The most significant opportunities in life are seldom risk-free, and exporting sits firmly in this category. The industry can be a lucrative one, but it also has a large number of moving parts. The result is that many things can go wrong if you are ill-informed, poorly prepared, or just plain unlucky. To help you navigate these challenges, we’ve put together a summary of the top five challenges that exporters face.
There can be a significant gap between the purchase of raw goods, manufacturing costs, shipping costs, and the point when the customer’s money hits your account. For this reason, many companies turn to export finance, which allows them to release the value of unpaid overseas invoices and offer their customers longer payment terms. Of course, it is also crucial to review and confirm any potential customer’s financial viability by asking to see proof of funds or a letter of credit.
The Political and Economic Environment
As we have seen first hand with the political shifts surrounding the Trump administration, politics can have an enormous impact on imports and exports. You need to understand the trade alliances and sanctions of any nation you seek to do business with and check whether international or government-enforced trade embargoes are in place.
Additionally, if the market is politically unstable, you run the risk of unexpectedly losing your investments in the region. So, it is also worthwhile considering economic stability. If your export business relied on Greece back in 2007, 2008, then you may have found it challenging to stay afloat. Having a diversified customer base can reduce your chances of sustaining losses by spreading the risk.
Labeling and Barcodes
Each overseas market will have specific legal requirements for labeling and barcodes. For example, any food items that you export must adhere to very stringent labeling guidelines. Depending on the country, the wording, formatting, and inclusions within the list of ingredients and nutritional information can vary widely. There will also be specifications for the barcode and the expiry date. Don’t risk having to recall thousands of products at high cost or pay a third party to relabel the entire shipment. This is an area where you must research, check, double-check, and then triple-check to ensure you have it right.
Pandemics aside, there can be a range of unforeseen challenges that you may face as an exporter. Natural disasters can obliterate raw materials, while bugs or water damage can wreak havoc on your goods during transportation. There are so many factors that can delay the arrival of your deliveries. Exporters must put safeguards in place to try to minimize the impact of these kinds of events. Insurance is also a must!
Cultural Differences and Language Barriers
A hilarious joke in one culture can result in a room full of blank faces in another. Exporters face similar hurdles when expanding into foreign markets. You must be mindful of developing culturally appropriate products. To give you a couple of examples, an American mug bearing the slogan, “World’s Best Mom,” would flop in Australia where the correct spelling is “Mum.” Braniff International airlines were one company that didn’t do enough research, launching a campaign targeting first-class customers with the tagline “Fly in leather.” Unfortunately, in Spanish, this translated to “fly naked.”
All of these challenges aside, a successful export company is worth the risk. In 2018, 19.5 trillion U.S. dollars of goods were exported worldwide – a number for which you may be happy to jump through a few hoops!