Wednesday, December 10, 2008

Identifying Products For Export

What to export ? What sells well in international market ? How to select products for export ? These are questions uppermost in the mind of every budding exporter. Let us examine various options and a practical way of selecting a product basket.

There are products that sell more than others in international market and it's not very difficult to find them from various market research tools. However, such products will invariably have more sellers and consequently more competition and less margin. On the other hand - a niche product may have less competition and higher margin - but there will be far less buyers.

A Practical Approach in Product Selection

Fact of the matter is - all products sell, though in varying degrees and there are positive as well as flip sides in whatever decision you take - popular or niche product.

So, instead of approaching the product selection process from demand side - it is far more practical to look at supply side. Ask yourself - what can you supply. What are your strengths ? How close are you to supply sources. Once you take a stock of your capabilities - evaluate and prioritize available options.

Key Factors in Product Selection
  • The product should be manufactured or sourced with consistent standard quality, comparable to your competitors. ISO or equivalent certification helps.

  • It should be available in sufficient quantity. If possible, avoid products which are monopoly of one or few suppliers. If you are the manufacturer - make sure sufficient capacity is available in-house or you have the wherewithal to outsource it at short notice. Timely supply is a key success factor in export business.

  • It is competitively priced. The price should not fluctuate often - threatening profitability of your export venture.

  • Regulatory aspect of export. Check Govt policy - if there is any restriction in its export. Here's a good source for export import policy and hand book of procedure for indian exporters.

  • Status of various Govt incentives - such as duty drawback, tax incentives,DEPB etc.

  • Import regulation in overseas markets, specially tariff and non-tariff barriers. Though some major non-tariff barriers such as textile quota has been abolished-quite a few tariff and non-tariff barriers exist in European Union and other regions. If your product attracts higher duty in target country - demand obviously falls.

  • Registration/Special provision for your products in importing country.This is specially applicable for processed food and beverages, drugs and chemicals. For example - one needs FDA approval for exporting drugs and pharmaceuticals to North American market.

  • Seasonal vagaries of selected products. Some products sell in Summer,others in Winter. Some products may sell only during Christmas. Keep in mind seasonal aspect of your product, if there is any, and lead time required to reach target market.

  • After Sales Service. If exported product needs after-sales service, you should open service centre beforehand or arrange distributor/agent who can provide servicing facility. It is not advisable to export a product that requires after sales service, in case you lack the technical and financial ability to provide it.

  • Packaging and labeling requirements. Keep in mind special requirements of perishable products like processed food.

  • Mode of transport, logistics requirements. Special care is required for certain products which may be bulky or fragile or hazardous or perishable or of some such feature.

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Retail Chains and Future of Business to Business (B2B) Trade in India

Govt of India has decided to allow 51 percent FDI in retail chains. This will certainly make the sector more attractive to foreign retailers who want a controlling stake in their Indian ventures. Retailers who are comfortable with ownership rather than franchises may look at the Indian market with greater interest.

Entry of large foreign retail chains like Wal-Mart will have profound effect not just on small retailers and Indian retail chains but also on business to business (b2b) trades Introduction of b2b cash-and-carry outlets by Wal-Mart, Metro and possibly other retailers will bring significant changes in large and fragmented Indian supply chain. Middlemen like wholesalers and stockiest will increasingly be under pressure. Where does small and medium manufacturers/exporters stand in this changing scenario ?

What is Cash-and-Carry Scheme ?

Targeted at and open only to business customers - cash and carry scheme focuses on small-wholesale customers who buy in bulk and pay in cash. Unlike hypermarkets where any consumer can walk-in and buy goods, cash-and-carry outlets allow only authenticated bulk buyers to transact business. Medium-sized businesses such as retail stores, hotels, restaurants, caterers, exporters etc can buy from cash-and-carry outlets at prices much cheaper than market rate.

In its original form, owners of cash and carry outlets (i.e. large retail chains) buy from producers directly at very high volume, dispensing with middlemen like wholesalers and stockiest. They also establish their own brands - asking producers to manufacture as per their product and packaging specifications. Volume purchase and removal of middlemen result in substantial cost reduction - a part of which is passed on to b2b customers. So, b2b customers get products of assured quality throughout the year at less than market price.

How Does Cash-and-Carry Outlets Affect your Business ?

Large scale introduction of Cash-and-Carry outlets will definitely affect and influence various players in Indian b2b supply chain. While it may prove to be a boon for business buyers, manufacturers and producers such as small-scale units and agricultural producers' cooperatives which are not big or savvy enough to be able to dictate terms to established supply chains - it may adversely affect wholesalers and other middlemen.

De-layering of Indian distribution system may pose threat to middlemen, many of whom may be rendered redundant in the supply chain. Increase in competition and cost cutting will bring more efficiency in the market place - benefiting businesses.

Where does Small Scale Manufacturers and Exporters Stand ?

Though its too early to predict possible changes - large retail chains may bring new opportunities for Indian manufacturers and exporters While small scale manufacturers may enter into collaboration with retails chains - allowing them the chance to join a modern procurement chain that thrives on efficient suppliers, it may have interesting influence on Indian exporters.

Fragmented and largely un-organized sourcing channels pose a formidable challenge to small and medium exporters in Indian sub continent. Some of the major hurdles in any export transaction are - lack of assured and uniform quality standard, uncertainty about round the year availability and wide fluctuation in market price. Exporters lose lucrative overseas orders because of deficiency in supply chains - factors completely out of their control. Organized supply chains such as Cash-and-Carry outlets may bring new opportunities for small business owners.


Exporters sourcing from organized channels such as Cash-and-Carry outlets will benefit from more predictability in business, reducing inventory levels and competitive price. The resultant cost benefit, if passed on to buyers, can make Indian exports that much competitive

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Frauds in Import Export Business - Time to Exercise more Caution

Global economic meltdown has severely strained companies engaged in export import business. Absence of buyers from market is driving many exporters to accept export orders which they otherwise would have declined for lack of prudential norms.

Ironically, this is the time to exercise more caution as fraudsters may exploit present desperation in market to target more exporters with seemingly lucrative deals.

Exporters should be very cautious about certain geographical regions which have become a favorite destination for fraudsters and con artists.

Some may find it sweeping generalization or even unfair treatment - but the fact remains that there is no sign of a decline in scam proposals even after wide publication of Nigerian and other scams.

Worse, the fraudster population seem to be growing everyday with newer and more daring con games. Victims have nowhere to go as there is no law court or policing authority against these fraudsters.

Exporters and importers should be careful of various seemingly lucrative proposals coming from certain regions and countries such as Nigeria, Benin, Togo, Cote' D Ivory etc. and exercise enough caution.

We document here a few scams. Some of these are specific to certain geographic regions - others more universal.

Nigerian Money Offer (419 scam)

This is by far the most popular one - where Nigerian businessman, Bank Manager, Govt Bureaucrat or just about anybody offers huge sums for small help in siphoning money out of their country. We have written many articles on this scam (also called Nigerian 419 scam). One may get an exhaustive list of scams and gain more information on suspect regions at this b2b portal for Indian exporters

Nigerian Oil Fraud (Bony Crude)

Bonny Light oil is a grade of crude oil produced in the Bonny region of Nigeria. Fraudsters present lucrative and legitimate looking offer for this oil. These self-declared oil traders offer to sell as much as 1,000,000 barrels of Bonny Light oil at below market rates. In many cases, they are able to present legitimate trade and shipping documents, acknowledging the seller's oil allocation rights. Buyers who accept these trades are persuaded to provide significant cash fees up front. The charges are normally in the region of $50,000. Fraudsters claim the charges are for anything from agency fees to reassignment charges.

ICC's International Maritime Bureau (IMB) has found that a variety of false supporting documents are being used, all of which allegedly feature the corporate logos of legitimate international companies,such as the Nigerian National Petroleum Corporation.

In the majority of cases seen by the IMB, this forged paperwork includes the following documents:

  • Joint Venture Contract Agreement for the Sale and Purchase of Nigerian Crude Oil

  • Charter Party; MOU between Nigerian sellers and named buyer

  • Master's Receipt of Documents

  • Certificate of Authenticity

  • Joint Venture Bill of Lading

  • Master's Receipt for Samples

  • Cargo Manifest

  • NNPC Bonny Terminal Certificate of Quantity

  • Certificate of Quality.

Often these meticulously forged documents name vessels that actually loaded oil cargoes at Bonny. The vessel's stamp and master's name -though not the signature - are often also correct. The genuine cargo, however, is consigned to a completely different party.

Illegal Immigrants Disguised as Buyers or Agents

Fraudsters run illegal immigration racket in the disguise of export import company. They offer to send buyers or agents for negotiation, inspection of manufacturing facility etc. and request official invitation letter from exporter/ manufacturer. Visa, obtained by producing these genuine papers, is then used to send illegal job-seekers.

When in doubt, please check the age and position of the visitor. Very young or low ranking buyers should arouse suspicion. If you receive request for groups of buyers - please check the credibility of the company thoroughly.

Un-Collectable Payment

If you receive Letter of Credit (L/c) from an unknown local bank,be sure to check the bank's credibility. If there are any doubts about its financial condition, it is advisable to request confirmation of the L/C from a reliable bank.

Refusing payment for Remaining Shipment

This is a common trick where the fraudster gains trust of exporter in first part of a deal by making immediate payment by T/T. However, he refuses to pay for second part of the shipment. When working on a T/T basis, there is very little an exporter can do if importer refuses to pay. It pays to remain alert - one successful deal should not change all equations.

Avoid Payment through Changed Identity

Some importers deliberately shut down their existing companies and set up new ones in order to avoid payment, leaving exporters unable to collect money. If your partner suddenly changes his or her company's name and places a big order on credit, it is wise to check the company's legal status on the export contract and shipping documents.

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Role of Web-Site in Export Marketing

Exporters, aspiring to use Internet for overseas marketing, must recognize certain basic facts about Internet and orient their marketing drive accordingly. Principles of traditional marketing, though still applies to Internet, needs to be supplemented with intrinsic features of the Web such as its anonymous nature, absence of geographic borders and all round competition. What's considered a cozy niche product in your domestic market, ceases to remain so when exposed to world wide web.

Having good product and competitive price is simply not enough for success in such an environment - your business should also be able to inspire sufficient confidence in customer's mind. In the anonymous world of Internet, where buyer and seller are unlikely to meet each other physically - a professional web-presence goes a long way in establishing your credibility and attract buyers from all over the world.

Without a professional web-presence, you are ill-equipped to survive and grow in overseas markets. Going to battle field without arming yourself sufficiently brings failure and disaster. Imagine how you are going to impress buyers when your competitors with professional web-presence and business e-mail are in a far better position to establish their credibility and communicate in far superior way compared to your free e-mail.Successful Indian exporters realized the virtue of professional web-sites and equipped themselves with some kind of web-presence early on.If you are still not convinced - here's some compelling reasons for your consideration:

Establish Your Identity - Build Trust

Trust is the bedrock of any business transaction. In the anonymous world of Internet where buyer and seller seldom meet face to face -establishing one's identity is the first step towards building mutual trust and confidence. A professionally designed web-site inspires far more confidence than an anonymous (and mostly free) e-mail. With a web-site - you can provide detail information about your company including names, numbers, addresses, and directions for interested customers to get in touch as well as cross check. Besides, one can verify brief details like name, contact address, tel etc. from domain register (WHOIS) or web-host.

Attract Customers from All Over the World

The Internet has no geographic limit - reaching a customer in Canada requires no more effort or resources than reaching a customer in Chile or China. Use this wonderful opportunity to showcase your products to worldwide audience, attract customers from all over the world. Your Internet presence exposes you to far greater number of potential customers - local, regional, nationwide, or worldwide.

What's more - information about your company and product remains available 24 hours a day, 7 days a week. No matter what time of day/night or which corner of globe - anyone can find basic information about your business, or products and get in touch with you. Web-site is not only your global show-case but it remains open 24-hours without your physical presence.

It is Superior - Yet Inexpensive

Web-site is not only a superior way of promoting products, it is far more inexpensive and effective than print or CD publication. Let us compare it with a traditional way of promotion like printed catalog.

Cost of printing a multi-page colorful catalog on quality paper is substantial. On top of that - there's postage and packing costs. Above all - there is a time loss in dispatching printed catalog that may result in opportunity loss as buyer may decide to buy from someone else by the time the catalog arrives. Finally, one can not change content of printed catalog - they are dead as soon as published.

Compare this with web-site - one can have a reasonably good web-site at fraction of cost of printing a 25 page colorful catalog. There's no postage or packing cost and access is instantaneous, so no time or opportunity loss. Maintenance of content is a breeze as you may add new products or update existing ones as many times as you like.

Apart from economy there are many other benefits like business e-mail (, live chat, auto responders, payment gateway etc. that go with web-sites.

Customer Feedback

Unlike most forms of advertising or promotional material, the web is not a one way street - it is interactive. Your web-site facilitates two way interaction between you and your customer. Customers' Comments, suggestions, feedback etc. are invaluable input to improve your business and customer relations.

Help Your Customer to Locate You

Directories and yellow pages help us to locate suitable vendors. There are enough businesses, organizations, and people now on the web that many people use it as one of their first sources for information. How can you get listed in search directories to be accessible by the public when you don't even have a web page?

Think of the internet as a huge Yellow Pages with no limitation on the size of your advertisement. By investing in a web-site, you are enlisting your company in this global yellow pages and helping your customer to locate you conveniently.

Build Professional Image

A professionally designed web-site is a statement about your company, an excellent communication medium to convey your image. Use this tool to build a positive image about your company that inspires confidence in your customer. Information is a powerful marketing tool. Educate your customer with detail information about why and how they can benefit from using your products and services (whether you want to sell online or not).


Web-sites have emerged as an essential tool for those who wish to use Internet for marketing. Its effective use may decide the extent of your future success. If you have a web-site, explore how to make better use of it. If you do not have one - go for it right away.

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Trade Leads - How To Use Them Profitably

Trade leads from Internet is an important aspect of international business and considered an inexpensive way of getting new buyers and consequently export orders. here are many sources onb2b trade leads which readers can easily find through search engines. However, for effective and profitable use of these trade leads, we need to understand who places these leads, why and how to use them for expanding international business.

How Reliable are Trade Leads?

It is important to distinguish between trade lead and export order. Trade leads or 'RFQ' (Request For Quote) are enquirers from unknown buyers published in public bulletin boards or b2b marketplaces r sent directly to suppliers. These are certainly not export orders - though some of these could be converted into firm order after successful negotiation. At the same time, many of these could be of questionable value.So, how do we identify trade leads from serious buyers ? Let us look at these trade leads critically and find out ways of dealing with them profitably.

There are many kinds of trade leads like business opportunities, foreign government tenders etc. For this discussion, we take the most prevalent type of offers in WWW - message placed by private company or individuals to buy or sell a specific product/service within a reasonable period of time.

Who Places Trade Leads ?

Foreign distributors know exactly where to go when they want to buy something for re-sale. Normally, they do not need to post trade leads for sourcing.

Then why such proliferation of trade leads ? How come there are so many thousands of trade leads populating hundreds of trade bulletin boards ? To answer this question - we need to understand effect of Internet on conventional distribution channels.

The advent of Internet has dealt a serious blow to traditional distribution channels, specially in overseas trade. In more specific terms, middlemen are in serious danger of losing substantial business. Earlier, foreign buyers such as retailers had little option but to buy from cal distributors who usually imported the stuff in bulk and supplied to retailers in adjoining areas. For retailers, importing in small quantity from unknown sources was difficult and uneconomic.

Internet has helped buyers and sellers from different countries to interact freely. Retailers can now reach sellers in distant countries, see their products in websites, negotiate a favorable price and buy in small quantity. There is no dearth of exporters who are prepared to sell in small quantity at regular intervals.

This direct buying by retailers at a favorable price, in turn puts pressure in local market and distributors feel hard-pressed to find new suppliers, new products and most important lower price. So, what was once a rather lengthy distribution chain of seller to exporter to importer to wholesaler to buyer, is increasingly losing middle players. It is true that large part of international trade is still dominated by traditional distribution channel, but the trend is towards marginalization of middle men, facilitated by an open medium like Internet.

Then Why this Skepticism ?

Like most other areas in life, reality normally lies in shades of grey rather than in black and white. So, along with serious buyers looking for serious sellers there are sundry others ranging from window shoppers, arm-chair international businessmen to downright fraudsters and conman populating the market. As a result, one can find trade leads posted for variety of reasons such as:

  1. Self Advertisement - pure and simple product promotion (seller in the garb of buyer

  2. Find market price (usually to put pressure on existing supplier)

  3. Find out about competitors

  4. Locate alternate or additional suppliers

  5. Find suppliers for new product

  6. Begin negotiation for a later purchase
The Challenge - How to Separate Wheat from Chaff

There is no specific rules - but common sense, observation, care and imagination can help you locate potential leads and manage your time and resources that much better. Following are some tips on this regard based on my experience since 1997:

Find Reliable and Exclusive Sources

If you talk to people who actually sell in foreign markets, they may privately disclose that their best leads are those that they generate themselves, usually by direct mail. It is far easier to cultivate a trade lead into business when they come from exclusive source, not available to million others or displayed in free bulletin boards. The options are clear-either invest in research to locate buyers or take professional help. The days of free commercial information from Internet are over.

Keep a Watch for Competitors

Look for keywords that might indicate the intention - if the guy is gathering information and has no intention to buy. Be suspicious of companies who ask for detailed information about manufacturers' prices but do not identify themselves distributors looking for new lines.

Be Careful of Large Orders

Be cautious of companies who post trade leads for large orders but can not be located easily in company or industry directories. These are often small companies who issue 'RFQ' (request for quote) for large quantities in order to get a lower price. Ultimately, such companies order smaller quantities to 'test' the supplier, making the deal uneconomic for seller.

Observe the Language

Do not be unduly influenced by flowery language or very specific requirement.Do not prejudge a lead - exercise normal precautions necessary in international business.

Check the Market

If you are not a manufacturer and outsource products - be careful of locked market activities. This trade lead will specify a particular product. Your company contacts the manufacturer, only to find out that the manufacturer already has representation in that country and will not sell directly to you for resale as they want to protect their distributor relationship.

Letter of Intent ?

Generally Ignore trade leads offering "letter of intent" or "letter of interest".

Jack of all Trades ?

Generally ignore companies who claim to deal in all commodities traded on world markets such as coffee, sugar, urea, oil and gold. Normally, these are very large deals handled by well established companies in well established markets. Such well established companies usually do not place trade leads in Internet.

Do not Believe in Overnight Success

Be cautious of international business scams designed to separate you from your money. Be suspicious of anybody who prefers phone conversations to written documents. Do not get sucked into fantastic business opportunities which promise to yield huge profits with no risk. Learn which countries and areas have a reputation for spawning international business fraud. Never respond to business opportunities which require you to make wire transfers in advance for receiving goods or services.

Understand the Virtue of Patience

Understand that most foreign distributors do not make fast buying decisions. It is not at all unusual for an initial order to require 9-18 months from the time of the initial solicitation depending upon the cost of the item.

Develop Relationship

Instead of treating the leads as 'export order' with a hit or miss attitude use the opportunity to develop lasting relationship. Understand buyers' requirements and offer solution accordingly. Do not indulge in monologue on your products-make it a dialogue on how both the companies can stand to gain from a mutual understanding.