How to research an export destination

Researching export destinations can be demanding, whether you’re a new exporter looking for your first export destination, or an old hand traversing the globe. Here’s how to find your ideal export location.

Exporters forget that researching a destination is much like first starting a business: you need to find a market that best fits your product or service and sell to it. Because most SMEs usually start in their local area, they have an advantage due to the bank of unwritten knowledge that comes from instinctively knowing who their customers are. While new destinations may seem daunting at first, it’s really about dissecting what you already know in your existing market and applying it to what you’d like to know about a potential market.

Marketing specialist Nick Scott, an International Business lecturer at the University of Western Sydney, advocates starting with hard data to determine which countries are best suited to your offering. This includes information like population size and per capita income, which you can readily obtain from the World Bank or the country’s bureau of statistics.

“Set standards. For example, any country with an average per capita GNP [gross national product] of less than $US10,000, strike from the list straight away. Have a series of criteria that you apply and whittle away until you come down to a shortlist. Those shortlisted countries will be, on the economic data, the feasible ones,” says Scott.

He encourages exporters to further shorten the list using macro information about the country to see if export conditions are favourable. This includes looking at tariff rates, currency, the structure of the industry there and existing competitors. “If you were thinking of exporting to Vietnam or Thailand and you found that Vietnam had a 30 percent duty rate and Thailand had 10 percent, that might be a contributing factor into your decision,” he explains.

“One of the primary problems all exporters have is price escalation. There are shipping charges, import costs, duties and tariff rates, a longer distribution chain, and distributors generally need about a 30 percent gross margin to make it worthwhile for them,” says Scott. “One of the main problems is the price competitiveness of their goods, the price at which foreign buyers can afford to buy their goods.”

While hard data might determine the financial suitability of a destination, it’s the data for market acceptability that will single out the most suitable destination. Market acceptability relates to both the cultural acceptability of the product or service in the country, and the critical factors that ensure the viability of the product.

Scott uses the example of exporting hearses to Brazil. In Australia hearses are black, but in Brazil they are purple, therefore hearses exported to Brazil would need to be purple for market acceptability. In other cases, such as services, there may be other barriers relating to market acceptability, for example, an Australian lawyer cannot practise until they have been admitted to the bar of that country.

It is extremely important that businesses identify their critical product factor without which their product becomes unviable, says Scott. “Unless you know what those critical factors are and see how you can address that, then you can never enter that market.” A critical product factor may be the availability of refrigerated transport for food or wine, or the ability to provide a service within a particular timeframe, hence requiring a physical presence at the destination.

Appointing a distributor or agent is a good indicator of market acceptability. If your product has been accepted, it’s because they believe they can sell it. If you can solicit feedback from these channels, it can provide valuable information on how you might alter or improve the product to penetrate the market further.