How to calculate pricing for USA, Danish, South Korean & Hong Kong/Chinese markets

Question

We are a premium product company and have been approached by several different importers, to whom I need to provide prices.

The USA opportunity is direct to a retailer.
The Danish, South Korean and Hong Kong opportunities are distributors.

They have given me no indication of volumes at this stage.

Answer

Hi.
I guess that when you say selling direct to retailer, you are talking about consumer goods rather than capital equipment etc.

If you are already selling in the UK then you will have experience of what is the right price point for that product. Since with the internet there is now transparency, then the final selling price in USA,Denmark, South Korea and Hong Kong should ideally be close to the price that already exists on the internet.

In a lot of cases that is not the case because when setting pricing some companies don’t start off with determining a pricing policy that works globally as well as at home.

If we take the easier example of Denmark which is in the EU.
If you sell at £10.00 fob to a distributor, it could cost between 5% to 20% to arrive by freight into Copenhagen. Since you give no details of size of your premium product you will need to do the maths ( if they are cosmetic brushes- small, low transport costs; big tins of paint high transport costs ). Then the distributor will want to make 40% margin ( or more if they have to spend a lot of money on marketing the products)
Then the retailers want to make a margin. In Denmark that seems to be higher than UK so 50% margin. plus 25% vat.
So if it was say 15% transport.
£10.00
£11.50 landed
£20.00 to retailer
£40.00 to consumer
£50.00 incl vat.

By going direct to retailer as you do in USA you only have one set of margins, though there is freight plus duty. So it depends on whether you set up your export strategy and commercial policy based on going direct to retailers (might need sales agents, and the right trading terms, replenishment , warranties, returns etc) or you have set your model up based on going to distributors, and the managing and marketing support for those distributors.
Hope this helps you
http://exportadvisory.com/tips-on-getting-started/
Gilio

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