In October 2021 I’ll be traveling to Pordenone, Italy to attend SICAM, the furniture industry’s International Exhibition of Components, Accessories and Semi-finished Products. I’ve visited SICAM many times, and every time I’ve heard exhibitors express an interest in exporting their products to the United States.
This theme isn’t surprising since the United States is currently the largest furniture market in the world, amounting to $248 billion in 2021 with expected growth of over 2% annually (https://www.statista.com/outlook/cmo/furniture/united-states). However, although expanding into new markets can be both exciting and rewarding, it’s also extremely risky—particularly when your target market is as complex as the United States.
The fact is, a poorly planned expansion into a new market can negatively impact a company’s balance sheet as well as its future growth plans. Here are three fundamental strategies that can’t be ignored if you want to grow internationally.
If you want to grow internationally, you need to have an organization that supports your global ambitions. That starts with who you hire and retain. Having “global DNA” impacts everything about your organization: its recruiting practices, company culture, business strategies and vision. The earlier in its life that a company builds and supports a global mindset, the better it will be positioned to expand into different markets.
A company that hires people with international expertise, and that values employees who speak other languages and understand other cultures, will at the very least benefit from those different perspectives. But in today’s world, that strategic investment also lays the foundation for successful expansion into new markets.
Employees with international experience, or at least a global mindset, can help a company avoid basic and all-too-frequent pitfalls that can sink expansion efforts. These valuable employees not only understand that marketing strategies, product offerings and entry points won’t look the same elsewhere as they do in the U.S., but they may also have insight into what the best approach could be. No matter how successful you’ve been in your home market, you’ll need to adapt your approach according to the market you hope to enter.
If you open a subsidiary in the U.S., do you need to employ local professionals rather than sending expats who may not fully understand the market and the culture? Who is prepared to adapt your marketing material so that it speaks to American customers and not Italian ones?
Regardless of where you hope to expand, you won’t realize success without a good knowledge of your intended market, a thorough plan, and a strong and precise execution. This may seem obvious, but so many companies – no matter their size – often rush this step, leaving them vulnerable and unprepared.
A company simply cannot consider entering a new market without a full picture of the industry in that market: identifying future directions and dynamics that may impact the business, analyzing the competition, assessing potential barriers and opportunities, identifying sales channels, understanding industry practices and consumer preferences, identifying regulatory and industry requirements, and setting up a strong pricing strategy, just to name a few angles that must be considered.
In short, you need a good business plan in hand before you start a market expansion. Creating that business plan requires a significant investment in temporal, fiscal and human resources from within the company and possibly also from external advisors or consultants.
I often hear from foreign companies that the U.S. is a huge market. This is the first misconception. The U.S. is not a single market; instead, it’s 50 different markets with varying rules and standards. The U.S. has a complex legal system, and you’ll need experienced professionals to address day-to-day compliance in areas like state taxes and payroll. You’ll also need to learn regional differences, such as how the market in New York City is different from the market in Dallas, Texas or New Orleans, Louisiana.
International business is not just an expansion of your domestic operations. Rather, it’s a completely new business venture with different requirements and considerations that are unique to those new markets.
Conquering the U.S. furniture markets without building a distribution network is an extremely difficult task. A good distributor sells your products, provides support and customer service, carries inventory, promotes your brand, identifies market trends and competitor positioning, and shares its market knowledge with you.
In short, you should consider your distributor as being your best ally and an integral part of your team. It’s your job to set the distributor up for success; besides supplying marketing tools and training, you’ll also need to establish pricing strategies that allow your distributors to be competitive if your company simultaneously sells directly on e-commerce platforms.
In markets the size of the U.S., you’ll need to create a widespread distribution network in all states and work to balance your company’s needs with those of your distributors. Often your distributor may request exclusivity in the territory they cover, as without that clause the distributor may have limited incentive to allocate adequate resources toward development of sales. In response, you’ll want to mitigate the risks of being tethered to a distributor who doesn’t do a good job for your company or represents only one of your product lines but prevents you to sell other product lines to other distributors.
Finding the right partners who can adequately support your global expansion is a time consuming, costly and challenging task—one that can be made easier by Expandigo. Whether you’re sourcing distributors, sales reps, consultants and business advisors or other partners, Expandigo can support your company’s success by helping you identify and connect with the right partners to reach your objectives.