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Trade Routes: The Challenges of a U.S. Launch

Michael Long and Chris Czajkowski
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While many international companies would like to sell their products in the U.S., they have the impression that the U.S. market is too vast, expensive and competitive to take on. This fear is fueled by a preconceived notion of the U.S. market as being an overwhelming and unmanageable myriad of distribution channels that require significant levels of brand investment. This fear is further fed by horror stories of unsuccessful attempts by other brands to penetrate the market. As a result, international companies often choose to postpone or forgo profitable and rewarding opportunities in the U.S. Indeed, the basis of this fear lies in one undeniable truth: first impressions are lasting impressions.

There are, in fact, challenges associated with launching overseas in an unfamiliar market: multiple distribution channels to consider—each with its own margin and cost structure; absentee management unable to effectively oversee and react to day-to-day business needs and opportunities; and the absence of a localized logistics infrastructure. All become impediments to smooth operations and steady growth. Lastly, there can be frustration in dealing with time differences, regulatory and governmental requirements, insurance issues, and the loss of critical details due to language barriers.

Still, many brave companies attempt to introduce brands into the U.S. on their own.  The results vary—at times they are met with only mild disappointment; at other times, they suffer failure and significant loss of credibility—and smaller brands in particular, those managed directly from overseas, rarely maximize results.

But why should an international brand reject what could be a potentially profitable and rewarding experience? A launch in the U.S. provides strategic diversity in a global distribution plan and PR exposure in the most important beauty market in the world, not to mention supplemental cash flow and operational efficiencies.

The Answer: Appropriate Partnerships
International companies can ally themselves with experienced U.S. management organizations to help navigate challenges and facilitate the achievement of corporate goals. If executed properly, the U.S. launch experience can be both profitable and rewarding.
Identifying the appropriate U.S. management partner is the first step to meeting the challenges ahead. Ideally, a management group should provide a full suite of services with the ability to ramp up support as growth dictates and be well-versed in all relevant disciplines—including brand and sales development, financial management and operational support. A launch in the U.S. is a complete business commitment and should be handled as such. All necessary elements must be considered, and all resources must be available for an immediate “call to action.” All things being equal, a retailer is more likely to choose a brand that can deliver hands-on management and service at an exceptional level—as well as a fine product.

A critical step in developing a U.S. launch is the creation of a business plan to assist in evaluating and developing a strategy, and to serve as a road map in the execution of said strategy as a finished product. Such a plan should identify and quantify all resources needed to maximize success. The business plan will identify the challenges and propose actions that address those challenges in a responsible and timely fashion. This will enable the brand to move quickly through the decision-making process. Attempts to launch without a plan will, most often, yield disappointing results.

Meeting the Challenges
The first challenge to launching a brand in the U.S. market is positioning the brand vis-à-vis its current positioning overseas. This involves a consideration of several factors best identified while working in conjunction with the U.S. management team. Very often, a brand established overseas will need to modify its approach to most effectively reach the U.S. audience.

The next challenge is to create an appropriate distribution strategy that reaches the target consumer and reinforces the brand’s positioning. Certain retailers are best suited to establishing a brand’s profile, while others are better positioned to provide consumer access. Even within a single distribution channel, each retailer has its own personality and appeal. Maintaining a brand’s long-term image and intrinsic value is directly influenced by its initial placement in the correct distribution channel. Once established in the appropriate channel, a brand is thereafter defined by that distribution. Each channel of distribution has its own margins, cost structures and brand spending requirements. Understanding these factors is key when developing a distribution strategy. Striking the right balance is critical to success.

Ensuring an efficient importation process can be a significant logistical challenge. A working knowledge of the pertinent regulations, restrictions and operational processes is critical, and one must consider compliance with various agencies—including the FDA, the Federal Trade Commision and U.S. Customs. Various nuances of this process are best managed on-site. In addition, there are a number of applicable insurance needs to be addressed.

Once a brand has cleared the importation hurdle and is ready to launch, the day-to-day routines take on a life of their own. Brand management is a constant driver of the business, and past results must be reviewed while planning for the future. This includes developing and executing marketing strategies; anticipating and handling in-store activities; planning, hiring and training selling staff; driving the PR machine to ensure the brand is receiving priority placement; managing appropriate and timely flow of goods; and securing in-store presentation and positioning. These demands are essential from day one, regardless of whether the brand is sold in one door or in one hundred doors.

As an international brand gains a foothold in the U.S. through increased sales and distribution, the logistical challenges grow accordingly. Larger retailers require electronic data interchange (EDI), and smaller retailers require more frequent shipments—and the cost of shipping small orders from overseas becomes prohibitive. In addition, retailer payments to overseas vendors can be problematic. In order to be competitive and able to react to immediate opportunities, the international brand should be positioned in the U.S. with a flexible logistics infrastructure.

An international brand can maximize its success and enjoy a very rewarding and profitable business model in the U.S. International companies should recognize the challenges associated with launching in the U.S., and the fear to venture alone is, in part, well-founded. By partnering with a U.S. management organization, there is sufficient expertise to address each challenge, move through the decision-making process and continue to move the brand closer to launch and future success. It is clear that the ultimate legacy of a brand will be dictated largely by the actions taken in initial planning, preparation and execution.

The essential elements of success are immutable: great product, well-positioned branding, adequate infrastructure and skilled, hands-on management. The rewards are there for the taking. So why shouldn’t an international brand enjoy a profitable and rewarding experience? The answer is they should.
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