Venturing into international trade can open up new opportunities and help expand the market base of your products. Exporting to different countries involves different logistics, including shipping, customs, legal frameworks, and diverse payment methods. So, it’s important first to gauge the additional risks associated with the export business and come up with an efficient plan on how to deal with each risk.

This is especially true for small-medium enterprises that find themselves in the export business without prior planning. This article will help you assess why you should consider exporting your merchandise, its risks or disadvantages, and the solutions, including how Abiel Logistics can help your business.

The Pros of Export Business

1. Profitability

While it takes time and costs to develop an export market plan, it can increase sales due to higher demands. It might also allow you to diversify the variety of products you produce, depending on the unique needs or demands from different markets and countries. 

2. Risk diversification

When selling your products domestically, you’re prone to higher risks in the case that something happens to the market, for example, political instability, change of laws, or a flooded market. Exporting to different countries enables you to spread this risk across many marketplaces, which has less probability of deteriorating simultaneously.

3. Reduced production costs:

An increase in demand means a surge in production, which can lower the production cost per unit because you can now use formerly under-utilized capacity efficiently. In addition, the rise in demand means that you’ll source raw materials in bulk, which significantly reduces the cost of manufacturing.

4. Market compensation

You can view through two lenses: where the locals purchase your goods in certain seasons and secondly, a situation when there are so many players domestically, leading to overproduction in your factory. An off-season locally can easily be an on-season for your products in a different region. Exporting can also solve the problem of stiff competition locally, which might have been leaving you with a lot of goods in warehouses.

The Cons of Export Business

1. Transportation and Logistics

Securing an export order is important, but delivering that order is critical. Although, it can prove to be challenging, especially if you’re new to the process of exporting. Export goods require different packaging and handling, also freight tracking to make sure the goods reach the intended destination securely. During the shipment, you risk damage, theft, late delivery, or infringing rules and regulations in some countries.

2. Payment

With local markets, you have a way to prove the credit worthiness of customers and to have a seamless way to receive payment for your products. But, exporting creates another set of challenges, particularly when a customer wants to take goods on credit. Even if they’re paying cash-on-delivery, you risk defaults or time-consuming payment methods, which can dig a hole in your cash flow or profits.

3. Costs

As we earlier mentioned, developing and learning how to smoothly conduct exports takes time and money. While bigger companies can afford this, small businesses need solutions that can help them alleviate the aftershocks of diving into a foreign market. Some of the extra costs include:

  • Customs clearance, fees, and taxes.
  • Administrative costs incurred when sending product representatives or agents into the new markets.
  • Product modification to fulfil various safety codes, quality minimums, and labelling & packaging requirements in foreign countries.