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BOOK 2

IMPORT PRACTICE

147

Part 1.—THE IMPORT PURCHASE

Chapter I.-IMPORT MARKET ANALYSIS

The importer who is newly entering the field, or about to embark upon the handling of a new product, must be sure of his ground. Importing is a complex and often hazardous undertaking. The mere fact that someone abroad has an article which he thinks will sell in the United States, or someone at home believes that he can successfully distribute a product of foreign origin, is no reason why an importer should risk his time and money on such projects, without reasonable assurance that the proposal is sound. The ultimate test of the soundness of all business activity being profits, the first problem that faces the importer is to analyze the United States market with a view to discovering whether he can import the product at a profit and if so at how great a profit. In so doing, he will find at least three steps essential:

(1) A statistical analysis will be necessary to determine what countries export the product and how much of it they already sell in the United States. (2) A factual analysis will determine at what price the product can be bought in these markets, what the respective qualities of the various foreign-produced items are, and whether the product is adaptable to domestic use. It will also bring out new uses and new methods of distribution. (3) A competitive analysis of the foreign product with a similar domestic product will show its advantages and disadvantages, both as to quality and price, and how it meets consumer needs in the United States. This can often be established only by sample shipments which are actually put on sale side by side with a similar domestic product or one imported from another country. (Appendix A.)

STATISTICAL IMPORT ANALYSIS There are two sources of information available to the importer who wishes to know what countries export the product under investigation and to what extent we buy it. Each foreign government publishes export statistics. Most of these are available in the Bureau of Foreign and Domestic Commerce in Washington soon after they are published abroad, and the Regional Division will, upon request, supply the necessary information. The Statistical Division of the same Bureau publishes, in the Monthly Summary and in Commerce and Navigation of the United States, the monthly and annual statistics of imports into the United States, by countries. Where the item is not specifically segregated in such statistics and the business is large enough to interest possibly more than a single inquirer in this country, a letter may be sent by the Bureau to its appropriate field officers to prepare special reports on the availability of the product for export in the various markets of the world.

IMPORT PRICES AND TERMS OF SALE

The importer will then want to know something of the price range of the product abroad. In this respect, no governmental agencies can be of much practical assistance. Whatever information they could give him would not consist of bona fide quotations, for it is not considered a proper function of a Government officer abroad to ask for quotations, and they would have to be culled from newspapers, trade journals, and price lists which might be currently inaccurate and misleading. Moreover, prices of many types of goods are never quoted in such sources. The best service the Government can perform, therefore, is to bring the inquiry to the attention of bona fide exporters of the product with the view to having them quote current prices in commercial quantities. The same thing holds true of sales terms. Where foreign exporters are anxious to dispose of a product in the United States, however, they often approach a United States Government representative abroad and if, upon investigation, they appear to be bona fide and in good standing, our representative may send in a Trade Opportunity which the Bureau may make available to United States importers and users of the product. Such Trade Opportunities will cite the sales terms but not usually prices. An accompanying World Trade Directory Report will be available on the foreign exporter. The best advice, therefore, to an importer who wishes to obtain reliable information on foreign prices and terms of sale is to ascertain from the Commercial Intelligence Division of the Bureau the names of foreign exporters or producers of a product and to write directly to them, asking for quotations.

QUALITY ANALYSIS OF IMPORTS At the same time that he investigates prices, the importer may wish to obtain samples, especially in certain types of imports, so that he can compare the product, point by point, with similar products already offered in this country, either imported from other countries or domestically produced. Practically all imports, except heavy machinery and equipment or raw materials of standardized classification, are introduced into this market by means of sample. Machinery and equipment is sold by catalog and specification.

ADAPTABILITY OF IMPORTS

Every market presents its own peculiar phases of consumer demand. Foreign producers must adapt their products to this demand or else take steps through advertising to create the demand for their product. Argentine “maté” is a drink that may be in great demand by the "gaucho," but the American cowboy may find little in it that refreshes or stimulates. On the other hand, certain cheeses, originally imported exclusively, have become so adapted to the American palate that lower-priced domestically produced substitutes have supplanted them in certain consumption levels. Tea, coffee, cacao, tapioca, tin, rubber, kapok, and vegetable ivory are good examples of products, not produceable in the United States, for which a steady demand exists through their steadily increasing adaptation to American life. On the other hand, the history of our import trade presents a long record

of thousands of other foreign products which have never found a successful foothold on the domestic market. There are no formulas for testing adaptability of a new product except the formulas of common sense and “trial and error.” This constitutes one of the greatest hazards in the import business. The whole operation of sampling and trial shipments is strictly a matter of trial and error, yet importers are constantly on the alert for new foreign products and are seemingly willing to take many chances, in the hope that through the introduction

of a single successful product they may be compensated for inevitable losses.

NEW USES FOR IMPORTED PRODUCTS

Changes in industrial technique often create new uses for products never before imported, or brought in only in negligible quantities. The aluminum industry created a vast, new demand for bauxite, and the automobile and electrical industries alone have sent importers to the far ends of the earth in search of new metals and minerals for which there was never a demand before. This metamorphosis in American industry is more pronounced, perhaps, than it is anywhere else in the world and is not lessening in its intensity. It accounts for the dynamic character of American business and provides endless opportunity to the American importer who keeps closely in touch with developments in industry.

NEW METHODS OF DISTRIBUTING IMPORTS

The item of transportation cost is often an important factor in the movement of imports into the domestic market. Recently the utilization of the Great Lakes to reach the interior markets of the United States and Canada has entirely revolutionized the handling of such articles as cacao, essential oils, and other products. New ways of reaching interior points with needed raw materials may give to certain importers momentary advantages which enable them to supplant their competitors by absorbing important distributing agencies. The transportation of raw silk by slower, all-water routes

at lower cost, to be stocked against immediate demand near the industrial centers, is working important changes in the marketing of the product in this country. All of these changes have been brought about by close market analysis and a careful weighing of the handicaps attendant upon existing methods with a view to minimizing or eliminating them.

COMPETITIVE ANALYSIS OF IMPORTS As soon as the importer has determined to his satisfaction that the demand for a foreign product exists in this market, and is one which he can meet as to price, quality, and adaptability by an import transaction, he is faced with other considerations. If the product has never been imported before, he must make sure that there is no prohibitive restriction on its importation; he must ascertain whether it is dutiable and, if so, what the duty is and what it will cost in the way of advertising to introduce the product to the American consumer. If the product is being imported but he has discovered a new source of supply, or a cheaper supplier from the same source, he must make sure

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