Types of Export Houses
Export house is mostly home-based organization, located in the manufacturer’s country, which is involved in the export of products that the manufacturer has produced. These export houses carry out most of the export-related activities overseas, via their own agents and distributors who are in place in the country where the product is being exported.
In most cases, Export houses are used by manufacturers when the manufacturers do not want their own export team in place, or when having an in-house team is much more costlier rather then hiring someone from outside – such as an export house. Because of the very nature of this business, export houses are specially focused on the export market and know the ins and outs of this industry very well. This is why, in many cases, export houses are preferred over in-house export teams.
6 Functions of Export house
The following are 6 major functions which export houses are expected to carry out in the market.
The first function is to represent the parent manufacturing company in the market where the product is being exported. In overseas market, the manufacturing company might not have any sales presence or market presence. The export house takes care of all that via representing itself as the main contact point for the manufacturer.
- Competitive and market intelligence
An export house not only carries out sales work or representations for the manufacturer, gathering market intelligence, competitive intelligence and the work of other competitors in the market is also a task carried out by the export house. This flow of information happens naturally via agents or distributors to the export house. However, it is important that the flow of information also reaches the manufacturer so that he is able to make decisions and change strategies as per the market.
- Procedures and documentation
In the export business, there are many procedures and documentation involved. Export is the interaction point of 2 different countries with 2 different laws and procedures. As a result, both laws and both procedures have to be followed by exports. In fact, more then focus on export, many exporters complain that their core focus is on documentation so that the export is not rejected or any problems do not arise in the target country.
Also, export happens in large containers and the volume is huge. Thus, any export house which is improper with its document handling or procedure handling will not receive many orders from manufacturers.
- Market Penetration
In sectors like Pharmaceuticals and chemicals, export houses are chosen on the basis of their market penetration in the target country. Each export house has a setup of agents and distributors. The more the market coverage of an export house, the more will be the market penetration. Hence, ensuring that they are present widely in the target country is a service which has to be provided by the export house.
- Manpower for Order Management
Collecting orders, ensuring the papers are in place, arranging finance or taking care of credit, shipping, docking and undocking, labour and law issues – There are many things which take place in a single order when export is ordered. It runs like a well oiled machine and for this you require huge manpower. This manpower is provided by the export house in each stage of the export.
- Arbitration, Finance and credit
There are a few types of payments and handling which are used in export. In handling, one is FOB origin means seller is liable only till material is shipped. FOB destination means seller is liable till buyer receives the goods. In such cases, there is huge financial implications, arbitrations and credit terms involved. Such risks are borne by the Export houses in many cases.
Advantages of using Export houses
Export houses are most important in the following conditions
- Lack of Resources: When the parent company has a lack of resources which includes manpower, finance or know how to establish in the new country, then it will most likely use Export houses to do its work.
- Small-scale operations: If a large company wants to set up small-scale operations in a new country, then instead of training and recruiting a local team in the target country, it can simply outsource the task to an experienced export house in the target country.
- Expertise: Many time, even if the manufacturer has an in-house team overseas, still export houses might be used because of their expertise in this segment. This is very true for products which are highly technical in nature or which are controlled substances.
- Marketing: Manufacturers who are product oriented and don’t have the willingness or the desire to market themselves in a new territory might outsource the work to export houses so that they can in turn expand.
Disadvantages of using Export houses
- The manufacturer is not in contact with target market: A major problem with using export houses is that the manufacturer himself is not in touch with the target markets. As a result, he lacks the on-field knowledge which the export houses have.
- Future trends cannot be observed: A manufacturer can notice trends taking place. And even though he might be getting truckloads of information from the export house, the export house might fail to notice the actual change in trend or it may not have as keen eyes for products as the manufacturer. Thus, the manufacturer may miss out on opportunities.
- Huge adaptation curve for the manufacturer: If the manufacturer gets used to the export house, and then decides to launch his own in-house team, there will be a huge adaptation curve for the in-house team. This is because the in-house team will have to start brand new with fresh distributors and agents.