Before investing large sums of money in a new business, profit-minded importers work long and hard to find the right products for the right audiences at the right prices.
Prospective importers must first gain a thorough understanding of the imported goods to be sold. Just as important is a detailed study of the financial realities of importing those goods. This often depends on the audience to which the imported goods will be marketed. Another key factor is the business environment in which the proposed importing company must operate.
Product Reasons to Import
Successful importers search for products with global reputations for quality like Germany’s finely engineered products including BMW luxury cars and Porsche racing cars. Other importers focus on raw materials that are cheaper on international markets sometimes due to climate, which is why Russian demand for South African grapes continues to rise. Specialists prefer to import exclusive products like Canadian ice wine as a way to dominate share for targeted products in their respective home markets.
Below is a checklist of reasons for importing based on the advantages of the targeted goods.
- Acquire goods in constant demand due to their high quality.
- Raw materials cheaper internationally than in home market.
- Exclusive products enable importers to dominate market share.
- Replace obsolete goods.
- Take advantage of technical advances.
- Develop new lines of import.
Imported DVD discs have made eight-track tapes, audio cassettes and VHS tapes virtually obsolete. Blue tooth headsets from Taiwan are example of technically advanced wireless products that encourage hands-free driving. Cal Systems total engineering solutions has expanded its offerings to more than 20 process control and automation lines.
Financial Reasons to Import
When the US dollar depreciates, American importers have to pay more dollars to buy Middle Eastern oil. However, imports in general garner higher profit margins than exports because exporters have operating costs including manufacturing and production expenses.
The following summarizes financial planning factors for importers to consider.
- Strong importing nation currency lowers import costs
- Higher profit margins for importing over exporting
- Imported products are more attractive as domestic production costs rise
- Exporters offer special trade discounts to start import business.
Even in the midst of the current recession, General Motors has announced plans to import automobiles from China. This is due to the high costs of producing North American vehicles. Examples of special trade discounts include an Irish exporter of home exercise products who offers volume discounts and will waive shipping costs for importers in new territories. Governments can also offer financial incentives that benefit importers either directly or indirectly. Certain exporting countries encourage lower shipping rates for their exporters. As a result, importers in client nations realize lower costs.
To encourage the import of raw materials and components not easily accessible in the home market, local Custom authorities may establish a remission program that reduces or eliminates tariffs on those inputs if used to manufacture final products. Governments in India, Japan and Thailand offer exporters financial incentives known as drawbacks that can lower the cost of exported products. These savings are then passed on as lower purchase prices for the importers.
Marketing Reasons to Import
Ideally, the home market should have healthy economic indicators including low interest rates, low inflation and high employment so that people have the cash to whatever goods the importer decides to sell. Specialized niche services like refining raw diamonds have made many Indian entrepreneurs wealthy. More recently, market demand for imported premium beers has steadily grown over time. Importers also bring in ethnic goods ranging from Ethiopian spices to Filipino buns to satisfy immigrant market demand.
The following list can be used to evaluate an importing opportunity from a marketing perspective.
- Positive economic indicators in home market encourage purchases of imports.
- Provide specialized services in importers market.
- Demand for an imported product has increased over time.
- Import goods to service specific ethnic groups.
- Invest in a local distribution system.
- Wholesalers or distributors want to buy directly from importers.
- Importer may choose to supply retailers in his market directly.
- Exporters offer market support to importers especially for highly technical products.
UK entrepreneurs could import New World Wines like those from Argentina and New Zealand if they were investing in a distribution system to local retailers. Wholesalers and distributors sometimes want to buy commodities like tea and coffee directly from importers. Other times, importers have to convince large retail chains like Wal-Mart and Costco to allot shelf space for their goods like specially imported safety shoes. Exporters can entice importers to buy technical products like voice-activated GPS navigation systems by bundling those advanced products with import marketing support.
Strategic Planning Key to Success
Many importers plan to also export products at a later stage. Customers in other countries sometimes ask importing countries to source such products as gold coins produced by the national mint. If feasible, the importing company then engages in exporting activity as a way to increase overall business revenues and profits.
Import initiatives can also lead to joint ventures and strategic alliances with companies in other countries with comparative advantages. For example, German engineers are currently developing solar and wind energy technology that can be manufactured and marketed around the globe.