What Do We Mean by Exporting and Importing?
The history of importing and exporting dates back to the Roman Empire, when European and Asian traders imported and exported goods across the vast lands of Eurasia. Trading along the
Silk Road
flourished during the thirteenth and fourteenth centuries. Caravans laden with imports from China and India came over the desert to Constantinople and Alexandria. From there, Italian ships transported the goods to European ports.
For centuries, importing and exporting has often involved intermediaries, due in part to the long distances traveled and different native languages spoken. The spice trade of the 1400s was no exception. Spices were very much in demand because Europeans had no refrigeration, which meant they had to preserve meat using large amounts of salt or risk eating half-rotten flesh. Spices disguised the otherwise poor flavor of the meat. Europeans also used spices as medicines. The European demand for spices gave rise to the spice trade. The trouble was that spices were difficult to obtain because they grew in jungles half a world away from Europe. The overland journey to the spice-rich lands was arduous and involved many middlemen along the way. Each middleman charged a fee and thus raised the price of the spice at each point. By the end of the journey, the price of the spice was inflated 1,000 percent.
Exporting
is defined as the sale of products and services in foreign countries that are sourced or made in the home country. Importing is the flipside of exporting.
Importing
refers to buying goods and services from foreign sources and bringing them back into the home country. Importing is also known as global sourcing.
An Entrepreneur’s Import Success Story
Selena Cuffe started her wine import company, Heritage Link Brands, in 2005. Importing wine isn’t new, but Cuffe did it with a twist: she focused on importing wine produced by black South Africans. Cuffe got the idea after attending a wine festival in Soweto, where she saw more than five hundred wines from eighty-six producers showcased. Cuffe did some market research and learned of the $3 billion wine industry in Africa. She also saw a gap in the existing market related to wine produced by indigenous African vintners and decided to fill it. She started her company with $70,000, financed through her savings and credit cards. In the first year, sales were only $100,000 but then jumped to $1 million in the second year, when Cuffe sold to more than one thousand restaurants, retailers, and grocery stores. Even better, American Airlines began carrying Cuffe’s imported wines on flights, thus providing a steady flow of business amid the more uncertain restaurant market. Cuffe has attributed her success to passion as well as to patience for meeting the multiple regulations required when running an import business.
Exporting is an effective entry strategy for companies that are just beginning to enter a new foreign market. It’s a low-cost, low-risk option compared to the other strategies. These same reasons make exporting a good strategy for small and midsize companies that can’t or won’t make significant financial investment in the international market.
Companies can sell into a foreign country either through a local distributor or through their own salespeople. Many government export-trade offices can help a company find a local distributor. Increasingly, the Internet has provided a more efficient way for foreign companies to find local distributors and enter into commercial transactions.
Distributors
are export intermediaries who represent the company in the foreign market. Often, distributors represent many companies, acting as the “face” of the company in that country, selling products, providing customer service, and receiving payments. In many cases, the distributors take title to the goods and then resell them. Companies use distributors because distributors know the local market and are a cost-effective way to enter that market.
However, using distributors to help with export can have its own challenges. For example, some companies find that if they have a dedicated salesperson who travels frequently to the country, they’re likely to get more sales than by relying solely on the distributor. Often, that’s because distributors sell multiple products and sometimes even competing ones. Making sure that the distributor favors one firm’s product over another product can be hard to monitor. In countries like China, some companies find that—culturally—Chinese consumers may be more likely to buy a product from a foreign company than from a local distributor, particularly in the case of a complicated, high-tech product. Simply put, the Chinese are more likely to trust that the overseas salesperson knows their product better.