Mistake #6: Disconnecting from distributors
Your distributors are your eyes and ears. You’ve been working with your distributor for 12 months but results have been unsatisfactory. Your distributor has been complaining about pack sizes, pricing and the product. It’s time for your once-every-two-year trip to see them.
We hear lots of complaints from distributors and brand owners.
Brand owners complain that distributors overpromise and underdeliver. Distributors complain that brand owners don’t listen.
When you disconnect from your distributor you’re disconnecting from the market. Distributors work for you. Distributors also need to work with you. The underlying mistake is that exporters disconnect from distributors and the markets they service when things are okay. Product goes out. Sales come back.
But when sales struggle you don’t know enough to make an informed decision. In our experience when you disconnect from distributors you’re disconnecting from markets. If you don’t believe a distributor when they tell you how they can sell more, then you either need to reconnect with the market, or with the distributor, or both.
Mistake #7: Bring it and they will buy
How do consumers adopt a product they don’t know and don’t understand. They don’t, of course. They’re not telepathic. That’s right. You will need to spend on marketing and promotion.
We were talking to an alcoholic drinks wholesaler in a Lagos market. “What are consumers demanding these days?”, we asked. He named a brand, before adding that six months earlier his customers used to ask for a different brand.
“But they stopped advertising.”
Consider this: The average length of a marketing generation (like Gen X or Gen Y) in many sub-Saharan African countries is under 10 years. These countries have very young, aspirational consumer bases. Their consumers are buying products and services at a time when technology, living standards, their purchasing power and retail markets are undergoing substantial change.
So marketing generations only last a few years until a new one appears. Attitudes and behaviours are changing more quickly than in developed markets, meaning brand loyalty isn’t guaranteed. On the flipside, if you’re a new entrant: brand loyalty to existing brands isn’t guaranteed either.
Mistake #8: It’s also about moving product
It seems obvious, but it’s always worth remembering that export is fundamentally about moving product from A to B and selling it.
Is your product bulky or prone to spoilage? If it is, the risk increases that it won’t be price-competitive by the time you move it to its destination market and get it on shelf. It seemed like a good idea to ship surplus stock out of a South American factory until costs and complications racked up. Simply choosing the wrong container size can wipe out margin.
A second issue is fatal out-of-stocks. Inconsistent availability is problematic anywhere. But it can be fatal in emerging African markets where a brand may be new to market and where product shipments may already be irregular or spaced apart.
And finally a note on delivery costs in fragmented markets: Reaching most consumers in a fragmented market such as Nigeria, Algeria or Uganda is resource intensive. It gets more expensive as the chain of distribution also gets longer, and that cost has to be taken by someone.
Mistake #9: Assuming payment is easy
In some ways, getting product into a market is the easy bit. The hard part is getting money out. The mistake here is assuming that payment is easy because the money rolls in when times are good.
The FX issue in a nutshell: Consumers pay in local currency. You, the exporter, want payment in foreign exchange. If there is a shortage of foreign exchange from a financial crisis or downturn, payments in foreign currency become harder to make.
There are no easy remedies for this, although smaller importers find it easier to manage than larger ones because they can be more ‘flexible’ at finding ways to get hold of currency.
Which brings us to third-party payments, one way in which some traders pay for imported goods. It used to be common and easy to accept payments from third parties. You sell to company A. Company B pays you.
Now, more banks are requiring stringent customer due diligence checks to prevent money laundering, and turning down payments that fail those checks. Beware.
Mistake #10: Overstretch
“We’re going directly to market,” said the export director, confidently.
They then engage a freight forwarder, a clearing agent and a distributor to get product to market. And a local legal firm to handle registration and trademarks. One market down, 53 more to go.
Okay, so you’re probably not targeting all 54 markets. But a few markets.
What began as simply exporting quickly becomes managing tens of new relationships with the companies getting your product to market. That leaves little time for managing your export markets strategically.
If hard work paid well, then donkeys would be rich. The final mistake exporters operating in Africa make is working too hard, for too little return. Many of these developing markets are specialised, emerging, niche, complicated and hard to navigate.
For that reason we recommend considering using a market entry specialist at some point in the process to help you do it more quickly, more easily, while avoiding the most common mistakes.