Established brands, even those that have successfully expanded into other international markets, must understand the vagaries of the U.S. market before committing to enter. The U.S. market is like no other: retailers buy and sell differently, and logistics operators work on unique metrics. Importantly, consumer behavior is impacted by comparable products, ease of shopping, and social media. While the influencing factors are similar to those in fast-growing economies, the dynamics are exaggerated in the U.S. given its size and culture of consumption.
There are several proven paths for brands to enter and establish themselves in the U.S. market. Sustainability of the chosen path or partnership is a larger, longer-term consideration. Brands need to understand initial investments and ongoing expenses, and have to assess business and operational risks. Accelerated permeation into all the right sales channels, and focused management of these channels, will translate to growth and sales. With the above aspects in mind, and with a holistic stance on risk-return, brands should take the path that would allow them to reach “escape velocity” at the earliest.
Brand-Managed Remote Operations
Many brands start in the U.S. with a controlled B2B launch. They showcase in trade shows, receive orders, and fulfill directly from their respective countries. This is an easy way to test the market, and BrandMX certainly endorses this cost-quantifiable, measured launch strategy. Brands can eventually adopt a hybrid model by engaging a local logistics company, and yet continue operations without local company personnel or vested partners.
Brand-controlled remote operations requires low investment to get started and has manageable operations risk; many of the levers are within the brand’s control including brand positioning. However, it is no easy feat to keep the level of engagement with the retailers and manage fulfillment remotely. For specialty brands, B2B is almost more important than B2C, and B2B sales requires constant, ubiquitous outreach which is not easy to do remotely. Viable as this is in the short-term, brand-controlled remote operations is not a high-growth model; it will not maximize potential for the brand.
Third-Party Traditional Distribution
International brands can partner with a distributor or a sales representative to enter the U.S. market when they want focused, expert attention on their brand to grow sales. Usually, these brands have seen high-growth in their respective markets and can attract distributors that will commit to buying inventory upfront. Such partners will usually have a category focus and can deliver immediate market access as well as sales via the right channels.
- Distributors should have a strong balance sheet, i.e., adequate capital to buy inventory and fund marketing activities. Trade show presence is necessary to launch brands and to create connections with buyers, but outside trade shows, distributors must maintain and grow buyer relationships with a dedicated sales force. This option requires little investment from the brand outside product samples and marketing collateral.
- Sales representatives should have a well-established, category-focused network, have showroom presence, and be able to place products with enough retailers to create sales momentum for the brand. Sales representatives do not carry inventory, so there is a long lead time to convert purchase orders into actual cash revenues.
Traditional distribution is a ”safe” path and requires low upfront investment. It is certainly a sustainable, long-term option. However, this takes a long time to maximize sales since distributors and sales representatives are focused on B2B channels, and do not actively promote direct-to-consumer or related brand-building activities. While legal agreements offer some protection, brands cannot control their brand or its positioning.
Brand-Controlled Local Operations
When a brand establishes its own local physical presence in the U.S. and manages all aspects of sales, marketing, and distribution, it has the greatest control. Most brands take this path once they see traction for their products in the form of repeat orders from retailers. Brands convey their own brand story in the best manner and can tune their brand positioning as they learn from the market. Overall, controlling the facets of the brand positioning and optimizing the various sales channels will realize the most potential.
Brand-controlled local operations is a very expensive option — investing to establish physical presence, recruiting a knowledgeable in-house operational team, establishing sales channels, and funding the right marketing activities – all require non-trivial spending. Many brands have seen tremendous success with this strategy, but it is a commitment beyond just a financial one to embrace and maintain this strategy in the long term.
BrandMX Option
In conclusion, brands can avail one of several viable options to enter and establish themselves in the U.S. market. Capital investment and gaining market foothold are initial challenges. Importantly, brands need to minimize the time to establish omni-channel presence in order to maximize sales potential.
In the next article, we will talk about the BrandMX; this option mitigates upfront risks while providing a day-one ready network.