Import Marketing Channels

One of the fundamental decisions for foreign suppliers is whether to sell their products directly or through intermediaries. Relying on an intermediary relieves the producer of in­ternational marketing activities. However, the producer forgoes part of the export profit and does not obtain firsthand information on the market, and this, in turn, may reduce the firm’s product adaptation capacity (International Perspective 17.4).

Two of the important developments in marketing channels have been the involvement of large retail groups in direct importation and the subcontracting abroad of production by major manufacturing companies. In this age of intense competition, firms that manufacture standardized products can no longer rely on firm-specific advantages arising solely from technology. They should focus on ways of minimizing costs by manufacturing certain com­ponents (or subcontracting such production) in low-cost countries.

There are three major markets for imported goods in the United States.

1. Mass markets: Mass market retailers such as Walmart or ToysRus account for about 55 per­cent of the U.S. retail market. There are a number of limitations to accessing these markets for new importers. First, they focus on popular and proven items for sale at the lowest possi­ble price. Second, their orders contain a number of conditions that are quite difficult for new importers to meet. These conditions, if unmet lead to penalties and fees. Such conditions include but are not limited to requiring sellers to put the purchase order on all bills of lading, requiring short delivery windows, or imposing other shipping and delivery instructions.
2. The fashion “trendy” market: Fashion markets represent less than 10 percent of the U.S. retail market. They focus on exclusive, expensive products for a narrow segment of the market. In view of the unpredictable nature of the market as well as the small orders in­volved, there is limited competition.
3. The regular retailers: These include mainline retail stores (department stores), neighbor­hood stores, and stores in shopping malls and account for about 35 percent of the market. They are ideal markets for new importers.

Independent sales representatives (ISRs) are crucial in helping importers navigate the un­chartered territory of import marketing. ISRs help with pricing, distribution, credit checks of buyers, packaging, and other pertinent issues. It is important to sign a formal contract with ISRs covering items such as sales territory, commissions, and incentives.

Source: Seyoum Belay (2014), Export-import theory, practices, and procedures, Routledge; 3rd edition.