Our second tip for selling U.S. firearm products internationally is to develop a proactive business development strategy.
The importance of having a strategy is obvious, but how to build one for the international market is not. In this post, we’ll focus on the 3 most important considerations in building your international business development strategy.
Identify Your Distribution Channels
What are the best ways to get your products into the hands of end users in foreign countries?
For U.S. exporters of firearm products, there are 5 primary distribution channels:
- Direct to Dealer. In the direct-to-dealer model, U.S. exporters sell to foreign dealers who resell to end users. This is very common in international commercial trade in sporting firearm products. In international transactions, direct-to-dealer transactions do not carry the credit risk that direct-to-dealer sales entail in domestic transactions because international sales are ordinarily handled on a pay-in-advance or letter-of-credit basis. In addition, from a compliance standpoint, it is easier for exporters to keep an eye on where their products end up when the recipient is only one step removed from the end user. (Note: Under ITAR Section 127.1(c), exporters bear continuing responsibility for ITAR-controlled defense articles they export). There is a significant untapped potential in this channel, especially for exporters who can profitably supply smaller accounts ($10,000 – $50,000 annual volume).
- Sale to Domestic Exporter/Distributors. Some firearm manufacturers participate in the international market by selling to U.S. based exporters who take possession of the products and then resell to their own network of dealers in foreign countries. This is the easiest way to sell firearms internationally for companies that suspect there is an international market for their products but don’t want to divert sales and marketing resources from the domestic market. The trick here is to make sure to align yourself with a reputable company that specializes in the firearms industry (consider Civil Arms, Inc.); the wrong exporters can get you in trouble. Other than that, your sale to the U.S. exporter/distributor is a domestic sale, but you know the goods will leave the country, so maintain good communications with your distributor and know where your goods are going.
- Sale to Foreign Wholesaler/Distributors. Selling to distributors in foreign countries who resell to dealers is challenging for a couple of reasons. First, export licenses authorize export to only a single country; sale outside the original destination country requires a re-export license or, for items subject to the ITAR, a Warehouse and Distribution Agreement (WDA). Second, it generally is more difficult to police what happens to the products you export if there are two levels of intermediaries (as opposed to only one in the direct-to-dealer model) before the product reaches the ultimate end user. If your company’s international business is large enough to support a company-owned distribution facility outside the U.S. that sells to multiple countries under a WDA, this model can work well. Otherwise, this is not a good channel for most.
- Direct to End User. U.S. exports to governmental end users (military or law enforcement) are typically sizable direct-to-end-user sales. On the commercial side of the business, however, direct-to-consumer (ecommerce) sale of firearms is no more possible internationally than it is domestically. Ecommerce sale of optics, parts and accessories, while theoretically possible, is too complex and expensive to be practical. Brownells is an exception. Brownells is equipped to handle direct-to-consumer international sales in many foreign countries. Getting your products into the Brownells catalogue is one channel for making them available to foreign end users.
- Sale to U.S. OEMs. Products made by Magpul, Knight’s Armament, Troy Industries, and numerous other manufacturers of on-the-gun accessories, have done very well in the international market as original equipment or customer-specified enhancements to firearms made by OEMs for the international market. For many sellers of firearm components and optics, this may be the area of greatest international opportunity, particularly if you can stoke demand in the destination countries by simultaneously channeling your products to foreign dealers for aftermarket purchase by firearm owners.
Be Visible
People who don’t know your products are available won’t buy them, obviously, but how do you make your products visible in new and unfamiliar markets?
Here are some suggestions.
- SHOT Show. The easiest place to achieve and maintain a degree of visibility in the international market is SHOT Show. According to NSSF, SHOT attracts buyers and sellers from more than 100 countries. At least some of the people you want to connect with, no matter what you sell, are likely to be there. If you have a booth and identify your company as an exporter, NSSF will provide you with “We Export” signs for your booth to attract walk-by traffic.
Plan well in advance if you want to make the most of the opportunity SHOT Show gives you to make international connections. The United States Commercial Service, a unit of the Department of Commerce, has a significant presence at SHOT every year for the sole purpose of promoting international trade in products exhibited at the show.
Contact them well in advance of SHOT if you can. Another thing you can do is rent mailing lists from NSSF for targeted pitches to attendees from outside the U.S. Walk-by traffic is great but you will do better if you reach out to targets ahead of time to set up meetings or demos while they’re in the United States.
- IWA and Other International Trade Shows. Many U.S. exporters of sporting and law enforcement firearm products attend the IWA Outdoor Classic show that is held every March in Nuremberg, Germany (March 6-9 in 2020). If you’re new to IWA, NASGW is now sponsoring a large booth with spaces for individual exhibitors, which is an affordable way for smaller companies to be visible. For military and law enforcement products, there are annual aerospace, defense and security shows in every region of the world. Seriously consider attending and displaying your products at shows in the regions where your opportunities lie.
- Manage Your Distribution Channels. It is important to stay on top of performance in each distribution channel to ensure that your intermediaries (U.S. distributors, foreign dealers, etc.) are actively and effectively promoting the sale of your products. This activity involves some special challenges that are unique to the international market. It is harder for American companies to create relationships with their foreign partners than with U.S. partners, which can lead to a reluctance to terminate these relationships, even in the face of poor performance. In addition, distance and lack of familiarity with foreign markets can make it difficult to define good performance. Our advice is to do two things. First, prioritize your distribution channels and markets so your international sales managerial resources are deployed where they will have the greatest impact. Second, design metrics appropriate for your products and markets that will allow you to measure the effectiveness of your international channels and partners.
- Social Media and Advertising. Huge untapped potential lies here. If you have defined your target markets, end users, and distribution channels, you’re ready to hire the right professional to help guide inbound marketing and social media campaigns in your target markets. Feel free to email us for recommendations. When doing business with partners or end users in European Union countries, pay attention to the EU General Data Protection Regulation (GDPR).
Assemble the Right Team
The companies that are most effective at selling into the international market define their strategy first and then put people in place to implement the strategy. Many others do the opposite, however.
They get off on the wrong foot by designating a person to handle “international business development” and then let that person figure out how to generate international sales revenue and define success.
Active participation by the senior management team in developing international strategy leads to a better strategy with firmer senior management buy-in and greater prospects for real success.
With that preamble, here are some suggestions on the people side of your international business development program.
- Internal Sales Team. Ideally, implementation of international sales strategies should be captained by dedicated international sales/business development personnel. The skill sets that make an individual successful selling firearm products domestically don’t necessarily lead to corresponding results in the export market. That said, it takes a sizable export business to support a full-time resource, so, in many companies, international business development is led by someone who wears multiple hats. If that describes your company, look for the individual, inside or outside the sales organization, with the right skill sets to implement the strategy you design. Many smaller and mid-size organizations with good international sales programs have CEOs who stay directly involved. (Note: We will address compliance issues in a future post, but the individual who leads international sales must be someone who either knows or will learn the relevant export, international trade and anti-corruption laws and who can be trusted to abide by all of them, all the time, even when not being watched.)
- Domestic Sales Representatives. Professional domestic sales representatives, such as Austin Sheridan Consulting and M.G. Suber & Associates, LLC, can be, and are, very effective solutions for certain companies. They can bring customers to you and take care of pretty much everything except packing and shipping (some do that, too). Be careful, however, before engaging third-party freelance representatives without a track record, especially if they want to be paid primarily on a fixed, non-contingent, basis. Many good sales representatives are willing to work on a commission basis.
- Foreign Sales Representatives. Lots of companies rely on third-party, commission-based sales representatives located in foreign countries to develop business in those countries. The practice is particularly widespread in sales to governmental end users. As a practical matter, working with local representatives is the only way to obtain governmental business in many countries if you don’t have your own employees permanently stationed on the ground. It is risky to do business through foreign sales representatives, however. You should assume that U.S. and other law enforcement authorities will regard legal violations (think bribes or diversion of product) by your foreign sales representatives as legal violations by you and that you will be held responsible for your representatives’ bad acts, even when you have no knowledge of them. Careful vetting and ongoing management of third-party representatives is extremely important. Also, procurement regulations in certain some countries and tenders prohibit the use of commissioned representatives so make sure your arrangements are permitted under the local laws and procurement rules. We will return to compliance issues associated with these arrangements in future blogs.
- Foreign Sales Offices. Very few U.S. based companies in our industry can afford to station their own employees on the ground in foreign markets, but that is the best way to have boots on the ground. Local employees should be imbued with the company’s values and should be truly under the control of the home office.
- Foreign Dealers and Distributors. Foreign dealers and distributors to whom you sell are not only components of your distribution channel but also members of your sales team. Choose and vet them carefully. You want them to sell, but legally. Know to whom they sell and assure yourself that they conduct business in accordance with applicable laws and your company’s code of conduct.
Don’t Let Language Deter You
If the only language you speak other than English is Pig Latin, don’t let that deter you from pursuing international business aggressively.
You can do just fine in English most of the time, although long-distance communications are often more effective by email than over the phone (don’t use Snapchat or other apps that don’t leave a paper trail; you want a paper trail).
Spending some time online familiarizing yourself with, and respecting, the local customs (other than bribery where it is a custom) of the foreign countries in which you do business helps compensate for not speaking the local language.
What’s Next?
So, we’ve helped you target international markets and create or improve your business development strategy. How do you get paid? We’ll look at customary international payment terms, letters of credit and related subjects next time.
Tip No. 3: Get Paid.