Selecting a market, sales channel and payment method for foreign tradeThe page was last modified:
Information about different sales and distribution channels, payment methods, and important considerations when choosing a market.
On this page you can read about:
When you are looking to expand outside Sweden, you should conduct a market analysis and acquire knowledge about the new market. This may mean that you need to take a closer look at the following areas:
Access to the market
Are there import restrictions, quotas, customs duties, documentation requirements or other requirements that may affect your ability to move into a specific export market?
What similar products are available in the market and who is supplying them? Are they local or international companies? Who are they selling to? What do they do in order to succeed? How will you distinguish yourself from your competitors? You should also investigate the competitors’ intellectual property protection and compare it with your own.
Customer analysis and pricing strategy
To be able to sell your product in a good way, you need to be able to explain why a potential customer should buy from you, and show what sets you apart from your competitors.
You should also make sure that you have set the right price for your product. You can pick up price indications at trade fairs and events, from competitors and from members of trade associations. You can also make direct contact with potential customers to find out what price they are willing to pay.
Even if you read up on the new market, it can be difficult to truly understand the market and its business environment. It can be worthwhile hiring or enlisting the help of someone from the country in question who understands the customers, purchasing patterns and decision-making processes. You may also need to make changes and adaptations to your product, marketing, design and so on.
How you should market your product or service depends on the market to which you intend to export. Many companies around the world follow the advertising and marketing communication rules issued by the International Chamber of Commerce (ICC). Bear in mind that you must also observe the marketing rules that apply in the country where you will be marketing your goods and services.
Cultural factors can relate to the country’s norms, language, culture, public holidays, religion and what is politically correct. Your brand, colours, choice of words, packaging, symbols and offerings may be perceived in a different way than you intend. It can therefore be useful to enlist the help of someone who knows the market, such as an agent or reseller.
Different rules apply in different countries regarding the level of service you must provide. Learn the consumer law in the country you want to export to, and bear in mind that good service is important for your brand.
Intellectual property law
If you want to protect a design, trademark or patentin the export market, you must apply for protection that is valid in each country. This area of law is called intellectual property law.
Agents or resellers
An agent represents your company in the export market. You will normally pay the agent commission on sales. You own the product, and you are responsible for costs incurred by the agent. In some countries agents can be considered employees, which means that you will take on responsibility as an employer. If you want to avoid this, you should engage a reseller instead.
A reseller buys your products, sets its own price, and resells them to its customers in its own name. Resellers usually have a warehouse and therefore take on a completely different financial risk than an agent.
It is important that you clarify rights and obligations with agents and resellers in a contract, which should be in writing. It can be a good idea to enlist the help of a lawyer with knowledge of international trade when drawing up the contract.
Commercial agent agreement at Business Sweden (in Swedish)
Reseller agreement at the Business Sweden website (in Swedish)
If you are going to launch your web shop abroad, it is important to acquire knowledge about the market in which you want to sell and adapt your web shop to meet local requirements and conditions.
E-commerce guide at Business Sweden (in Swedish)
If you set up a branch, you will have a permanent operational base in the foreign market. A branch is not an independent legal entity but can be seen as an outsourced unit of your Swedish company. You must, however, register the branch in the country in question. As the branch is not a legal entity, you must report the branch’s financial results in your Swedish company.
A subsidiary in a foreign market is a separate legal entity and is subject to the laws of the country in which it is established. Subsidiaries are normally taxed in the country in which they operate.
A joint venture may involve you and your foreign partner jointly setting up a new, jointly owned company to sell your product.
By offering franchising, you can expand with less risk of losses and using less of your own resources than if you were to sell abroad on your own. The franchisee in the new market often knows more about that market than you do, and also contributes capital.
Payment in advance
By far the safest way for you as an exporter is to request payment in advance. This means you are sure to get paid before you deliver the goods to the buyer.
Payment against letter of credit
A letter of credit is a very secure, but also expensive payment method. The buyer directs payment through their bank, and the bank guarantees payment to the seller when the seller presents certain documents to the bank. A letter of credit can be an advantage if you are doing business with a new customer and want to avoid payment in advance.
Documentary collection means that the seller sends documents such as shipping documents, invoice and packing list via the bank. The bank will only release them to the buyer once the goods have been paid for. Documentary collection works more or less like cash on delivery. It can be expensive for the seller if the buyer does not collect the documents, because the seller then has to pay to bring the goods back again.
Payment guarantee from bank
A payment guarantee means that the buyer’s bank promises to pay a certain amount to the seller if the buyer does not fulfil its part of the contract. Contact your bank to find out how the payment guarantee works with the country in question.
Export credit insurance
The Swedish Export Credit Agency (EKN) offers various guarantees to protect your company against the risk of not getting paid. EKN insures against losses caused by commercial and political events. There are also private insurance companies in Sweden and abroad that offer export credit insurance.
Payment solutions for e-commerce
There are many payment solutions for e-commerce. Which method you should choose depends on how much money is involved and what your target group is. Here are a few examples:
- credit or debit cards
- text message
- pay calls
- digital wallet
- direct payment (online banks)
- cash on delivery
You have to choose not only a payment solution, but also a payment solution provider. There are many providers to compare among. Don’t forget to calculate the total cost (setup cost, monthly cost and transaction cost).
Collecting payments through debt collection
If you are not paid for products and services that you have sold abroad, you can try to recover what is owed to you through debt collection. But it can be difficult to come to terms with the rules that apply in the other country. You should therefore contact a Swedish debt collection company that has contacts and resources where the buyer is located.
Regional exportsamverkan (Regional export collaboration) is a partnership between government agencies and organisations that offers advice, financing and other support to those who want to expand internationally.
Responsible: Swedish Agency for Economic and Regional Growth