Kenny discusses some of the common piftalls direct sales companies face when expanding internationally. He talks about differing regulations on network marketing and MLM, product pricing and product regulation, the danger of embracing quick fix solutions (like the common choice to go NFR), and the needs of the distributor field during international expansion.
Welcome to the MLM.com podcast. I am your host, Kenny Rawlins. This week’s episode is focused on international expansion. Over the past several weeks, I’ve talked with a number of individuals—who combine for many decades of experience within the direct sales and network marketing industry—on the challenges of international expansion and some of the common mistakes that are associated with opening new counties. In passing on the feedback that I’ve received, we are going to break with our normal format and there will be no guest this week. I don’t anticipate that we will do this often, but I thought that we would give it a try. So, let’s talk about international expansion.
There were several common threads in the feedback that I received, the first was regarding timing. A company should make sure that they have roots in their home market before trying to expand. Many of the biggest problems come when company try to expand too fast and into too many markets. At InfoTrax, when we are selling our software to a new start-up, one of the common bits of feedback that we get is that people want to make sure our software can handle international expansion and, in passing, they will talk about ambitious goals of being in many markets within just one or two years. That’s often one of the biggest mistakes people make—not allowing their product and their opportunity and their business to take root in the country where they’re starting.
People don’t often understand the resource intensive nature of expanding internationally. International expansion requires a lot of effort by both the executives and the full-time employees who work in the home office of a direct selling company, but it also can be demanding on the field as people strive to open a new market and go in and establish the opportunity. And so if you’re not set up well at home and those roots are placed, it often times can’t sustain the growth that you’re trying to achieve internationally.
The other bit of feedback, or one of the other bits of feedback, that I received is that you have to be careful who you trust when going international. It’s common for people to have a little bit of experience in having worked at other companies and expanding internationally, but they’re not experts in that field and the may not be experts in the particular country that you are trying to expand into. So, you want to make sure that the people that you are partnering with and the people that you are getting advice from have real experience on the ground in the countries that you’re expanding to.
You also need to make sure that you understand the regulations. And by regulations, I don’t just mean product regulations or I don’t just mean compensation plan regulations, although all of those are very important, but it’s the full body of the regulations. What are the tax laws? What are the product regulations? What are the data regulations? That’s a big one throughout the world right now – different countries putting different regulations on what can be done with their citizens’ data and that’s something that can cause you a lot of problems if you don’t take that into account.
Restrictions for going in NFR—if you’re not familiar, NFR stands for “not for resell”. NFR can often be looked at as kind of an easy way into different markets where you’re selling products from your home country and they’re going in under a “not for resell” model where it permits you to sell directly to customers within other countries, but people have come to not understand the nuances of NFR—What countries allow it? What countries don’t allow it? What you need to do to be able to do it?
Going into a country prematurely and breaking either laws or regulations or going contrary to the way things are done in that country can cost you for years and years down the road. I’ve seen a number of companies have to pull out of countries and not be able to go back in for years, if ever, just because they left such a sour taste in the mouths of the collective people there—either regulators or even the distributor field just because they’re not doing it correctly.
You want to make sure you’re adapting to the cultures within a given country. That means making sure that you’re using the currency of that country and displaying the currency of that country. You don’t want to be perceived as a US company temporarily coming to a market; you want to perceived as a company that is coming into that market and knows what they’re doing. So you want to take local currency. You want to support the local language; that means getting really qualified people to do your translations and making sure that it’s adapted to the local language. For instance, there are many countries around the world that speak Spanish, but that doesn’t mean all of the nuances of the language are the same, so you can’t get translations from going into Spain and use them all throughout Latin America and South America.
Using the proper forms of payment—often there are alternate payment methods that aren’t common US that can be common in other countries. Whether it’s payments through a cell phone or going to convenient stores and paying, so you need to take that into account. What are you going to support? what will the market demand you support? And be prepared to either adapt to those local forms of payment or have a good reason why you’re not doing it.
Delivery methods can often be different—whether you have distributor run pick-up centers or you have different ways of delivering the product.
You also need to know—going back to the NFR question for a few minutes—you need to make sure that your pricing is initially set up correctly. You might go in NFR and go for a little bit cheaper price and then when you figure out all of the nuances and all of the costs of being on the ground, you might realize that that is an unsustainable price for when you open that country for on the ground, but if you’ve been selling the product for months or years at a much reduced price, that’s going to hamper your ability to open the country properly with your on the ground resources set up. So you need to make sure there’s a lot of research done up front.
One of the other things I want to touch on is pressure from distributors. That’s often one of the reasons companies give for wanting to open a specific market; it’s because they’ve got leaders who’ve already been in that market or they’ve got groups on the ground in that market. By no means do I want to come across as critical of distributors; obviously they, like you, want the company to be successful and they are out there advocating for your product and wanting to build a business. But you need to work with your distributor field and your distributor field needs to work with you to say, “what are the proper steps that need to happen,” so that you can go in successfully. And you need to understand from them what are they going to do as you open a new country. What’s their commitment to you in providing support and making sure that the opportunity is successful.
Unfortunately—this isn’t just pertaining to distributors—we’ve seen, at InfoTrax, over the years, a number of companies open countries where they never make back the initial investment in getting open and that has to do a lot with not properly researching it before you endeavor. There are different countries where the amount of work to get the products approved, to get the compensation plan approved, to have IT support to take into account data security requirement, to take into account the tax requirements and the withholding and to make sure that you’ve got representation in that country, that it becomes so costly that then, if you don’t pretty quickly take off in that country, that’s an investment that becomes somewhat unsustainable – if not for the company as a whole, at least for the company within that country.
So it is important that you take the time and carefully research what is involved in opening a new country and make sure you’re prepared to pay that price. The price in terms of the investment monetarily, but also in terms of the investment of time and of resources.
A couple of reasons that I think should be pointed out that are not good reasons to go international are simply because everyone else is doing it or because you think that is the mark of a successful company. Especially when we are talking about starting in the US; the US is a huge, huge country with a lot of people and there is a lot of success that can be had here to create a mature company before being forced to go international. But that is true for any country that you are starting in; make sure that your roots are strong and that you are deliberate in your expansion internationally and that you’re not doing it simply because others want you to or that because you feel that that is what needs to be done.
The final thing I wanted to touch on is simply making sure you have open communication between your field, your partners – whether it be fulfillment, IT, payment methods – and your executive team to say, “okay, what are our goals in opening country X? And have we done the research and do we know that the product and opportunity will resonate culturally?” And then be prepared to spend the time to get set up right and spend the time on the ground to make that successful. And as you do that, then obviously there are many, many, many companies in our industry that have a tremendous amount of success around the globe. But don’t neglect what you have at home. Make sure you are doing the research and make sure your distributors and customers at home continue to have the same high level of service and high quality products and upline support that they’ve grown accustomed to and that really is it in talking with many industry experts both within the company I work for, InfoTrax, and outside of it. Those are the main points of feedback.
I would make sure that as you’re talking to different consultants, make sure they have a firm grasp of not just expanding internationally, but going to the specific countries you are looking into. I’ll say that going into Korea and going into Italy are two very different animals and both we’ve seen companies—those are just two random country examples—but we’ve seen people have success in both, but the expertise to go into one is necessarily the same expertise to go into the other. You need to be intimately familiar with the country you are going into.
And my last word of caution is don’t think that NFR is just this panacea that allows you to into every country all around the world without having to do the vetting and the setting up. We’ve seen a lot of companies get themselves into trouble with that mindset.
I hope that this episode hasn’t come as too much of a downer, but just as a thought provoking way of saying, “okay, what do we need to do as we’re expanding internationally?”
We’ll be back in a couple of weeks and we’ll return to our old format of bringing on guests and I thank you for your time. I hope that as you have different topics that you want to hear about or as you have different bits of feedback on the podcast, that you’ll reach out to us on MLM.com.
I’d also like to give a very special thank you to the contributors for this episode who’s great information I distilled and was hopefully helpful to you. Those people are David Judd, Sean Smith, Glen Rawlins, Jared Smith, Mark Rawlins, and Steve Hooper. As always, we want to thank our productions support – Adam Holdaway and Jana Bangerter. This is the MLM.com podcast we hope you’ll join us in the future.