Exporters Must Investigate New Markets Carefully
Exporters often view a new market as promising based on initial impressions, such as a familiar language or similar business culture. However, these first impressions can hide significant risks. Laura Pixley, CITP, notes that exporters should start by proving there is a real market for their product, rather than assuming enthusiasm will be enough.
This involves looking beyond broad indicators like population size or economic growth, and instead understanding actual demand, local consumption habits, competition, and whether the product fills a meaningful gap. Pixley emphasizes that a product’s success in one market does not guarantee success in another.
Understanding Market Demand
Consumer preferences, lifestyles, trends, and purchasing behavior can vary significantly from one market to another. Exporters need to investigate whether there is an established need for their product, if there is room for another entrant, and what makes their product meaningfully different. They must also determine if buyers will pay enough to make the opportunity commercially worthwhile.
The goal is not simply to identify an attractive country, but to determine if there is a realistic place for the specific product in that market. Pixley advises exporters to define the market at the level where buying decisions actually happen, rather than assuming a single commercial market within a country’s borders.
For example, Europe is not a single market, as consumer behavior, language, regulations, and distribution models can vary significantly from one country to another. Similarly, Canada and the United States have regional differences in income levels, buyer expectations, and distribution systems that can impact market entry strategies.
Compliance and Market Entry
Pixley stresses the importance of investigating compliance requirements early in the process, including labelling, certifications, product standards, and traceability requirements. Regulatory requirements can determine whether an opportunity is viable, and exporters should not assume that a product will automatically qualify for preferential tariff treatment under a trade agreement.
The rules of origin are critical, as a product must meet specific origin requirements to receive preferential tariff treatment. Pixley notes that understanding where inputs come from and having documentation to support preferential tariff treatment is very important, as the commercial impact can be substantial if a competitor qualifies for a lower tariff and the exporter does not.
In some cases, exporters may need to reformulate their product or change packaging to meet local requirements, as seen with traditional Scottish haggis in Canada. Market adaptation does not always mean changing the marketing, but sometimes changing the product itself.
Exporters should also involve customs brokers and trade specialists early in the process to answer questions about classification, origin, and eligibility for trade agreements. This can help companies accurately assess the opportunity and make informed decisions about market entry.
Pixley emphasizes the importance of pricing the full landed cost, not just the product, and understanding the responsibilities built into the chosen Incoterm. Companies need to know not only what the buyer will pay, but what remains after every export-related expense has been accounted for.
When selecting a local partner, exporters should treat the decision as a strategic one, investigating the partner’s history, customer base, sales channels, and sales capabilities. Due diligence is essential, and exporters should understand exactly what the partner will expect from them in return.
The structure of the channel may need to change from market to market, and in some cases, an exporter may need more than one partner for the same market. Pixley notes that the key is to understand how the product is actually bought and sold locally, rather than trying to replicate the distribution model used at home.
As Pixley explains, understanding the local market and adapting to its unique characteristics is essential for success. This involves recognizing that market entry is not just about finding a new customer, but about understanding the complexities of a new market and adapting to its regulatory and commercial requirements.
By taking a disciplined approach to market investigation and adaptation, exporters can increase their chances of success in new markets and avoid common pitfalls. This includes understanding the importance of compliance, pricing, and local partnerships, as well as being willing to adapt their products and strategies to meet local needs.
