Exporting simply means sending products to another country in exchange for payment. If you are on a plane and you carry like five bags of candies from your country to another, it is not exporting. You are merely taking goods with you.
Exporting is done on a large scale. The opposite of it is importing, which means a country is receiving goods from another country.
Exporting is an important part of an economy. It allows the residents of the country to produce goods, employ people, and earn money. The receiving country, on the other hand, will benefit from the goods because they have a short supply of it.
For example, there may be countries that have a high demand for rice. But since their lands are not suitable for planting, they have to ask another country to supply them with it.
The country that supplies the rice is the exporter and the country that ordered it is the importer.
Looking at the Numbers
We live in a world of export and import. Many of the products you buy may not have been produced in your country. And if your country has good diplomatic relations, it is in a better position to export goods to another state.
The total trade of merchandise statistics from the United Nations Conference on Trade and Development indicate that global export amount to $19.5 trillion in value. This means that the world exchanged hands between money and goods by exporting. A business person would be glad to have a share of that pie, even if it is just a fraction of it.
Looking at resources like Statista, World Fact Book of the CIA, and Wikipedia, China is the world leader in export, earning 2 trillion US dollars in 2017.
The United States is second, with Germany, Japan, and South Korea trailing behind. This is the reason why many of the products sold in the US and other developed countries today are coming from China. Your iPhone is made in China, and most shoes, clothing, and gadgets are from China.
The question is, is exporting a profitable business for you?
Methods of Exporting
There are three methods to export your products to another country.
These are:
- Shipping
- Plane cargo
- By road
There are countries that are only separated by land, so exporting by cargo using huge trucks is a better option, especially if the receiving country has a depot of the goods, ready for distribution to different markets.
If the products need to be exported to a far country that is separated by the sea, the only two options are sea and air. Usually, exporters will use plane cargo to ship perishable goods, such as fruits, food, and flowers.
Toys, non-perishable items, and clothing are usually shipped through the sea.
There is no such thing as the best way to export your products. Each method has its own advantages. Shipping, for example, is a low-cost export method and is usually used for bulk export of goods that can last months in the sea.
Examples of these are materials made from plastic, construction materials like steel, or ready-made products like clothing. Frozen foods that are also processed can be exported using this method. If you export via shipping, you can fill out huge container vans of your product, so you do not have to do it over and over again.
Trucking is the fastest way, but it only works if your customers are your neighboring countries. And trucks are not as huge as container vans; you should be prepared to meet demands as they come.
The most expensive is through the plane, and this is usually done on a tight schedule, possibly months ahead. This is faster than the sea, and it is usually used for perishable goods that cannot wait. Therefore, items that are exported via this method are typically much more expensive.
The Different Exporting Channels
There was a time when exporting only had a single channel. It was only B2B, which stands for business-to-business.
In this channel, the manufacturer from China may export 1,000 table lamps to Walmart. Then, Walmart will be in charge of distributing these lamps to its chain of stores.
It does not work that way anymore all the time. Now, there are two methods. One is indirect selling, and the other is direct selling.
An example of indirect selling is when you use middlemen, also called intermediaries. Usually, these are called export management companies of EMC. The EMC will look for buyers from other countries, and then place an order for you.
As a manufacturer, you give the items to the EMC, and then the EMC will handle the exporting logistics. You get paid, and they get paid, too.
In direct selling, the manufacturer is directly talking to the buyer, like a banana producer who exports his products to another country. Usually, the manufacturer is in business with either the government or a huge private company in the receiving country.
Because of the internet, direct selling has become easier. Amazon, eBay, and AliExpress are examples of direct selling. If you go to AliExpress and order a phone case, you are ordering directly from the manufacturer.
The manufacturer packs the phone case from the warehouse and then exports the product to your country.
How to Get Started in Exporting
You do not need to have your own shipping line or airplanes to be able to export. These companies are called logistics experts. What it means is that they are experts in packaging, storing, and then moving your products to their final destination.
You need to work with them to ensure that your goods are delivered on time. But that is just one small part of the entire exporting business process.
Here are the steps you need to follow to get started in the exporting business.
- Research your market in relation to you your product – even if you want to sell to huge countries like the US, you need to ask yourself if there is a demand for your product and what the competition is. You can use the services of data analytics companies to do market research for you.
- Screen the markets – after getting information from the data analytics companies, you need to reduce your market list. Then, you have to carefully study which of these countries have the most buying potential.
- Analyze the profit potential – let us say you have decided to export clothing goods to the USA; you also need to consider if the US is a culture that will buy your clothing design. As you know, there are trends in the market, and you need to be in the know. Part of this analysis is whether your product is welcome in the country you are targeting or not and if the cost of your products is something that people can afford to buy.
- Find buyers – use the power of the internet to find buyers. You can use Alibaba to offer your products on wholesale prices, or you can attend local and international trade shows to find clients. You can also go to the government and work with them to find clients. The government would love to work with you on this since you will be paying taxes for your sales.
- Choose your logistics partner – this should be like a shopping list. There are many known brands like FedEx, DHL, UPS, and others that can handle your exporting requirements. Choose the one that offers the most reasonable price, and ensure that the goods will be handled with care.
- Make it legal – every country has its own customs department that checks all the things that come in and come out of the country. Work with your government to understand the requirements, and make sure you follow all of the requirements.
- Sell at a profit – if you export, there are many costs that you have to consider. There is a production cost, the freight cost, insurance, documentation, taxes, import and export duties, and so much more. Know how much you are spending per product, and price your items properly to make a decent profit.
Payment Methods You Can Offer
As an exporter, cash will not exchange hands as it does in a personal transaction. Most of the time, your buyers are only willing to pay for a down payment, then pay the balance once the shipment has arrived and inspected.
As your items are being shipped, and as they are stuck in Customs, your money is sleeping. Make sure you have plenty of cash to keep on operating, as you will only get paid later on.
And speaking of payments, you must be ready to offer several methods to your buyers.
- Advanced payment – and advanced payment means that you will take a down payment or a payment in full before your export the goods.
- Open credit or open account – you can only offer this if you already know the buyer, like if you are dealing with an export management company. If you choose this payment method, you have to protect yourself, and ensure that products exports are products sold. You cannot take them back simply because the buyer changed his mind.
- Bank or Wire transfer – you can take this payment, but you will have to pay high fees to the bank. If you take this kind of payment, you must add your fees to the total cost of doing business.
- Credit card – as an exporter, you can sell your goods through your own website and charge c=your clients through a credit card payment processor.
- e-Wallet – an e-wallet is a digital payment system that protects consumer or buyer financial information. An example of this is PayPal, Neteller, and Skrill.
Summary
Exporting is a business that can make you a lot of money, especially if you are in a country where there are lots of producers like you. Although it also means a lot of paperwork and actual work, you can expect to get paid handsomely, and this is going to happen if you choose markets that have a better economy than yours.
In summary, you have to remember some key things to succeed in the exporting business.
- Logistics – you can choose between air, sea, and land.
- Channels – export through indirect selling or direct selling
- Market research – do your research and use the services of a data analytics or market research company
- Legal – make sure you study the laws of your country about exporting, and of the receiving country allows your products in their country
- Payment – be ready to take different types of payment methods
Exporting is a business where you can meet many people from around the world, provided that you have goods that they need. It gives you business exposure, and you can expand your market across the world, not just in your locality, therefore giving out business profits a much-needed boost.