• How to Select Product for Export | Step 5 in Starting Export Business

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    All documentation, compliances and marketing aside, the backbone of your export business is the product itself. If you have a good product that overseas buyers are willing to buy, everything else usually falls into place. What can you export, therefore, is likely to be the toughest and most crucial question you will to answer while on your way to becoming an exporter.

    As important as it is to know what you can export, it’s just as crucial to also know what you cannot export. The government has a list of items that you cannot export from India because they are prohibited or restricted. The Directorate General of Foreign Trade (DGFT) keeps an updated list of the same on DGFT's website. Other than these products, it is pretty much up to you to choose what to export.

    A good idea is to look for a product category or offering that triggers a want in you to become an exporter. It could be a particular product that excites you or it could be the desire to be an exporter for a product that hasn’t yet become ‘mainstream’. In any case, you need to conduct some preliminary homework. Randomly picking a product and trying to sell it overseas is not a sound business proposition. Similarly, although a product may excite your entrepreneurial-exporter spirit, it may not be in demand abroad—which could spell disaster for your business.

    Also Read: How to register a New Business?

    So what are the factors that could help you pick your export product? Below are a few variables to consider:

    Find Unique Products made in India

    What are the products that India is known for? What about your state? What are its top exports? Who imports from us? Find answers to all the elementary questions you can think of. Look at the historical trends and patterns of our country’s exports, as well as that of your state. You can find most of this information in public databases hosted by the DGFT and the Ministry of Commerce. By analyzing India’s trade statistics, you will get an idea of what we sell well and which of our products have a reliable reputation overseas.

    Analyse Demand and Supply of the Product in Global Market

    Chances are you already have a few specific products in mind when you decide to start exporting. You should find out further details about the product and its supply chain such as how is it produced, what are its raw material sources, who are its producers, what are its components, if it is seasonal, how much is its demand, if this demand can be met by you, how can it be promoted, if guarantees and replacements can be given in its place, etc. The questions you need to ask will vary from product to product. One of the most important things to know is how much demand is generated for the product, if you can meet this demand and within how much time.

    Select a Country with Steady Demand for your Product

    You should ensure that the product has a sustainable demand wherever you wish to ship it to. Find out the right export market in specific geographies in which the demand exists. For example, exporting tea from India to a country where coffee is preferred may yield limited success. You should learn about the economy and political climate of your target market as these factors may affect the growth and sustainability of your business.

    Growth Prospects

    Analyzing the growth prospects of your business is important. You may be exporting a product to a particular location right now, but will demand be created elsewhere in the future? Is it possible that the importing country might start to produce your product domestically? Could your product reach out to a wider audience in the country or its neighbors? Stagnating sales can be detrimental to your export business, so you must be sure that your business is scalable in the future.

    Profitability of the Product

    As a business you should choose products that have the potential to be financially rewarding. You must identify the most economic source of the product and ensure that your target audience is willing to pay a good price for it. A good idea would also be to check how the product has fared over the years. Find out if it is susceptible to seasonal or periodic trends. Make a forecast of all expenses related to the product such as product cost, logistics, taxes and duties, and calculate your profitability against the sale price.

    Trade Regulations

    Every market is unique when it comes to compliances and trade regulations. You should be well aware of the rules of your product’s destination country. Find out if the destination country has a trend of restricting similar products in the past or charging heavy taxes and duties on their import. You should also learn about the country’s trade relations with India.

    Competition

    Unless your product and/or offering is unique, there is a high chance that you will face stiff competition from businesses who are already engaged in exporting similar product exports from within your geography. In such a case, you must present your product as unique and different from your competitors. Your product USP could be better quality, cheaper price, better after-sales response, or a combination of these and other factors. A note of caution about competing on prices: simply slashing your price may work temporarily but it eventually affects your own profitability. You may need a different long-term USP.

    Once you have identified the product that you wish to export, you should narrow down on the markets you can ship it to, as well as explore various incentives and benefits you could get for trading in that product. We cover these topics in subsequent articles.

    Pro-tips

    • The uniqueness of a product is important—it need not have an export tradition. A distinct and fresh overseas import often has the potential to sell better than an established one.

    • Choose a product that is as universal as possible as it increases your market horizons, rather than trying for something too niche.

    • Be confident about the quality that you can deliver, because customer retention is critical in exports.

    Warnings

    • Avoid products that seem temporarily popular, unless you have a pipeline of various products in case one goes out of fashion.

    • Be aware of the difference in Indian production standards and overseas requirements so that your product’s entry is not barred. (For example, Indian agricultural products often get barred because of having high fertilizer/pesticide doses.)

    • Not having a back-up source for your product can lead to embarrassment/failure if your supplier defaults in delivery.

    Also Read: APEDA's Online Registration Process & Schemes for Agricultural Exports

    Raghav Khajuria
    Raghav Khajuria
    Leads Marketing activities for Drip Capital.
    6 min read