types—credit cards are not very popular or common in some international markets. A good payment processor will be able to tell you what international payment types make sense in each market and have the fraud tools to help you mitigate risk. There are even some solutions now for international distributors to directly take in-person and social media payments from customers leveraging your corporate payment account rates and payment solutions.
4. Should I use an express or economy shipping solution?
This is also a question that may not be as simple as it sounds. Some of your products many not clear customs through an express shipping solution but may clear through an economy solution. There are solutions that range from 1-2 days delivery to international markets to sometimes a month or more. Above 8-10 days seems too long, and there are a number of economy solutions that can hit that window. Generally, an economy shipping solution is less expensive, but not always. Each country and market is different. You will want to make sure you leverage the experience and expertise of a partner that knows what they are doing, and that is experienced with your type of products.
5. How do I minimize my duties and taxes?
Many countries and markets have a tax de minimis. Meaning that if you can keep your shipment below a certain dollar amount, you will pay no duties or taxes—it can be substantial savings to send smaller shipments or to split up your shipments. You will also want an experienced partner to help you with your declared values and harmonization codes (some products may fit into different classifications) as to minimize your tax burden. An experienced partner can also help you with free trade agreements or tax clawbacks.
The bottom line is that international is the key to growth and survival in this new economy—it is easier than it has ever been, but you need to make sure you ask the right questions and have the right expertise to help you. DSN
Michael McClellan leads Global Access’ business development efforts in the direct sales industry providing customized solutions for clients that simplify the complexities cross-border commerce and are easily integrated into direct sellers’ unique selling processes and operations.