THE MAIN MISTAKES TO AVOID TO BE SUCCESSFUL IN THE US
The development of the US market is a long and difficult process, and Italian companies often underestimate the preparation, planning, and budget needed to be successful.
It is, therefore, very useful to get to know the main mistakes to avoid when approaching the US market.
One of the main mistakes to avoid to successfully sell in the US is to think the process of developing the market simply consists of finding the “right” distributor or agent. Contrary to what many entrepreneurs think, that kind of research is usually far longer, more difficult, and less fruitful than expected.
A distributor in the US won’t agree to sell a product, even if excellent, if not supported by investments provided by the company in terms of staff, marketing, logistics, etc. To build successful commercial partnerships, it is, therefore, necessary to co-invest with one or more distributors.
In regard to agents, in the US, representatives that work exclusively “on commission” do not exist: American agencies require a $4.000/month base plus expenses, in addition to commissions. As well as in this case, the Italian company is required to invest in terms of marketing and promotion.
The “right” agent or distributor that “believes in the product” and develops the American business on behalf of the Italian company does not exist. In order to successfully sell in the US, efforts and dedication are required to build sales network, define commercial partnerships, and create a stable presence on the territory.
Exporting does not mean simply searching for a client and internationally, especially when talking about a market like the US. Not only is it necessary to adapt the product (e.g. labels and dedicated packaging) and to obtain the required certifications to export to the US, but it is especially important to internationalize the entire company. The adaptation to the American business logics must involve the whole company, and that means acquiring both internal processes and service levels in line with local standards.
With this in mind, some of the elements that must be guaranteed to potential American clients are:
- Brochure, catalogue, company profile, instruction manual and unit of measurement in English and according to American standards
- Staff dedicated to the market able to interact in English and available during American “hours”
- Invoicing should be in dollars
- Customs rules should be monitored constantly
- Web site adjustment: it is necessary to provide an ad-hoc version of the website made for the US, with American English texts, graphics, and navigation maps following American A local address and phone number also should be included.
Even before approaching potential American clients, it is necessary to gain a company attitude oriented to the export and to the dedicated personnel who manage the whole, sometimes complicated, process of exporting to the US.
When acquiring information about the US market, it is important to consider that the newborn corporation does not “inherit” the credit history of the Italian parent company.
Unfortunately, companies that have just been created in the US cannot provide a credit history and, therefore, banks cannot verify their creditworthiness. This can make it difficult, even for financially solid companies in Italy, to obtain a lease for buying a car, renting offices or warehouses, or receiving credit cards for daily purchases. Moreover, it is unlikely for suppliers, especially if at the beginning of a partnership, to allow payment delays up to 30/60 days.
One of the main mistakes to absolutely avoid is to delegate only one commercial partner to manage the whole commercial, administrative, and logistic aspects of the business.
Entrepreneurs, especially in the case of a distributor which develops a good sales volume in the US, full of enthusiasm allow the commercial partner to completely manage the overseas business. That means the company’s products are stocked in the distributor’s warehouses and that every commercial contact is managed by the partner; the Italian company loses direct contact with the market and visibility over the effective performance of the business.
Although a written agreement is not signed, an exclusive business relationship is established with the commercial partner, which makes it very difficult for the Italian management to get free from and to get back control of the market in case of disagreement.
For example, if the mother company decides to expand the distribution network or change the commercial partner, try a new sales channel, or build its own productive plant in the US, the distributor could turn out to be a fierce competitor, with deep knowledge of the company’s products (sometimes even more than the company itself) which gives the ex-partner the chances of a price war.
Moreover, even in the case of the distributor interrupting the relationship (e.g. for ceased activity), it could request revenues on future sales.
Therefore, it is absolutely fundamental to not completely entrust the development of the US market to only one partner, avoiding the risk of being back at the start years later, working from scratch, looking for clients and developing a market that you do not really know.
One of the main mistakes to avoid is to think that doing business in the US is the same as doing business in every other European country, not considering all the similarities that make Europe a much more homogeneous market than one would think.
It is, therefore, fundamental to not underestimate the cultural differences which make the US a deeply different market in terms of values and consumption habits. Contrary to what many companies think, not all the products that are sold in Europe will be automatically bought overseas, where there are different purchase logics, product standards, and supply chains.
Moreover, Italian entrepreneurs are often guided by a sense of “familiarity” towards the US market, given sometimes by personal, touristic, or cultural reasons, that make them think it is similar to the Italian market. Actually, it is not so: American companies are generally bigger, with more professional managers and Anglo-saxon business culture, characterized by clarity and respect for rules. In the US, rules are clear and simple, that is why it is supposed that people will follow them.
With that in mind, it is fundamental to pay attention to the certifications needed for products and to always be in compliance with American regulations: there are no shortcuts which bring good results in the long-run, especially if the company is willing to build a stable presence in the US. Likewise, contracts with American distributors and buyers must follow American legislation, avoiding problems in case of disagreements. Another complex theme for companies willing to develop their business in the US through direct Italian employees is work VISAS.
For example, a quite common case is represented by Italian companies that need to send specialized employees to clients in the US for machineries installation or final tests. Most of times, the Italian management is not aware of the fact that a specific visa is needed: employees get to customs with a tourist visa and are rejected with a “CANCELLED WITHOUT PREJUDICE” seal. In those cases, both the employee and the company are put on a blacklist and problems get bigger.
In conclusion, Italian companies are more likely to successfully sell in the US if they take into consideration the cultural differences between Americans and Europeans, and adapt their mentality to the American business attitude.
One of the most common mistakes made by Italian entrepreneurs is thinking they can develop a business in the US without proper preparation and preliminary research. Most managers indeed base their decisions on brief information received by people they know in the US, occasional selling experiences or participation in a few trade shows. However, those data are not sufficient: most of the time it is indeed incomplete information based on personal opinions and with no scientific foundation.
Selling in the United States requires perfect knowledge of the competitive context, supply chain, purchase and consumption habits, and requirements to export in the US according to rules.
Most entrepreneurs believe the United States is an “easy” market since people speak one language, there is only one currency, and there is a strong business orientation. Nothing could be more wrong. It is an expensive, overcrowded market with competitors coming from all over the world and several internal economic protection measures (custom duties, certifications, etc.). Moreover, the US population (around 325 million people) is very heterogeneous in terms of ethnic groups, social status, religions and age, and it is spread out over a large geographic area.
Without detailed analysis and a complete picture of the market, investing in the US is very risky and the chances to reach the target and successfully sell is quite low.
One of the main mistakes to avoid is believing it is possible to manage the American market from Italy, just likeany other European market, while actually these are smaller, more easily reachable, and less complicated markets.
The US territory is three times the size of Europe: that means long travel times and high travel costs. Moreover, the Atlantic Ocean is quite a geographic barrier which makes logistics operations longer and more complicated. All these aspects deeply affect the level of the service offered and, therefore, the reliability and credibility of the supplier, which is an important theme for the Americans.
Likewise, a serious mistake is underestimating the importance of “proximity” to the American client, which implies promptness in answering and frequency of contact: participating in trade shows or rare visits to potential clients (trips that, by the way, mean thousands of euros invested for just a few days/weeks) in the US is not enough. This is indeed a commercial development activity which, except for obtaining “certificates of excellence”, is almost always scarcely prolific since it is occasional: for the main part of the year there is nobody directly in the US market to continue it.
Moreover, it is naïve to completely rely on distributors, agents or representatives to develop the US market: they rarely give the Italian company realistic and complete feedbacks coming from the final clients. The only way to obtain satisfying results is to build a stable and continuous presence in the US, in order to reassure and transmit reliability to American clients.
In order to continuously sell in the US and efficiently control one of the richest and largest markets in the world, it is fundamental to have a structured and long-term approach (at least 3 years). With this in mind, one of the main activities to ensure a stable presence in the territory is to establish a corporation in the US.
One of the most common mistakes made by Italian entrepreneurs is thinking that opening a corporation is complicated, expensive, and does not bring any benefits to the commercial development in the US. Actually, the establishment of a legal subject in America (usually an LLC or a Corporation) is an activity which gives many advantages and it is easier than many entrepreneurs think, since:
- It is not necessary to physically go to the US
- It has limited costs: only a few thousand dollars to set up a corporation or an LLC, and it does not require a minimum amount of share capital
- It is not necessary for the stakeholders/administrators to live in the US
- The legal entity could be based in a CPA or lawyer’s office or other kind of trusted offices like Gen USA
- It allows the Italian company to create a bank account and work just like any other American company
- It allows an easy management of all the administrative aspects required by American clients
Moreover, managing the American company in itself is far less difficult and expensive than managing an Italian company and it also implies limited fixed costs and variable costs based on the effective volume of commercial activity. It is not necessary to have direct employees in the US to manage the corporation, since all the activities can be carried out from the Italian company.
In conclusion, for a limited investment to establish a branch in the US, there are plenty of advantages: the market understands the intention of the Italian supplier to stay close to the American clients and to satisfy their expectations in terms of efficiency in services. The parent company is this way considered more reliable and trustworthy and it considerably increases the chances of selling products in the US.
Most Italian entrepreneurs, especially in the Food and Fashion/Design sector, believe their high-quality “Made in Italy” products will automatically be sold to American buyers. Nothing could be more wrong. Proposing a valid product or service is the minimum requirement to approach the US market, but it is not sufficient to guarantee sales. A great product must be integrated with a complete proposal, which is comprised of a series of requirements (such as a strong brand and competitive pricing) and before- and after-sales activities.
First of all, it is important to consider that the US market is a “proximity” and “networking” market: trade fairs and other kinds of promotional and marketing activities supporting the sales part are essential.
Moreover, American buyers will not buy products from companies that do not guarantee efficient customer service and after-sales support. Therefore, it is essential to organize warehouses with products and spare parts, as well as specialized employees in the US that can promptly provide local assistance in a few hours.
In conclusion, in order to export to the US, it is not sufficient to propose excellent products. On the contrary, it is fundamental to give much more importance to all those sales activities which are essential for American clients.
When approaching an American buyer, the first four questions addressed to Italian suppliers are:
- Where is your company located in the USA?
It is important to give an American address and phone number: rarely will an American buyer purchase products from suppliers that are not already in the US.
- Do you have people we can talk to in the US?
It is fundamental to provide salespeople and/or employees dedicated to after-sales assistance in the US.
- Are your products in compliance with US regulations?
It is necessary to obtain all the certifications needed; otherwise, your product will not appeal to potential customers
- Where is your warehouse?
A warehouse for products and spare parts must be provided. Americans are concerned with the possibility of being abandoned by Europeans immediately after their purchase.
It is fundamental to not make the mistake of being unprepared during the meeting with potential Americanbuyers. Only after passing this initial screening will American buyers take foreign suppliers into consideration.