3 Export Secrets the Fortune 500 Doesn't Want You To Know

1-888-SHIPWIRE
www.shipwire.com
Three Export Secrets the
Fortune 500 Doesn’t Want
You to Know
A special report on successful international product sales
by Nate Gilmore
Vice President Shipwire, Inc.

Table of Contents
State of the Union
A Goal Without a Path
The Fortune 500 Advantage
Selling Into Overseas Markets
Overseas E-commerce Markets are Growing Quickly
International Shipping
3 Export Secrets You Can’t Do Without
Export Secret No. 1
Export Secret No. 2
Export Secret No. 3
The Road Map
Global is the New Local
Best Practices for Entering the Export Market
Shipwire to the Rescue
1-888-SHIPWIRE 2185 Park Blvd. | Palo Alto, CA 94306
4
4
4
5
5
6
7
7
8
9
10
10
11
14

State of the Union 2010
A Goal Without a Path
In his 2010 State of the Union address, President Barack Obama identified U.S.
exports as a major catalyst to help reignite America’s sagging economy. “We will
double our exports over the next five years,” said President Obama, “an increase that
will support 2 million jobs in America.” A lofty goal, to be sure. President Obama
went on to say this goal would require much more effort than the government alone
could muster. Rather, he called on a ground-swelling of small business growth to get
the economy headed in the right direction. The question now posed to the market
and various export government agencies is, “How do we double exports in five
years?” The Obama export vision is a call to action – in need of a roadmap. Shipwire
contends, and will address in this white paper, that the same advantages that benefit
the globalization of the Fortune 500 are now available to small and medium sized
businesses. By employing the same export strategies as the Fortune 500, small and
medium sized merchants can open international markets, compete globally and
break down the barriers to overseas product sales.
The Fortune 500 Advantage
Over the past 15 years, an array of e-commerce tools and marketplaces have
emerged to make it possible to source products globally and sell them locally. For-tune
500 businesses have discovered that to compete in an overseas marketplace
and subsequently grow exports, inventory must be stored in those local markets. By
keeping their inventory in the local marketplace, it can be shipped to individual and
corporate buyers with local shipping rates, enable incountry “drop shipping”, and al-low
small retail shops to get resupplied quickly when inventories run low.
Additionally, due in part to post-
911 security concerns, local
customs agencies around the
world often hold packages that
are shipped into their country
for weeks on end. Consequent-ly,
American businesses that sell
products into a foreign country
– even into a market as close as
Canada – have traditionally been
unable to guarantee their prod-ucts
would arrive in a timely fash-ion.
Moreover, as Ameri-
2 mil. jobs in America will
increase and double
exports over the next
five years. A lofty
goal, to be sure
Applying these three export secrets to
your business can jump start your entry
into the international marketplace with
less risk and more success.
Export Secret No. 1
Globalize Your Supply Chain
Export Secret No. 3
Flex the Power of Local Connections
Export Secret No. 2
Try Before You Buy
1-888-SHIPWIRE 2185 Park Blvd. | Palo Alto, CA 94306 Page 3

can exporters have learned, a surprisingly high number of packages seem to “disap-pear”
after crossing the border, never to reach their destination. Fortune 500 compa-nies
have learned the hard way that storing merchandise in a foreign market is the
missing link that eliminates the significant hassles, cost and time constraints associated
with international product sales.
In lieu of storing merchandise abroad, product manufacturers and exporters have tra-ditionally
worked through distributors that were willing to buy containers of product at
wholesale prices and, in turn, resell them to end users, drop shippers or directly to over-seas
retailers. This proverbial “middle man” introduces additional complexities, oppor-tunities
for error and costs that further reduce the profits of selling to the global econ-omy.
Adding to the challenge, finding good distributors is difficult and keeping, as well
as managing those that perform, is increasingly difficult in today’s fast paced market-place.
As a result, Fortune 500 companies have established trusted networks of distribu-tion
partners that help them route, transfer and ship their products through the individ-ual
nuances of each country.
Even so, only the largest product suppliers and retailers have been able to master the fi-nal
challenge of shipping optimization. With a dizzying array of options and rate charg-es,
international and local carriers have traditionally been unwilling to partner with
American exporters without significant volume commitments. As a result, the necessary
technology to optimize multiple carriers for a single exporter has only been economical-ly
available to a chosen few.
If this were the end of the story then President Obama’s vision of doubling US exports
would be dead on arrival. But recent changes in technology and global fulfillment net-works
are now bringing the purchasing power of the Fortune 500 to merchants both do-mestically
and abroad. For merchants that take advantage of the globalization of these
supply chain efficiencies, the world market is not only reachable but also an immediate
source of revenue and profits.
Selling Into Overseas Markets
Overseas E-commerce Markets are Growing Quickly
The reality is that overseas retail markets are growing, and opportunity is ripe for
business leaders that want to make exporting – and President Obama’s call to action
-- successful. Forrester Research recently posted some incredible numbers in its “U.S.
Online Retail Forecast, 2009 To 2014” that suggest e-commerce will continue to grow
at a 10 percent compound annual growth rate (CAGR) in the United States through
2014, and will hit $250 billion in 2014 (up from $155 billion in 2009). Forrester
further estimates that online retail sales in the United States were up 11 percent,
compared with 2.5 percent for all retail sales. In Forrester’s “Western European Online
$250 bln. in e-commerce
sales by 2014

Retail Forecast, 2009 To 2014,” it is estimated that e-commerce in Western Europe
will grow a bit faster at 11 percent CAGR, and increase from $93 billion in 2009 to
$156 billion in 2014.
Canada is another high-growth market. In an April 2009 ComScore a report entitled
“Canada Opportunities” stated there is an increase in the number of people going on-line
to buy goods. In fact, Canada boasts a 72 percent online reach, with the United
States and the United Kingdom close behind at 62 percent and 60 percent, respectively.
International Shipping
A Siren’s Song
Buyers want products fast and free, and any items that don’t meet that criteria are
more often abandoned in the shopping cart. For example, in a survey conducted by
PayPal and comScore , 43 percent of shoppers said they abandon their shopping carts
because of unexpectedly high shipping charges.
Online retailers selling internationally are taking note of this alarming data, and are
realizing that international parcel or express shipping is not the right option to reach
overseas sellers for five reasons:
International shipping is too slow for
today’s e-commerce sales. Even express
international shipping must go through
customs, and most shipments must pass
through two to three carriers’ networks
before reaching the buyer.
International shipping is too expensive. Ex-press
international is even more expensive.
International shipping is too risky. Each
shipment must go through customs, where
even the best shipper has a loss rate.
International shipping is too confusing for
everybody. Duties, tariffs, customs, carrier
brokerage charges and various local and
national taxes must be navigated, adding
to increased time, cost and risk.
International shipping is not a good cus-tomer
experience. International shipping
does not allow for a simple returns process,
resulting in a major headache if the cus-tomer
no longer wants the product.
While international shipping options may be easy for one or two shipments, it breaks
down as an option with any real sales volume. It is not a real long-term solution for the
entrepreneur who wants to build a competitive overseas sales channel. “Consolidated”
international shipping options break down for the same reasons – slow, expensive, error
prone and not scalable. Today’s buyer wants his online sale to arrive fast and hopefully
with free shipping. It is a market reality -- one that international shipping options will
never competently address.
43% of shoppers said
they abandon
their shopping
carts because of
unexpectedly high
shipping charges

As sellers look overseas, a large market of willing buyers greets them. Familiar ecom-merce
tools (e.g. PayPal and Google Adwords) and marketplaces (e.g. eBay, Amazon)
put sales within reach but, delivering the goods encounters roadblocks of cost, customs
and time that can quickly turn a good sale into a customer support nightmare. How
can today’s retailer, all too often struggling with time and capital constraints, hope to
deliver on the demand for their products? Take a page out of the Fortune 500 playbook
and follow a proven road to overseas growth.
Export Secret #1
Globalize Your Supply Chain by Shipping Locally
Today’s large global suppliers, online retailers and manufacturers have all “mastered”
shipping and globalized their supply chain. Take consumer electronics behemoth Logi-techi,
for example.
If a buyer in the United Kingdom purchases a WebCam online, Logitech doesn’t ship it
from its manufacturing plant. The company ships it from the local inventory sitting in a
warehouse closest to the United Kingdom. Ultimately, this provides a better experience
for the buyer, as the WebCam is delivered faster. Furthermore, Logitech can leverage
shipping promotions to spur conversion online. And, if the device must be returned, it
can be sent back to the local warehouse for restocking.
By having inventory in the local market, Logitech is able to overcome the challenges
of international shipping and take advantage of local market sales promotions and
customer satisfying returns processes. Inventory is imported into the United Kingdom
when it clears customs, and Logitech pays the appropriate tax and duties on the bulk
shipment, shedding light on its “landed cost” for each product. Now, Logitech has many
options by which it can sell into the UK marketplace:
Online at its own local Web store, leveraging local shipping promotions
Listed in marketplaces like Amazon.com or eBay.com, where buyers would
get the product in a timely manner to ensure positive feedback
Marketed by affiliates or resellers, which Logitech can drop ship to buyers
Sold at a local authorized distributor, who can be quickly resupplied with
small wholesale shipments
The Logitech example illustrates the salient point the Fortune 500 has long known:
Where international shipping is a barrier to sales, having products in the local market
allows the seller to sell globally while acting locally.
11% annual growth
rate for
e-commerce in
the U.S.

Export Secret #2:
Try Before You Buy
In the Timothy Ferris best selling business book The 4-Hour Workweek, readers are en-couraged
to micro-test advertisements to gauge consumer response prior to manu-facturing
a product. Ferris advises entrepreneurs to drive potential customers to an
e-commerce website to take orders for products that have yet to be manufactured.
In turn, the theory goes, one can abandon the products that didn’t sell well and focus
exclusively on the home run products.
Fortune 500 Companies follow this same methodology but employ much more so-phisticated
and scientific methods. Under the guise of “market research,” large man-ufacturers
and retailers not only test market the viability of products but they also
break into new international markets through partnerships prior to committing to
specific in-country channels and the markets.
Business schools around the world are rich with case studies that describe the failed
efforts of multinational corporations that didn’t follow this approach. Brazen with
confidence and devoid of local wisdom, these companies pushed their products into
international markets with disastrous results. However, beyond selling products that
were offensive or not desired by local communities, many of the worst business case
studies center around business decisions that were made prior to having any tangi-ble
experience in specific overseas marketplaces. In short, investing capital and infra-structure
too early can be wasteful and, in some cases, irreversible.
Fortune 500 companies tip the scales to their advantage by entering new markets via
partnerships that have an existing presence in the marketplace. Despite being able
to order products from a single website, behind the scenes some of the largest online
merchants leverage local services that are embedded in-country. The result is a flex-ible
and cost effective means of test marketing a country without investing heavily in
the capital and labor infrastructure required to set up shop locally.
In today’s instant-on, geo-targeted marketing reach made possible through
advertising services such as Google AdWords and Facebook, the world’s most
effective merchants are leveraging the power of localized social media in
combination with the synergies of local fulfillment and distribution. Whereas one
cannot be everything to everyone, smart marketers are targeting local prospects
with advertisements that specifically drive products that can be delivered incountry
or in-union (e.g. European Union). As a result, Fortune 500 companies have merged
the know-how of marketing and operations for a highly-profitable and efficient
entry into international test markets.
Fortune 500s
tip the scales by
entering markets
via strategic
partnerships
with local firms

Export Secret #3:
Flex the Power of Local Connections
Fortune 500 companies have learned through experience that there are both advan-tages
and disadvantages of using their existing vendors when entering new markets.
Whereas one partner may be strong in one country (or even internationally) they may
not have the same presence and strength as a local partner. Moreover, local partners
possess the in-country knowledge that often international corporate partners lack. By
leveraging the efficiencies of both, the most successful exporters leverage local and in-ternational
partnerships. And the reason they’ve gone down this hybrid path is that
they’ve learned their lessons the hard way.
For example, when Apple Computer entered Eastern Europe in the 1990s they lacked an
awareness of local shipping carriers and the then current state of copyright laws in Po-land.
By not understanding the copyright laws, Apple’s line of computers were deemed
too expensive in comparison to Windows based computers. On paper, the Apple Com-puter
products appeared to be similarly priced to comparative offerings from brand
name computers running the Microsoft Windows operating system. However, what Ap-ple
Computer failed to realize is that it was perfectly legal to copy and install software
according to local copyright statutes in Poland at the time (Polish copyright laws have
since been brought up to international standards). What Apple didn’t understand is
that the total cost of ownership for a computer was heavily stacked against them when
one could simply install a colleague’s Windows software library for free.
So too, Apple’s lack of connections with local shipping carriers brought with it unpre-dictable
financial risks. Despite a regular flow of products into the country through
known international carriers, many shipments would simply disappear after entering
Poland. What Apple didn’t realize is that that the local shipping carriers had relation-ships
throughout the country that ensured safe travel. As a result, once Apple switched
to using local shipping carriers the loss of products in transit disappeared.
In today’s global marketplace, the Wild West days of disappearing inventory is less of
a problem with some of the large established markets like the U.S., Canada and Europe;
but, local carrier knowledge remains a prized commodity. Fortune 500 exporters have
learned to evaluate every order against the efficiencies and costs of both international
and local carriers. By choosing the best provider of service unique to the individual ship-ment,
Fortune 500 companies have automated the process of choosing the best meth-od
to get their products to customers in the least amount of time and for lowest cost.
As a result, every order is optimized for both efficiency and profits.
In a world where insatiable demand for one’s products can be hampered by delayed ship-ping
times and costly fees, smart merchants evaluate both international carriers and local
providers for a best of breed solution that is appreciated by their new customers.
Fortune 500
exporters have
learned to evaluate
every order against
the efficiencies
and costs of both
international and
local carriers

The RoadMap
Global is the New Local
President Obama clearly understood in his 2010 State of the Union speech that the
end goal is a huge increase in U.S. exports and that the major drivers of this export
surge starts with thousands of small businesses increasing exports – niche suppliers
and manufactures setting their sights on overseas sales.
To gain traction and “move the needle,” this export growth needs to be diverse
and huge in numbers. Tens -- if not hundreds -- of thousands of entrepreneurs and
managers of growing businesses must start and grow exports. For that to happen,
the process must be understandable, the startup cost must be low and the business
model must have inherent economies of scale that increase profits with less hassle as
traction is gained. In short, these processes must be simple, flexible, automated and
scalable.
In the mid- to late 1990s, the Internet and online marketplaces finally began to meet
these criteria and offered a jumping-off point for online sellers to reach into global
markets. Sites like Yahoo Stores, Amazon.com, eBay.com, Google Adwords, PayPal and
Alibaba offered new web-based services with low to no start-up costs and success-based
pay-as-you-use pricing. Thanks to these ecommerce pioneers, merchants were
able to quickly setup new online businesses and start selling:
1. Services like Yahoo Stores, Google Adwords, Amazon.com and eBay.com
enabled retailers to reach a global audience interested in buying their
wares;
2. PayPal provided secure payment processing for online vendors; and
3. Alibaba offered a platform to connect overseas manufactures and
suppliers with SMB buyers.
4. Communicating with and getting money from overseas buyers is now as
easy as it had been with domestic buyers.

Best Practices for Entering the Export Market
1. Research and Marketing
Start by investigating the markets you’re going into and how you’ll get your products in
front of buyers. With today’s online marketing tools, this process is much more acces-sible
than ever before. Rather than conducting extensive market research, ask yourself
these fundamental questions:
1. What online marketplaces will drive buyers to your website?
2. What keywords and local phrases describe your product?
3. What are the pay-per-click and CPM prices for regional keyword buys?
4. What directories can you use to seed your catalog?
Take the time to write down a marketing plan (or just an outline). Understand your
short and long-term product distribution goals, and visualize what marketplaces you
want to use to distribute products.
2. Getting the Product into the Warehouse
At Shipwire, we break up the entire fulfillment process into a step-by-step process:
1. Getting goods into the country/warehouse (“Inbound receiving”);
2. Getting the order (“Automating Order notification and processing”);
3. Getting the goods out of the warehouse (“Outbound Shipping” either
B2C or B2B).
Sound scary? It’s really not.
To receive orders, your existing website can be quickly changed to focus internation-al
Web site visitor into a special Web store category - maybe a shopping cart category
called “Canada Customers” or “U.K. and European Customers”. Then just swap out your
PayPal buy-now buttons or confirm your merchant account can take foreign currency.
For getting the goods out of the warehouse, shipping is easy once you have product in
the warehouse. It can be as simple as swapping out Canada Post or Royal Mail for U.S.
Postal Service.

That leaves getting product into the country as the hassle. Let’s focus in on this. You will
likely be making an LTL freight shipment (less-than-truckload) from your existing ware-house
via a freight forwarder and customs broker. Ask around (or ask Shipwire) for a
couple freight and broker names that specialize in international freight, and have expe-rience
with the country you are targeting. Always get multiple quotes.
Importing in bulk looks different to a customs agent than an individual parcel ship-ment.
Customs will scrutinize your inventory documentation and tax paperwork. One
option to successfully import in volume is to register your company with the local tax
authority. This option will provide you a local tax ID for the importer of record. It is typi-cally
not difficult to get a tax ID, a couple forms sent to the right place.
There are benefits from registering and dealing with taxes in country, here are a couple:
If you are familiar selling in the U.S.,
you may struggle to understand how
taxes are handled abroad. Basically,
the rest of the world is on a system
called “Value Added Tax” (VAT). The
Canadians call it “Goods & Service
Tax” (GST); but, it is basically VAT. It
is different than the sales tax system
we have in the U.S.
Governments love the VAT system
because the participants in the
supply/sales chain audit one
another, and only pay tax on the
incremental “Value Add” that each
participant adds to the product.
Each participant needs to know
what the value of the product is
at the point where they receive it.
Check out Wikipedia on VAT if you
really want to learn the history or
the lingo.
To be blunt, taxes are complicated,
and doing them wrong can get
expensive. Do yourself a favor, talk to
a local tax advisor BEFORE you ship a
large amount of inventory. Shipwire
has a list of tax advisors.
When you send inventory to
yourself at your overseas warehouse,
you are changing from one tax
jurisdiction to another. It is a
“transaction” and customs will
expect a tax check in addition to
customs fees and duties. The three
are known as “CDT”.
If you currently operate in the U.S.,
you need to get the equivalent of a
Federal Tax ID. In Canada its called a
“Business Number”. In the U.K. its a
“Business Registration”.
You want a local tax ID and you want to file taxes locally because if you don’t you will
likely overpay VAT taxes. When you import you will need to pay VAT on the value of
the imported product (Basically “Supplier Cost”). When you sell to a local buyer you
will charge them a VAT tax. You will have to pay the government the full retail VAT tax
amount unless you can prove you already payed a portion of tax (aka, your import tax
payment) - in which case you only have to pay the difference between Import Value
and Retail Value tax amounts.
Governments love
the VAT system
because the
participants in the
supply/sales chain
audit one another,
and only pay tax
on the incremental
“Value Add” that
each participant
adds to the product

In the U.K. there is an alternative to a full business registration that involves registering
your business as an importer with the U.K. government and getting electronic Binding
Tariff Information and a TURN number. See the Shipwire UK Warehouse Guide for links
and more information on this.
3. Partners provide leverage
Don’t let the use of the word leverage here give you sub-prime mortgage nightmares.
Leverage is a core law of physics. Use a pulley and you know that you can lift a heavy
burden with a small amount of force. Partners are critical to your success; but you have
to use them correctly. An ‘in country’ order fulfillment partner will offer local warehouse
expertise at a reasonable price...and give you room to scale:
Your order fulfillment provider should allow you to start with a very small
amount of inventory, and charge you on a usage basis as you increase
volume. This is especially important when you are just starting out.
Make sure that your warehouse doesn’t charge you account set-up fees,
request minimum shipping amounts, or have hidden receiving costs.
Your order fulfillment provider should easily connect into your shopping
cart, and marketplaces such as eBay, Amazon and PayPal. This will help
you move fast.
You should be able to transparently see an order from Web store to
doorstep.
They should counsel you on best practices and help you cost-effectively
scale.

Shipwire to the Rescue
Enter Shipwire, and its “Store-Sell-Ship™ Platform for Global Growth™.” We’ve taken
the efficiencies of enterprise supply chain management and created an offering that
delivers three key types of services:
1. International Growth Support – we help established merchants export into
overseas marketplaces by extending their existing infrastructure through our
global fulfillment network.
2. Outsourced Fulfillment – for many companies, we are their fulfillment
and distribution arm for their business-to-business and business-toconsumer
operations.
3. Entrepreneur Order Management – for the emerging business, we
provide free Order Management Software and a scalable path to creating the
American Dream through access to 3PL Warehouse services that are normally
out of reach for startups.

About the Author
Nate Gilmore, Vice President, Marketing & Business Development Nate oversees
Shipwire’s channel development and developer network, as well as our marketing and
public relations. He built and manages Shipwire partnerships with over 50 ecommerce
providers. Previously, Nate was at Concentric, acquired by XO Communications, where
he ran product management, sales and marketing. Over his six year career with
Concentric, he developed dozens of new business channels, by initiating new products
for small- and mid- size businesses, developing partner programs for those products,
and working with web developers and systems integrators to provide ongoing support
of those products. Previously, Nate held various legal positions in intellectual property
and business law. He holds a B.A. in History, and a J.D., from Santa Clara University.
Follow Nate at the Shipwire Blog http://www.shipwire.com/blog
About Shipwire, Inc.
Shipwire provides cloud-based logistics, shipping software and ecommerce order
fulfillment services from warehouses around the world for companies of all sizes.
Shipwire’s industry-leading logistics platform helps you grow sales, expand into new
markets, and delight customers by eliminating the hassles of shipping and storage.
Instantly connect your online store or marketplace with our warehouses in U.S.,
Canada, UK, or Asia, and let Shipwire optimally pick, pack and ship orders to your
customers faster, and for less.
Visit www.shipwire.com/why-shipwire to learn more about order fulfillment.
Please contact us for more information
Contact sales through sales@shipwire.com or 1-888-SHIPWIRE
Connect with us on Twitter: @shipwire
i Logitech is not a Shipwire customer and all statements here are assumptions made for illustrative purposes.

3 Export Secrets the Fortune 500 Doesn't Want You To Know

Recommended

Recommended

More Related Content

What's hot

What's hot (18)

Viewers also liked

Viewers also liked (7)

Similar to 3 Export Secrets the Fortune 500 Doesn't Want You To Know

Similar to 3 Export Secrets the Fortune 500 Doesn't Want You To Know (20)

Recently uploaded

Recently uploaded (20)

3 Export Secrets the Fortune 500 Doesn't Want You To Know