For a US company it can prove to be quite difficult to get your product into the European market. Bart Vandezande, CEO of Anemo Engineering has seen first-hand many companies struggling and making several attempts to enter the EU market. Here are his tips and tricks for breaking into and building a footprint in this location:
- Direct Sales: Direct sales are an ideal channel for you to immediately grasp the popularity of your product and get a higher margin.
- Grey Distribution: One of the bigger challenges when outlining your strategy is that your current sales network in the US is usually already quite active selling your US-made products to the European market. The disadvantage comes when a US distributor does this, they typically do it at dumping prices making it impossible for a European distributor to compete against those companies. Final customers shop and see the USD net price, mostly online, and then compare it to the Euro sales price of your local distributor who already had to add around 4% import duties and 10% transport fee; this is a margin typically between 30% and 50%.
- Distribution Sales: Once you’ve finally decided to find a matching distributor for your business, don’t forget that a distributor is there to earn money from your products. If you already do direct online sales through your website you will have to offer a discount on that pricing of around 40%-60%; in this way your distributor will be able to import the goods, pay for transport, stock them, and resell them with a profitable margin.
As for Europe, the moment you enter a market officially, that one distributor is allowed to sell anywhere to Europe, so exclusivity does not exist anymore, having said that, most distributors are not active throughout the whole of Europe.
Language is key. The more south you go, the greater success you will get by translating your catalog or finding a local distributor or agent in those countries; this is true for places like Italy, France, and Spain. The preferred path to market is to have a distributor for each of these countries, since most customers want to purchase in their local country.
Type of Distribution
Depending on the complexity of your product you will need to select the type of distribution. If your product is straight forward, then you might prefer a catalog distributor that has divisions in each country. The challenge is then to get your product into the catalog.
Don’t forget, the discount that you give on your product will be less when the distributor only offers logistical value. The more you expect from your distributor, such as actively seeking customers in their country, the more discount you need to give. Protection will also be required in some way, don’t make the mistake by combining a channel like RS components with several value-added distributors. RS can steal the business away that your high value distributor has worked on, so it will demotivate your distributor network.
How to Remain Top of Mind
The more North you go, the more you’ll need to show repetitive innovation to have tools available for the product managers to promote your product. When selecting a partner distributor, analyze how many different product lines a distributor has, if they have a big list, surely, you’ll be a number too.
Prepare to share marketing materials such as videos, tutorials, samples, etc. on a regular basis.
Bart’s Breakdown of Europe in a Nutshell
- Innovation and machine construction is done mainly in the west; ranked by importance: Germany, France, UK, Italy, Netherlands, Sweden, Austria, Spain, Denmark, Belgium.
- If you’re seeking a single distributor, Belgium is an excellent choice! It is centrally located, a small country with a high adaptability and people with the necessary language set (Dutch, French, and English).
- Be cautious of having a UK distributor to handle the EU business. Due to Brexit, you will want your products fully cleared into Europe and VAT free commerce; transport will be much easier once the goods have arrived into the EU.
- If you are looking to move forward to reach the Czech Republic, Hungary, Slovakia, Slovenia and Croatia, an Austrian distributor is the best route!
- A Swedish distributor is a good way to reach Denmark, Finland, Norway and the Baltic States.
- The Irish prefer to purchase from Europe instead of the UK, remember they are also in the EUROzone.
- Preferred regions in European countries to set-up a distributor:
- Spain preferably in Catalunya,
- North of Portugal (Porto region),
- Italy (Milan region),
- South & West of Germany.
About Bart Vandezande, CEO of Anemo Engineering
Before owning his own company, Anemo Engineering, Bart Vandezande was a regional manager in Europe for 8 years for two different USA companies, where he was responsible for seeking and setting up new distribution channels in Europe.
Learn more about Anemo Engineering here: https://anemo.eu