There’s a common mistake we see made by brands that are new to the U.S. or are managing sales from the home country. It has to do with “Pricing for the transition to a distributor.”
We recommend that brands look at importing as a two-phase project.
Phase 1 is to start with a service importer such as MHW Ltd. or Park Street. This allows a brand to launch in the U.S. quickly, but still preserve their options as they develop a business case.
Phase 2 is when they look to attract a “forever” importer.
When price structures are created for launch through the service importer’s distribution license, keep in mind that they don’t charge a traditional importer or distributor margin, per se. Rather they have a menu of service offerings with costs associated with each.
Brands need to factor in that at some time in near future they will get a
“forever” importer or “traditional” distributor that will charge a markup/take a margin for their services.
So when the initial price structure for distribution in each state is set up, it’s imperative that the calculations build in that future importer & distributor margins. If you do the price structure based on the actual costs of using a service importer, more than likely you’ll end up with a selling price that will be significantly lower than a traditional importer–Distributor–on/off-premise structure would command
So what? Well, what will happen is the new distributor will use their system to calculate a price, factor in their standard margins, and the product that you may have been selling to retail at $14.99, now comes in at $19.99. Ouch!
And what usually happens then is when the on- and off-premise retail customers you got during Phase 1 (Service importer phase), find out that your price just went up (to them, and in turn to an MSRP), they will be unlikely to reorder. And that’s being nice.
So, get smart. Make sure that when you’re doing pricing in the U.S. you’re factoring in “next” along with the “now.”
And a caveat: If this point isn’t absolutely crystal clear to you. That’s a sign you need help. So, give me a call. That’s what I do: help brands NOT make the same mistakes other brands have made before them, again, for the first time. You’ll find that covered in detail in the chapter titled “Price Structures Illuminated” on pp 118-121 of my new book: How to Get U.S. Market Ready. So head on over to Amazon.com and buy a copy today. I guarantee you will find that it was the best $30 you ever invested in the U.S. market.