CHAPTER XIX PRICING IMPORTED GOODS & DISTRIBUTION CHANNELS

1. CHAPTER XIX PRICING IMPORTED GOODS & DISTRIBUTION CHANNELS • Cost of Imported Merchandise • Value Marketing • Distribution Channel • Selection of Sales Representative • Sources of Information

2. Cost of Imported Goods (1) FOB price (2) Ocean or air freight (3) Marine insurance premium (4) Bank charge (5) Unloading charge (6) Customs duty (7) Merchandise processing fee (.25%) (Minimum $25 & Maximum $485) (8) Harbor maintenance fee (.125%) (9) Customs broker's fee (10) Customs bond fee1 Landed cost at importer's harbor

3. Cost of Imported Goods (11) Trucking from harbor to warehouse (12) Storage at warehouse (13) Product liability insurance2 Net cost to importer 1 Single transaction bond premium: $3.00 per thousand dollars of value plus duty (general merchandise) 2 Applicable to imports with no domestic representation by a foreign manufacturer

4. Cost of Imported Goods • Product Liability Insurance Premiums • Fruit $4.522 per $1,000 receipts • Computer components $6.016 • Tools $7.140 • Clothing $4.011 • Shoes $1.924 • Plastic piping $10.325 • China (Tableware) $6.260 • Pens/Pencils $2.992 • Giftware $4.962 • Premiums are normally higher for start-up operations

5. Cost of Imported Goods • Retail price: Minimum four times FOB price • General markup (1) Mail order items: 300 percent (2) Wholesaler: 30 to 50% (3) Retailer: 100% (4) Importer: Minimum 30 to 50% when stock carried, 10 to 20% when no stock • Do not import anything without a firm order. Better get a letter of credit from a buyer.

6. Cost of Imported Goods • Until you have built up strong distribution channels, stick to sample sales without carrying stock. • Stipulate key specifications in your purchase order and letter of credit • The 3rd party inspection such as SGS International is recommended if you import from unfamiliar suppliers

7. Value Marketing (1) Offer products that perform (2) Give more than the consumer expects (3) Give guarantees: a no-question-asked guarantee or a longer guarantee (4) Avoid unrealistic pricing (5) Give the consumer the facts: Detailed information (6) Build relationship (Relationship Marketing)-Frequent-buyer plan, 800 numbers, and membership clubs

8. Distribution Channel • The success of a product: 30% product & 70% marketing • One region or one market segment and be successful. Very difficult to "serve it all" and be successful. • Consumer products: • Importer--> Sales Rep--> Wholesaler--> Retailer--> Public • Importer--> Wholesaler--> Retailer--> Public • Importer--> Sales Rep--> Retailer--> Public • Importer--> Retailer--> Public • Importer--> Public

9. Distribution Channel • Industrial products: • Importer--> Sales Rep-->Distributor--> End User • Importer--> Distributor--> End User • Importer--> End User • Sales Representative = Manufacturer's Representative

10. Selection of a Sales Representative • Through referrals. Most successful manufacturer's representatives do not advertise. • Referrals from other sales agencies: Agencies selling other products to the same market • Referrals from other importers: Importers of similar but noncompetitive products • Referrals from potential buyers of your products

11. Selection of a Sales Representative (2) Advertising • In the industry publication: Every industry has its own magazine. • In MANA's Agency Sales magazine or Directory of Manufacturer's Sales Agencies • Manufacturers' Agents National Association (MANA): http://www.manaonline.org • Trade show: A sign "Reps Wanted in ________" • Thorough investigation of the representative's credentials before signing any agreements

12. Sources of Information • PIERS (Port Import Export Reporting Service) • www.piers.com