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Doing business in the USA
2nd of December 2014 Article by Paul Wonnacott
Paul Wonnacott is managing director and president of Vectair Systems, specialist in washroom hygiene and aircare systems. The company does business around the globe and Wonnacott has gained considerable experience in many of the world's most important markets. In his latest blog for ECJ, he offers his views on trading in the USA.
Whether we like it or not, we all now operate in a global marketplace. I'm not one for shopping but 20 years ago, whenever I visited the USA, I would spend an afternoon at the shops or outlets, with a long list of requests from my family and friends to bring back items from brands that weren't available in the UK (Abercrombie and Fitch, for example).
Many big-brand items from Nike or Levi's were available first in the USA and didn't appear in the UK until months or years later - remember Nike TNs, or those children's trainers that lit up when you walked? Not to mention the fact that at £2 to every dollar, everything was half the price to us Europeans.
Nowadays, it is very different. Walking down the iconic shopping avenues in New York you see many of the same shops that you see back in London, Paris and Milan. Not only have US brands come to the UK, but European brands like H&M and Zara have taken over the US high streets and store prices in all shops are very much relative to the UK.
This relates very much to the cleaning industry. Hygiene brands no longer focus their efforts in one marketplace - they expand and spread across different countries and regions. Everyone in the world has the right to safe sanitary systems: a soap dispenser in India works in exactly the same way as a soap dispenser in the UK.
Products are launched globally, mainly due to improved transportation and manufacturing processes, and communication opportunities through new technology (websites, Instagram, Facebook etc).
But the USA isn't just another country. The USA is a vast, diverse nation made up of a number of states with differing needs, cultures, views, customs and their own laws. One could say that dealing in each state in the USA is like dealing with a different country every time!
We recently exhibited at the ISSA Interclean North America, which this year was held at the Orange County Convention Centre in Orlando, Florida. What was interesting is that we saw a great number of visitors to our booth, but these were mainly from North, East and Central America. The flight time from West to East Coast America no doubt has an impact - flying from San Francisco to Orlando takes around 6 hours. That's like travelling from London to Kuwait!
It is easy to forget the enormity of a country like the USA. It is also easy to assume that because America speaks English, we can target Americans in the same way that we target the English. This leads nicely on to my first piece of advice to any company wanting to expand into America - get to know the language. From phrases and preferred vocabulary, down to spelling, it is worth investing some time in getting to know the right ‘lingo' to use in your marketing material.
Secondly, it is important to get to know the infrastructure. The age old saying "Do your research" cannot be underestimated. What role does the Government play in purchasing decisions? Who are the main decision makers in the sector? What approvals and/or accreditations are important?
Focusing on one state or region can be an advantage, as this enables you to ‘try and test' your sales and marketing techniques.
So how will you sell your product? Selling into the USA might need more consideration than just following what has worked with distribution into other countries. Choosing the right distribution strategy is important to fuel your business growth. An effective distribution strategy will enable you to use your sales channels effectively and maximise profits. A strategic approach to distribution will also identify conflicts and minimise them.
Whether to invest in direct representation and the incumbent employment costs, or, take the route of the utilisation of Manufacturer Rep Groups (MRG) or a Manufacturer Rep, is a vital strategic decision to ensure that effective marketing, selling and distribution in your respective channels within the United States is covered. If you go the latter route each appointed manufacturer rep or MFG will have a defined area/state with which they operate and will sell and "represent" the manufacturer's products and the manufacturer (you).
These reps help provide that vital ‘local' link between the customer and the manufacturer and whilst this method can be cost-effective compared to the typical employment of direct sales forces (as mainly seen in Europe) the time, energy and investment required to build a successful MRG community should not be under estimated. Normally, MFG's will represent numerous manufacturers - mainly companies developing related products and not competing.
Whatever channels you choose, you need to make sure that you manage them properly. Think about building a good team on-the-ground. Customers like to know they can call and talk to somebody in their area. Other considerations include investing in in-house systems and staff, as well as building good working relationships with agents and distributors. Then, efficient logistics and good communication are imperative if you want to succeed.
There are far more unnamed tombstones scattered across the length and breadth of the USA of failed UK and European businesses than there are flag poles of successful enterprises! The cost of market entry should never be under estimated and from a financial perspective the amount of investment required is usually far more than what one might first envisage.
An extremely robust, measured and tested financial plan needs to be developed with disciplined and strict qualitative and quantitative forecasting and importantly, break-even and risk analysis. It is not unsurprising therefore to suggest that many failed businesses have not fully realised the extent of the costs and risks involved in market entry in the United States before they embarked on any campaign.
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