QUALIFYING YOUR BRAND
Qualification is not a gut feeling or assumption; it is based on facts and the application of logic. Your dedication to understanding your American marketplace is critical.
Whether you are in London or Los Angeles, Kalamazoo or Katmandu, consumers buy based on the same set of values:
Price point
Design
Functionality
Quality
Brand perception
Brand positioning
Your focus will be to persuade your target retailers that your brand has enough of these elements to get you an opening order.
Since your brand is new, your main focus should be on price point, design, function, and quality. Brand perception and positioning are relevant to existing products and brands in the market, giving your competition an advantage. Do not underestimate this.
Target customers:
The price point has a direct correlation to brand positioning. Do you envision selling to independent retail stores or big box retailers like Walmart, Target, or Bed Bath & Beyond?
I would recommend that, regardless of your product, you focus on independent or regionally focused retail customers in your first two years of business. Big box retailers are simply too risky for a multitude of reasons:
Slim margins
Complex set-up and operating procedures, including EDI
Significant penalties for mistakes or missed deadlines
Demanding requirements
60 days net terms
Heavy stock and scalability requirements
Pricing your products:
Pricing your products correctly cannot be emphasized enough. Detailed research is necessary to become knowledgeable about what the market is willing to pay. Otherwise, less than 40% of your potential market will be interested in buying from you.
Pricing is a top-down, bottom-up process. Top-down refers to the market and what the market determines the price points of your products to be within the independent retail sector. Bottom-up is figuring out the landed cost of your product and establishing if your costs + transportation + duty is cost-effective enough for you to sell your products with enough profit margin to create a sustainable and, most importantly, profitable business.
Landed cost of your product - Bottom-up:
Landed cost pricing:
You already know the F.O.B. cost of your products. Contact your freight forwarder and ask them to provide you with pricing for 7 pallets of product, a 20-foot, and 40-foot container.
If you are shipping from Europe, choose Los Angeles as your delivery point. If you are shipping from Asia, use New York (always plan on the furthest point).
The key element is not just transportation costs but duty rates as well.
F.O.B. cost of products + 7 pallet transport cost to the furthest geographical point + duty = landed cost. Work this out as a percentage.
Example: Shipment F.O.B. 5,000 items @ cost $10,000, transport & duty $2,000.
Transport and duty = 20%. Landed cost per item = $2.40.
Retail, wholesale costs - Top-down:
Establishing your prospective customer base will enable you to determine price points at retail.
Begin your research with Google. Find out what products are available in the U.S. at your prospective customers. Compare similar products (or as "like" as you can find) and their retail pricing.
If the retail price point is $50, the retailer needs to purchase it from a U.S. location for a maximum of $25.Your landed cost needs to be $10.
Choose your best-selling items and determine if these calculations work for you.
This is the first step in qualifying your price point. You are commencing a process that will determine if you have a potentially profitable and sustainable business in the U.S.