A CEO explains how he used an export trader to take his product international and the deal that was struck.
Export trading companies, which act as international distributors, have something novice exporters badly need -- experience with international markets. But you don't have to give up total control to tap their expertise. "Different export traders will provide different levels of service that have to be negotiated," says Tom Erickson, CEO of the Chromaline Corp., a specialty-chemical company in Duluth, Minn. Once Erickson gained some overseas exposure, he was able to win terms with a trader that ran counter to the norm.
Typically, market research is closely guarded. When Erickson discovered H&H Exports, also in Duluth, he knew the trading company lacked experience with Chromaline's printing-industry clients. So he struck a deal: he gave the export trader a list of hot and cold overseas prospects, and H&H Exports agreed to conduct its own market research and share the findings. "We had a close partnership in pioneering and developing markets, which was more effective in getting new customers," says the CEO.
Export traders generally keep customer lists secret. But Erickson accompanied the export trader on overseas visits. The value to H&H Exports was Erickson's presence. And he already had his own list of contacts, gathered at international trade shows.
Pricing is out of your hands. H&H Exports handled shipping, documentation, and delivery, and had ultimate control of pricing. Still, Erickson got access to the numbers. "It was difficult learning how to price," he admits, "so our export trader really helped with that."
When Chromaline started exporting with H&H Exports, 12 years ago, its sales were in the low six figures. In 1995 its sales climbed to $7.5 million, one-third from overseas. Since Erickson opened a sales office in France, the export trader's role has been reduced primarily to pursuing sales in Asia. Still, in the early days it really helped Chromaline exploit markets abroad with little financial risk.