Business Link

- big decisions, big risks

by Michelle Hardy-Berrington

Money can be made through importing and exporting – but experts warn it can also be a short cut to bankruptcy without extensive research and preparation. If it was easy, everyone would be doing it.

Importing – when should you do it?
Imported products may fill a gap in the local market – typically something that is new, better or cheaper than what is available. There is unfortunately no ‘scientific’ way to do this and business instinct is needed to spot an opportunity.

Then comes the cost: “One of the obvious issues to consider is the landed cost of any imported product,” says Riaan de Lange, director at Tariff & Trade Intelligence. “When looking at the selling price of products in a foreign market, you might well believe that there is a market for the product, purely based on the price advantage. When you take into account there are exchange rates, which are subject to constant fluctuations, shipping costs (denominated in US dollars), along with transport in South Africa, insurance, customs duties and other costs, then it might well no longer be cost effective.”

De Lange recommends that you should check credentials of consultants carefully. “With the proliferation of the Internet and the relative ease with which anyone can set up a website, I would be cautious. A good port of call could be the Chamber of Commerce and Industry, as well as Foreign Trade Representatives in South Africa, and South Africa’s Foreign Trade Representatives abroad.”

Exporting – when should you do it?
Juliet Koeman of Entrepreneur magazine has the following advice: Begin with the end in mind – your market. It doesn’t matter how brilliant you think your product is, if there’s no market for it overseas, your exporting attempts will fail. And just because there is a local market for your product, does not necessarily mean that there will be an international one as well. Each market is different and comes with its own set of drivers, culture, idiosyncrasies and challenges.

While a great deal of research can be conducted on the internet, successful exporters agree that the only reliable way to determine if your product has a market in a foreign country is to go there yourself. To identify the countries, describe your existing customers. Then draw up a short-list of countries where you believe there are similar markets – then book your tickets. If possible, plan your trip to coincide with trade fairs in your sector. This will give you a good idea of whether the market already has a product similar to yours. Then comes the real work – setting up a distribution network, finding buyers, costing the product, ramping up production, obtaining the necessary approvals, insurance, and more.