Qualification is not a gut feeling or assumption; it is based on facts and the application of logic. Your dedication to understanding your American marketplace is critical.
Whether you are in London or Los Angeles, Kalamazoo or Katmandu, consumers buy based on the same set of values:
Price point – Design – Functionality- Quality – Brand perception – Brand positioning
Your focus will be to persuade your target retailers that your brand has enough of these elements to get you an opening order.
Your brand is new, so your focal point will be price point, design, function and quality. Brand perception and positioning is relevant to existing products and brands in the market, and that is your competitions advantage. Do not underestimate this.
Price point has direct correlation to brand positioning. Do you envisage selling to independent retail stores or big box retailers like Walmart, target or Bed Bath and beyond?
I would recommend that whatever your product, your focal point is independent or regionally focused retail customers in your first 2 years of business. Big Box retailers are simply too risky for a multitude of reasons:
Complex set up and operating procedures including EDI
Significant penalties for mistakes or missed deadlines
60 days net terms
Heavy stock and scalability requirements
Pricing your products
Pricing your products correctly cannot be emphasized enough. Research into this needs to be detailed and you must become honestly knowledgeable about what the market is willing to pay. Otherwise less than 40% of your potential market will be interested in buying from you.
It is a top down, bottom up process. Top down refers to the market and what the market determines the price points of your products to be within the independent retail sector.
Bottom up is figuring out the landed cost of your product and establishing if your costs + transportation + duty is cost effective enough for you to sell your products with enough profit margin to create a sustainable and most importantly profitable business.
Landed cost of your product – Bottom up
Landed cost pricing
You already know the F.O.B. cost of your products
Contact your freight forwarder and ask them to provide you with pricing for
7 pallets of product, a 20 foot and 40 foot container
If you are shipping from Europe choose Los Angeles as your delivery point. If you are shipping from Asia, use New York (always plan on furthest point)
Key element is not just transportation costs but duty rates also
F.O.B. cost of products + 7 pallet transport cost to furthest geographical point + duty = landed cost. Work this out as a percentage.
Shipment f.o.b. 5,000 items @ cost $10,000, transport & duty $ 2,000
Transport and duty = 20%. Landed cost per item = $ 2.40
Retail, whole sale costs – Top down
Establishing your prospective customer base will enable you to determine price points at retail.
Your research begins with Google:
Find out what products are available in the U.S. at your prospective customers. Compare like product (or as “like” as you can find” and its retail pricing)
If the retail price point is $ 50, the retailer needs to purchase it from a U.S. location for a maximum of $ 25.
Your landed cost needs to be $ 10
Choose your best selling items and determine if these calculations work for you
This is the first step in qualifying your price point. You are commencing a process that will determine if you have a potentially profitable and sustainable business in the U.S.
Accomplishing your research and answering the following questions will enable you to determine if your plan of commercial action in the U.S.A. is prudent:
Are your products unique to the U.S. market?
Do you have competition? Make a list and bullet point everything about them
What are advantages of your product compared to theirs? Make a list
Can you compete with current market pricing?
Between pricing and unique selling propositions of your products, do you have enough to persuade retailers that they should buy your brand?
Create a bullet pointed list of why U.S. customers should buy?
Remember, it’s the market that determines your company’s viability in the U.S.A. – NO ONE ELSE.