Importing: how to grow your business internationally

Starting an import business is exciting but it's not something to undertake lightly. These tips will help you make the most of opportunities to expand your business overseas.

Getting ready to import

When small businesses can order from overseas with the click of a button, it's easy to underestimate the risks involved in importing. Regardless of the size or methods of your purchases, boosting business growth by importing shouldn't be taken lightly, especially by first-timers. It takes considerable forethought and detailed planning.

Establish compliance

Before you rush headlong into importing, find out whether the product you're planning to import is actually allowed to enter Australian borders. You don't want to spend time and money researching costs and market potential only to find you can't import the item in the first place.

Imported items can be subject to specific regulations or prohibited outright for many reasons, such as safety grounds and international trade embargoes.

How to check if the product can be imported

Consult the Australian Border Force to find out the legality of importing the product and the permits, duties and regulations it might be subject to.

If it can be imported

Consult the Department of Agriculture and Water Resources, opens in new window to find out if the imported item will need to be inspected on arrival in Australia.

Assess demand

As with any product, the basics of market research apply.

Target markets

Establish target markets for business expansion by researching the potential usability of the product and the solutions it could provide for different types of consumers or businesses.

Talk directly to potential customers and use surveys to establish the wants and needs that the product could satisfy.

Establish future growth

Once you have target markets in mind, establish their size and future growth potential by using demographic and statistical data from the Australian Bureau of Statistics, opens in new window.

You need to look for markets with positive long-term outlooks. If there's a high risk that competitors will ride on your coat tails, you could consider niche markets currently ignored by other businesses.

Investigate costs and pricing

When you can estimate costs and pricing, you'll be able to use your estimates of demand to perform a break-even calculation. You can then find out how many units of imported product you’d have to sell before realising a profit.

Costs

As well as the standard costs of marketing a product (sales costs, domestic logistics, advertising, etc.) imported products come with their own costs. These can include:

• shipping
• insurance
• storage
• finance
• custom brokerage fees
• customs duties and levies.

Unexpected costs in importing can be significant. If you miscalculate shipping costs or the value of the Australian dollar falls, you may find you have no margin at all. It's essential you drill down into every conceivable cost before you go any further.

Pricing

The importance of astute pricing is the same as with any product. Pricing should be influenced by:

• target market price tolerance (the highest price people would be willing to pay)
• competitor pricing
• demand for the product
• how you want to position the product or your business in the marketplace. If you’re too hasty in discounting your product you’re less likely to be perceived as a provider of premium quality.

If you have an exclusive contract to retail or wholesale the imported product in Australia, you should consider charging a premium. You may also want to consider this if you believe others will find it hard to follow in your footsteps.

Weigh up the risks

The risks of importing can be varied. They could involve:

• an unreliable supplier
• the product being lost in transit
• too much working capital tied up in import orders and finance
• deteriorating margins as foreign exchange rates change
• the imported product being banned or subject to high tax through a trade disagreement
• rising costs or threatened production due to economic or political turmoil in the country of origin.

Make a list of the risks in ascending order of likelihood and significance before you consider ways to minimise the exposure to your business. For example, you could draw up your own standard contract that provides you with cover if the supplier fails to deliver on time. You could also talk to one of our foreign exchange specialists about the ways you can protect yourself from fluctuations in the exchange rate.

If you haven’t already done so, consult an adviser with experience in importing products for your industry. They can act as a sounding board for identifying risks and possible solutions.

Research suppliers

If the numbers stack up and the risks you've researched look avoidable or manageable, it's time to look at suppliers. This should be one of the later steps you take in pursuing your business expansion strategy given it’s advisable to visit overseas suppliers in person if possible. That way you lower the risk of any misunderstandings. It costs money and time to do this but far less money and time than correcting things further down the track if you don't receive the goods you were expecting.

When assessing suppliers:

• ask for references from customers, plus contact details so you can talk to them directly if possible
• carry out thorough credit checks
• visit them in person or, if that’s not feasible, make sure you receive samples before you place any orders.

Before you approach suppliers, research the cultural differences you might have to contend with when expanding your business overseas to limit the chance of language or cultural barriers causing misunderstandings.

One last suggestion

Always seek an expert opinion as soon as you can on your journey to becoming an importer. You could:

• consult your Chamber of Commerce or industry association
• talk to non-competitor importers with experience in the country you wish to import from
• find information about the country you’re doing business in from export adviser Austrade, opens in new window
• talk to NAB’s international trade experts.