In this series we interview Managing Directors who have made export work for their business. But, they’re not afraid to share some of the challenges they have encountered along the way.
Company: Kalimex Ltd
Products sold: Motor products for the aftermarket, particularly K-Seal Coolant Leak Repair.
Head Office: Uckfield, East Sussex, UK.
Countries exporting to: America, Australia, New Zealand, South East Asia, South America, Middle East; several countries in the EU.
“Whatever you think the entry cost will be for a particular market, be ready to invest more.”
We originally launched K-Seal in the UK in 2003. Within a few years it had become very successful. There was clearly a huge demand for this type of product but at the same time I could see that the UK market was limited by the fact there are only so many cars with a coolant leak problem that we could solve. So we looked for a similar car focused market with a developed economy and the obvious choice was the USA. A huge number of cars offered great potential, plus the US motorist had a similar repair mentality to the UK consumer. In addition, having the same language makes things much easier.
On paper it looked relatively easy. Just take the UK model and do it on a bigger scale. However, it quickly became clear that the sheer scale of the market acts as a major barrier to entry, which large competitors exploit to defend their position. So we needed to adapt our plan and take a very specialised and focussed approach to entering the market.
The short answer is yes. We invested way more than we had originally planned but we did so having realised that the project needed more time than anticipated. So we weren’t just throwing money around, the investment was carefully targeted at specific activities and customers which eventually paid off. We invested in the leading trade media in the US – magazines aimed at the professional technician and the motor factors or as they’re know in the US the Counterman. We knew that if we were to build credibility we had to be seen in these publications in print and online. After we’d cracked the first major distribution chain, which took several years of chipping away at by our dedicated US sales guy, the others soon followed.
The US is now our largest global market.
We established manufacturing in the US which immediately overcome a number of regulatory and tariff issues. Also, due to a lack of research on our part, we made some errors with our wholesale pricing strategy which, although this has now been rectified it could have been avoided in the first place had we been a little more thorough! Dealing with the giant distributors brings its own unique challenges such as prohibitive payment terms, which required us to look at invoice factoring, and punitive vendor agreements which can lead to some nasty fines. Established competitors appeared intimidating to begin with but we realised that we were offering something completely new to the consumer; it was just a matter of taking the time to get our message to them via PR, exhibitions attracting the trade, advertising, promotional materials and store visits.
We now distribute to a number of EU markets although these bring their own difficulties, in particular local regulatory differences and of course languages. We also export further afield to Australia and New Zealand, South East Asia, South America and the Middle East.
Yes they do vary, and understanding this has been critical to finding the right partners. On the one hand you cannot simply apply the same business model from the UK to an export market. But on the other hand, don’t always accept what your export partner tells you. A mixture of your experience blended with their local knowledge will give you the edge to succeed. Marketing communication channels can also be quite different and understanding and adapting to these is very important.
Be patient and realistic. Don’t assume that because your product or service is successful in the UK it will automatically be as successful elsewhere. Be realistic about your goals and plan for a longer time frame than you think. Whatever you think the entry cost will be for a particular market, be ready to invest more. We’ve had to factor in the cost of ongoing advertising and PR plus creating a website with a universal reach and running trade promotions as requested by our stockists. Whereas in the UK a national group of motor factors may run into the dozens, in the US you’re looking at thousands so you do need deep pockets but it does pay off if you don’t lose your nerve!
Take your time selecting the best partner for a new market. Don’t just set up shop with the first person to say yes. Look around, take time checking references, talk to other businesses already exporting to that market and get their advice. This will pay dividends in the long run. I know this based on past experience.
Our domestic market is saturated and the particular sector we are in is actually shrinking. Therefore I am looking for developed and semi developed markets with growing middle class economies. The aim is to reach around 60 to 80 export markets in the next 5 years which, although unlikely to achieve the success we’ve had in the UK, when combined it will more than surpass the commercial levels in our domestic market. On the other hand, I am using our established UK distribution network to help new importers to the UK reach the market. For example we are the sole UK distributor for the JLM Lubricants range of products and our sales are set to double in the next year. I’m never afraid to turn down products that don’t meet our strict quality criteria. I know that the ones we promote are the best and so worthy of our time and budget.
Tell us a little about you – are you a risk taker? How do you keep your nerve?
I would say I like to take calculated risks. I will spend time analysing the information available, corroborating facts and assessing the potential for an opportunity. Only once the numbers stack up will I enter a new market in the knowledge that if I do my job properly, there is the best chance of success. I rarely lose my nerve because I have the confidence that comes from knowing I am promoting products that are regarded as heroes by the consumer and the trade. And I am a fairly relaxed person so I rarely get nervous.