Mahavir Pratap Sharma, Past Chairman, Carpet Export Promotion Council (CEPC), recalls how, as a novice exporter, he gave a lot of high credit to importers in the pursuit of growth. “A lot of them did not pay back and it resulted in bad debts. I ended up losing more than $100,000 around 14 years back. Later, I learnt from these experiences and started to only give cash against documents or a letter of credit (LC),” he says.
This is a fairly common mistake people make during the early days as an exporter. Sharma advises that new exporters should spend cautiously — or even frugally — in the initial years as that would be a more lucrative bet.
Besides such decisions, there are a number of other aspects that a new exporter has to carefully consider to avoid falling repeatedly into a loop of mistakes during the long drawn out export process.
Main factors to consider
Pushkar Mukewar, Co-Founder & CEO of Drip Capital, outlines some important steps that can come in handy. He categorises these into three: documentation, product pricing & market knowledge and packaging.
In documentation, for instance, a ton of paperwork has to be consolidated at multiple stages of the export process. “Even if exporters have a general idea of the commonly sought documents, they may not be entirely aware of the specific certificates and licences required for particular goods. This could cause them trouble at customs. These documents may include health certificates applicable only when exporting animal or non-animal food products, technical write-ups or literature, industrial licences, etc,” he says.
Mukewar suggests seeking the expertise of a customs agent to ensure that documents are in line with regulations. Equipping oneself with a thorough knowledge of all the certificates and licences that need to be obtained and submitted to the agencies will the exporter and also help save a lot of time and effort.
In product pricing & marketing knowledge, exporters often have a tough time determining the optimal price of their product as the export cycle involves an array of factors and additional costs. Examining the various aspects related to the product’s demand, expected volumes as well as sales and revenue expectations while adopting a pricing strategy will save SMEs from harm, Mukewar says. “Exporters should be on top of the emerging trends in their industry, should have in-depth market knowledge and a keen economic sense such as the impact of trade agreements among countries. This will allow them to identify new opportunities and grow their businesses efficiently,” he adds.
There are also areas to take cognisance of in packaging where design errors, typos, incorrect product descriptions and classifications on the label and the absence of cautionary details about the product can harm the brand’s credibility. Keeping brand value and recognition in the market is key, says Mukewar. “Before fixing the packaging material, exporters should understand their product, shape and size to best guard its characteristics and features. In addition, the packaging of the product should resonate well with the brand,” he says.
Also, some countries have certain mandatory disclosure in packaging. Exporters not following these rules could lose that market forever.
But it is not just aspects related to the various technicalities of the product that can come up as the usual set of mistakes. Sharma says exporters tend to go by the norm and don’t think out of the box. “They tend to ape the bigger and more established set of people in the business. Aping these people blindly is not the way when they aren’t even ready to spend in that manner yet. More expense means less profit and hurting cash flows as every service is paid upfront,” he says.
Instead, Sharma suggests, exporters should keep the focus for the first year on the quality or design of the product as this will lead to better growth opportunities. “Targeted marketing in which more is spoken about the product, its features and intricacies of the work will be a lucrative move. Spending money blindly on social media, offline media and exhibitions in initial years should be replaced with targeted marketing for better results. Quality will take exporters a long way, not cheaper prices. Educating the buyer should be the focus rather than undercutting prices,” says the past chairman of CEPC.
Overlooking potential foreign markets and chasing only the more popular markets, he says, is another common erroneous way of thinking. “Look at, say, Japan or Dubai as well, not just the US. It can open up new avenues even if it ranks lower on the list of markets to export,” Sharma adds.
Besides this, inadequate research of the target market and not having trustworthy global business partners can prove to be a costly mistake for new exporters. The process of export entails numerous steps. Taking time to brainstorm and narrow down on the best approach at each step will be time and effort well spent.