Zach Selch explains how shipping, tariffs, distributor margins, and other costs in international sales can erase your profit, even on cheap products. Map every cost and participant in your target market early to know if it's worth selling there.
Chapters
I'm here in Istanbul at the historical museum. Behind me is the actual historic chain that was stretched across the Golden Horde— that was stretched across the— behind me is the actual historic chain that was stretched across the Golden Horn during the siege and conquest of Istanbul more than 500 years ago. If you take a look at this piece of iron, each link is about the size of my arm. It was originally, it was about 700 yards long, and now what's left is about 250 yards. And the reason I'm talking here is I want to talk about the concept of a value chain. And the value chain is something that can really strangle you, just like a Dickens ghost carrying around a chain. when you're doing international sales. Because let's say you make something, it costs you a dime to make, you want the end user to pay a dollar, you want 40 cents for it. That gives you about 60 cents to play with. But that 60 cents, that has to cover the shipping costs, the insurance, tariffs. Maybe the foreign government wants 18, you know, 15, 18, 20%. And then there's the distributor's margin. Now, if you have one distributor and he's a reasonable distributor, Everybody, everybody's happy. But what happens if suddenly there's another layer of distribution? You have a sub-distributor. Okay, there's another margin that's needed. Or maybe your distributor has very, very high margins and wants a bigger piece, right? Has very high expenses. Or maybe there's an agent involved. Maybe there are other marketing fees. All these things can create a really heavy value chain that can sink you. So you have to be very careful about that. With international sales, Thinking through the value chain, thinking through who does what in the sales process, who gets paid what, and how that fits into the value chain is key. And you have to do it early on, especially— well, you have to do it early on. Every time you think about a new market, you have to think about the value chain for that market and if you can afford to play in that market. Remember, when you're ready to grow your international sales, reach out to us. We can help. When you decide it's time to grow your international sales, call us.
