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From Teffen to Wilkesboro and from Holon to Bentonville
Small Israeli manufacturers get closer to big U.S.retailers
Published in Hebrew in The Exporter's
Guide DIY Hardware (Issue 2), by the Israeli Export Institute,
Authors: Garry Favel (Fortune501 & senior ZOOZ
consultant) & Alan Con (Alan Con & Associates)
Small companies wishing to establish themselves through selling to foreign retail chains face several options and possible paths, but no one sure recipe for success. One may analyze each story on its own, be it success or failure, and draw important conclusions. This is true for companies based both in the north and south of Israel, and for all kinds of markets. The article refers mainly to the U.S. market, which has a large number of retailers.
The first thing to do is to figure out your identity, your strengths & weaknesses, your goals and the available means for achieving them. You, the owner of a production line or a sub-contractor, is looking for an interesting category to operate in, taking the equipment, production capacities and technologies at your disposal into consideration.
A. The product line
Assuming you do not yet own a product line, or that the one you own needs to be adapted to market demands, this is a critical stage. Wise investment at this stage saves a lot of wasted dollars further along in the process. You should find a lead, a starting point for a category to be examined. Bear in mind, we are talking about more than just an idea for a product that someone has come up with.
B. Know the competition
You need information from relevant databases, retailers or reps regarding market size, prices, competition, strategic alliances, IT and all other category entry barriers.
Which are the relevant retailers of the category? How big is it and is it saturated? Examine the competition as if it was about to face you head-on or buy you out. This information must serve as your starting point for defining the field of operation. Cross-checking information is vital.
C. The local connection
You should identify local people you trust, with whom you may work, and which will provide guidance to you or the people working for you on this project. If you do not know the person, convey a clear message to him or her that it is in their best business interest to do all in their power for the success of the business.
D. The "Mix"
Once you've decided on the category you wish to enter, you should learn about the product mix, that is - which products are a "must have" in the category, where's the major business, and what could get you a second meeting with retailers.
A good local representative should be able to set up a meeting with anyone that is relevant to you, especially an initial meeting. What have you got to offer - good prices? An exceptional product? A convincing and innovative presentation?
In today's reality it is impossible to compete on some of the retail markets with Far East manufacturers. Therefore, donít even try to do so.
E. What next?
Find a local person to help you get data on the most competitive retailers. Consider whether you can sustain the expected price levels. Offer a relevant and attractive price in market terms and perceived value for money.
Find a good intellectual property attorney (expect the fees to be high), learn the rules, strengths and limitations of the arena you are about to enter.
Force yourself to be innovative. Use one of the available means of concept testing, and introduce innovation to your defined product line (some of these methodologies are subsidized by the Nitsos
Launch a category mainstream product rather than a minor one. With time, your product should redefine the mainstream for the chosen market niche.
When you have a clear idea, and you know of its competitive aspects and have the appropriate (or at least the affordable) legal protection, as well as a general product design, it is time to ask for feedback from relevant category retailers. These may be general retailers, drug stores or home improvement stores, but your first "shot" should be aimed to at least 2 out of 5 major objectives. Take these meetings seriously, and prepare well your idea, presentation, price and excitement-generation.
Remember, that until you reach the end of the process, you will be at least $100,000 poorer, and at least one out of two retailers will be replaced. Depending on market size and segmentation, all you need is considerable activity with one large retailer in order to fulfill your dreams.
G. What? No orders?
Your American partner will help you set up meetings and analyze the results, apply some of the tips from retailers, and will assist in planning the next stage in terms of schedule, initial launch and follow-up. He should advise on the desired frequency of updating retailers on developments. At this stage you will not receive any orders, as development is based on connections and talks.
H. Product management
Assuming you get a positive response, and still have the resources to continue, when you land back home you should hire an Israeli product manager to help with the final stages of industrial design, models, standards, approvals, packaging, points-of-sale, MarCom, production schedule and budgets.
One must plan to ensure a smooth product line penetration, marketing and production. The product must be attractive and convincing at the point of sale in order to ensure commercial success.
Finally, nine to twelve months later, the presentation of the final product, all "dressed-up" and ready for sale, is important for purposes of settling the accounts and getting extensive feedback. Hopefully, this time you should see three out of five major target retailers and several lower-level retailers.
Logistical considerations depend on the category norm, the identity of the major clients and the important forces in the category. Some prefer to import and enjoy favorable prices, while others choose a local solution providing a more extensive service. You should provide solutions for both types, enabling import but also supplying a local product, whether through your own logistics or with an American distributer. These issues should be determined before sales begin, with accurate and acceptable answers provided to your sales team for all major questions.
J. Sales infrastructure
The U.S. sales team should establish itself and be involved well before sales begin. The American partner should locate, train and prepare them for the beginning of the process. Do not exclude Canada.
These guidelines do not include "do's" and "don'ts" in working with reps, although one cannot efficiently manage 7-10 sales representatives via long-distance control. An on-site sales manager is essential for working with your reps, or the product will never take off.
K. Sell, Sell, Sell
Now you are ready to sell: you have a great product, launching was successful, one in three Americans wants your product and retailers love you.
In spite of the temptations and distractions - do not rest. Continually seek ways to increase market share, broader coverage, and diversity. Make sure that now, if you haven't already done so, you solve the follow-up plan, while considering strengths: a top-notch local sales force and an innovative product line.
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