The Economics of Starting an Imports/Exports Business

For nearly as long as there’s been people, there’s been trade. In the long history of humanity, when we aren’t at war, we’ve been interested in buying and selling various goods from each other. Imports and exports are how the potato came to Ireland, and in a more modern sense it’s how we’re able to buy food, drinks, furniture, clothes, and nearly everything else, from all around the world today.

How to Start an Imports Exports Business

If you’re interested in starting an imports/exports business, there are a ton of considerations you need to make. For one thing, it’s helpful to have a background in business, international relations, or global finance. This should give you an understanding of the myriad hoops one must jump through to sell or buy a product from an overseas supplier.

“The compliances make it so complex that even if you did know how to do it, you’re still going to have to keep in mind a lot of random considerations,” says Selena Cuffe, co-founder of Heritage Link Brands, a company that imports, exports, and produces wine, and other high-end products like tea and honey.

Cuffe worked for years in brand management for Procter & Gamble, among other trade-related positions, before starting her company in 2005. She was inspired after going to South Africa, where she attended the first Soweto Wine Festival.

“At that festival were literally the first black winemakers and vineyard owners post-apartheid, showcasing their products for the first time to the world,” says Cuffe. “It was serendipity and enlightenment when I had my first glass. That’s how I got into the wine business—when I found there was no distribution into the U.S. market, and they were barely distributing in their own country.” 

Heritage Link Brands now operates within the wine industry in different ways: It imports wine from South Africa into the U.S. wine market, and it exports grapes from its own South African vineyard to the U.S. as well as the Philippines and Hong Kong. It also exports wine to airlines for use on international flights

But in order to understand exactly how Heritage Link Brands does business, it’s important to start from the beginning.

What Is Importing and Exporting?

There’s a very simple but important distinction that messes with high school students and functioning adults alike: The difference between imports and exports. Imports are any good or service brought in from one country to another, while exports are goods and services produced in the home country for sale to other markets. Thus, whether you’re importing or exporting a product (or both) depends on your orientation to the transaction.

The modern system of international trade is a complex web of import/export businesses that handle the sale, distribution, and delivery of goods from one nation to another. There is more than one type of import/export business. You could focus just on importing or just on exporting. You could be a manufacturer’s representative, specializing in a certain industry, or you could be an import/export merchant or agent, which is more of a freelance broker.

Or you could find yourself working a number of different angles within the industry at once, which is what Cuffe does at Heritage Link Brands. At the end of the day, if a product starts from a manufacturer, is exported to buyers internationally, bought by an importer, and then sold to a retailer, distributor, or directly to a customer, it’s part of the overarching import/export industry that adds up to trillions of dollars worth of goods exchanged around the world each year.

What Are You Importing/Exporting, and to Where?

The first step in starting an import/export business is to find a product or industry you are passionate about and that you think could sell in international markets.

For Cuffe, that product turned out to be wine. She felt a connection to the product not just from a quality and taste standpoint but from a social justice standpoint as well.

“When I first entered the industry in 2005, there was just one black winemaker and five black-owned brands,” she says. “Today there are 17 black winemakers and 31 black-owned brands.” 

Though the South African wine industry still deals with injustices like poor working conditions and unequal access to capital, Cuffe says things have improved since the previous decade thanks to the increased sales and notoriety of South African wines worldwide.

“The biggest thing that we’ve enabled is the financing of black businesses. When we first got started, in order for even these brands to create their own wine, they had to source it from existing white wineries, because they didn’t own any land,” Cuffe says.

Once you find your product, you also need to identify the right market for it. You can conduct research with resources like GlobalEDGE’s Market Potential Index or by checking with local government officials and websites, such as the Department of Commerce International Trade Administration’s Data and Analysis.

From there, it’s best to start “slow and steady.”

“Test your ideas,” says Cuffe. “Don’t assume that what you think will sell because you love it will catch fire in the market. What catches fire in the market is more than just the way it tastes—it’s who you know, and the packaging and serendipity of timing, and all of the indirect soft stuff that makes the difference.”

Get Your Business Basics in Order

Anyone starting a business in the 21st century needs to cover certain bases, like creating a website as well as social media channels like Facebook, Twitter, and a host of others.

You need a business plan too. Part of that business plan needs to cover how to handle the rules and regulations of the markets you want to work in. For example, to bring alcohol and tobacco products into the U.S., you need an Alcohol and Tobacco Trade and Tax Bureau permit, which is free but can take months to acquire. Similar research needs to be done when doing business with other countries, taking into account everything from various legal back label requirements in each nation to insurance.

Perhaps most importantly, you need access to capital.

“The first thing I recommend for anyone is to have your capital upfront,” says Cuffe. “That’s so you can protect your business from not only a legal standpoint but also the equity of the brand that you create and to make sure you invest in the quality of whatever you launch. Test a market, or test a city, then a state, then a region. Then I think that there are greater chances for success and sustainability long-term.”

The ratio that Cuffe cited for success in the wine industry—”In order to make $1 million, you need to invest $7 million”—demonstrates the kind of capital needed to start a business comfortably (if one can ever be “comfortable” as an entrepreneur) and be prepared for whatever occurs, from issues with sourcing to changes in trade regulations.    

Source Your Suppliers

Once you have a product you’d like to trade internationally, you need to find a local manufacturer or other producer that makes your product and can lead to a strong partnership. A good relationship with a supplier is crucial to long-running success.

Generally, you can find suppliers through companies like Alibaba, Global Sources, and Thomas Register. You will need to convince the supplier of the benefits of entering the U.S. market (or another market you wish to sell to), and figure out the logistics of taking their product from their local warehouse or production facility to another one, potentially on the other side of the globe.

You might also be your own supplier—in some cases, as Cuffe occasionally is for herself.

“We own an interest in a vineyard in South Africa called Silkbush,” she says. “My orientation when I do business to them is, 80% of the grapes that we pick we send off to domestic wineries who use our grapes to produce their own proprietary high-end wine. The remaining 20% is used to create our proprietary label Silkbush, which we export to foreign markets.”

Find Your Customers

Deciding on a market is not the same as finding your customers. You can’t just send your products to the Port of New York and start selling your wares on the docks to whoever walks by. You usually need to find distributors and clients who will take on your product and sell to others.

If you have a quality website that includes digital marketing campaigns, your customers may end up finding you. But to get started, Cuffe suggests doing things the old-fashioned way—by cold-calling.

“I cold-called the local Cambridge, Massachusetts, Whole Foods store, and they gave me a chance. And now we do display programs and regional programs with Whole Foods,” says Cuffe. “A lot of what I did in the beginning and even today involves cold calls.”

Lining Up the Logistics

Perhaps the most complex aspect of importing and exporting is the logistics of taking a product created somewhere and selling it somewhere else. How does the product make the trip from the vineyard of South Africa to the wine glasses of drinkers in California, for example?

“When you are operating within a supply chain where your customer is different than your client, which is different than your consumer, it requires an extraordinary amount of coordination,” says Cuffe. “I use a freight forwarder that on my behalf reaches out to shipping lines, like Maersk.”

In some cases, Cuffe will make sure that she can pick up from a small winery directly so that she can oversee palletizing and that everyone is ordered for maximum efficiency. The inventory will then travel overseas, where it can end up in U.S. East Coast or West Coast warehouses. Her freight forwarder will coordinate the stock so that it ends up in the right place to satisfy pending orders.

The important thing to note here: “Within the chain, everyone is putting their mark up on it,” says Cuffe. This is where you have to balance the price point of the wine with what it takes to get it from one side of the Earth to the other. Importers will typically take a 10-15% markup over cost, but make sure that final cost doesn’t exceed what the customer is willing to pay.

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The world of importing and exporting is a dazzling, complex system that balances both emotional and economic needs. If we want something that is grown or produced in another part of the world, how can we get our hands on it? How can we give others the opportunity to enjoy it, while still creating a sustainable lifestyle for those producing it and for those who transport it from point A to B?

If you’re interested in answering these questions, don’t let the enormity of the task overwhelm you. Just do it.  

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from Fundera Ledger https://www.fundera.com/blog/how-to-start-an-imports-exports-business