From Local to Global: Why Market Knowledge Matters for International Distributors

From Local to Global: Why Market Knowledge Matters for International Distributors

Imagine having a distributor who knows the local market inside and out, ensuring your product not only fits but thrives. Having a distributor who understands your target market is crucial for successful international expansion. They can significantly lower the risk of your product being rejected overseas by tailoring it to meet local demands. In this article, we’ll uncover valuable insights into why strong market knowledge as a key factor when choosing a distributor for your overseas operations.

Find a Distributor with Local Market Experience

To start, it’s essential to identify a distributor who is deeply familiar with the specific local market where you intend to sell your product. While many distributors may claim to have a comprehensive understanding of their specific market, this doesn’t necessarily mean they are equipped to handle the nuances of the local area where you plan to expand. The right distributor should have recent, first-hand experience in that particular market, ensuring they truly grasp its unique characteristics and demands.

It is crucial, however, to assess your distributor’s local involvement. They should be actively engaged in the business community. For example, they should regularly participate in industry events such as trade shows. These events provide an excellent opportunity for a distributor to network and establish business relationships with potential clients who might overlook an unsolicited online sales pitch. Through these interactions, they can connect you with the most relevant contacts and potential buyers for your product.

A distributor who actively participates in the business community also has more experience in observing and practising the business customs of the market. They can put this knowledge into practice by representing your company and products in a culturally sensitive manner. If your target market is South Korea, for example, then a distributor may conduct crucial business meetings whilst entertaining. Korean business partners build trust based on their personal relationships and therefore collective intoxication during a dinner shows the willingness of both partners to be their most honest self with each other.

It is important for your distributor to have local experience to provide feedback to product adaptations to suit local preferences and conditions. For instance, in Australia car manufacturers need to adjust the suspension of their vehicles to suit Australia’s rugged outback roads. Similarly, manufacturers should be careful not to disregard cultural sensitivities. Be mindful of cultural differences that may affect the marketing and use of your products when exporting. For instance, red is considered lucky in China and is often used in packaging, but it may symbolize death in some African cultures and therefore should be avoided.

Find a Distributor with Local Market Data

Lived experiences are an invaluable source of information. However, your distributor must be able to support their knowledge with data. In particular, they must have data for the following factors:

1. Consumer preferences

Your product might be popular in your home country, but may not appeal to tastes in the host country. In the UK, the first ingredient listed for Cadbury Dairy Milk is milk, whereas in the American-made version, the first ingredient is sugar. This difference in the composition results in a creamier taste and texture for the UK chocolate, something that is not to the US taste.

Your distributor needs to understand both the price sensitivity and the ethical consciousness of your potential customers. While lower prices are generally appealing, using factories in Asia that may involve child labour practices could lead to your product being rejected by customers in the United States. Western countries are more sensitive to ethical issues, and many are enacting tighter regulations to combat slave labour around the world. Examples include:

  • The UK Modern Slavery Act
  • The Australia Modern Slavery Act
  • The Labor Chapter of the United States-Mexico-Canada Agreement

2. Regulatory requirements

Your distributor must know the legal requirements that exist in your target market. For example, if you are a pram manufacturer here in Australia, did you know that the foot operated brake lever in the EU needs to be coloured red! A good distributor should be ahead of the game and advise you of the “tank traps” that lay ahead when preparing your product for an international market entry.

3. The competitive landscape

The ideal distributor knows your competitors so well that they can help you successfully enter regardless. The electric vehicle market in the United States is an example of an aggressively developing market, with Tesla dominating this market for years. A new competitor, BYD, recognised a demand for more affordable electric vehicles priced its products at 10 to 15 thousand dollars less than a Tesla, thus allowing them to successfully enter the market in the United States.

4. The economic situation in the market

Price always plays a significant factor in consumer purchasing decisions, especially during a cost-of-living crisis. However, entering the market on a price strategy is not always beneficial. The Spanish taxi company, Ola, entered the Australian market to outcompete Uber with lower prices. Despite the lower cost, Australian consumers were so loyal to Uber that their strategy failed. They recently exited after investing millions into the Australian market. An ideal distributor deeply understands customer price sensitivity in your target market and can accurately assess whether a price-led market entry strategy will be effective.

5. Industry trends

The ideal distributor can help you avoid risks and capitalize on opportunities from market trends. While I was working in the United Kingdom, I noticed that the record industry was increasingly encouraging artists to perform at live concerts. At that time, no footwear company was specifically offering boots designed for the often wet and muddy concert environments. Recognising this gap, I approached Hunter Boots with the idea of targeting this specific market. This strategic move increased the company’s revenue from US$10 million to US$50 million in just 3 years.

Conversely, a notable example of a company that failed to recognise an opportunity from an industry trend is Blockbuster. Sceptical that consumers would shift towards watching movies online, Blockbuster passed up the opportunity to acquire Netflix. This decision proved to be a critical misstep, as Netflix revolutionised the industry and effectively drove Blockbuster out of business.

The Case for Market Knowledge

Market knowledge is essential for your international success. If your product doesn’t align with local customer preferences or comply with local regulations, it risks rejection by either consumers or government authorities. Furthermore, even if your product is accepted, you will face stiff competition from local companies that have a deeper understanding of the market. To mitigate these risks, you need a distributor who not only resides in, but is also actively informed about, your target market.

If you’re looking for an international distributor, check out my Find a Distributor service – it’s designed to help companies find their ideal international distributor, so they can increase their momentum and sales in global markets.

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