When I worked as a family physician, I struggled to fall back asleep after patient calls in the middle of the night. My husband, Jason Wolfe, a videogame developer, solved this problem for me. In 2007, he designed and developed headphones that play calming music to help you fall and stay asleep—an invention we call SleepPhones®.
We realized this invention had broad appeal and patented it. We established an e-commerce venture that we ran from our home for six years on top of our day jobs. One of our very first orders came from a customer in the United Kingdom. Others from around the world soon followed.
SleepPhones were the first of their kind to market, and we quickly realized we’d stumbled onto a niche that has no geographic boundaries. In 2012, when the business hit $1 million in sales, we quit our day jobs to focus exclusively on our business.
To date, we’ve sold almost 2 million pieces and shipped to all seven continents. International sales, in stores and online, now account for 30% of our annual revenues. I expect those will only grow as we continue to focus on global expansion.
Three important connections have been instrumental in helping us expand internationally: the fantastic advisors and resources at our state and federal export assistance centers (which are free to any business) and exposure at our first international trade show, the 2013 Consumer Electronics Show.
Our 10-by-10-foot booth was the smallest size at the show, but it was big for us. Our company won its first CES Innovation Award that year, and it’s where we met most of our international wholesale distribution contacts. That first year we had distributors from 10 countries shoving 30-page contracts at us and wanting us to sign on the dotted line.
Advisors at the U.S. Commercial Service, a government organization that helps businesses export, and the Pennsylvania export assistance program, helped us see the big picture and understand what was possible.
We realized that working with international distributors is a great way to sell SleepPhones in foreign markets. They often have a speciality, such as selling electronics, health products or unique gadgets, and they have connections with various physical and online retailers within their country that they sell through.
Distributors formally import your products to their country, paying all the duties and other fees. Some act as an agent and apply for required licenses in those countries. They may even set up a brand website within their country, promoting it via social media and advertising.
However, it’s critical to select and vet distributors carefully. They should be strong in logistics, and the extent of their services should be discussed in advance and used to negotiate pricing. For example, if we plan to be very hands-off in a particular country—especially if we can’t easily understand their language and culture—we give them deeper discounts off our manufacturer suggested retail price (MSRP) to support their marketing efforts. On the other hand, if we can strongly support their marketing by sharing details like digital advertising keywords or public relations opportunities, that margin may not need to be as high.
There are many other considerations to navigate: Are there any trade barriers? If you sign with a European Union (EU) distributor, be aware that you’re governed by EU laws—a situation that can be favorable for the distributor but not necessarily for the manufacturer. What are the ramifications of giving a distributor exclusivity? And, if you do grant exclusivity in a particular country, how much should they be selling? (We came up with a formula that looks at the number of people in a country, its gross domestic product and its average household income.)
Over time, we’ve worked with distributors in a lot of different places, including the UK, Australia, Canada, Japan, Korea, Taiwan, the Middle East and South America. Our state export assistance program has boots on the ground across the globe and helped us vet them by checking credit accounts and government records and asking for information from their customers and suppliers.
It’s important to keep in mind that no matter how much you vet your partners, things happen. We worked with two distributors for almost a year that were buying pallets of products every few months and paying us on time. Suddenly, their payments stopped, and we were out $40,000. That’s when we connected with the Export-Import Bank of the United States, the official export credit agency of the U.S. For a minimal insurance premium, the bank guarantees 90% of the cost of every order you ship.
Finding global appeal
There are many benefits to selling globally. First, it helps even out the business cycle throughout the year for cash flow as different countries have different holidays for giving. It also opens up a huge potential customer base to us beyond what we have in the U.S.
Also, as a brand, you need to establish yourself overseas. It’s an intellectual property issue. If you’re not there, someone is going to step in with a knockoff and represent you. We want to let people know SleepPhones headphones are the gold standard for this niche.
As the world becomes increasingly interconnected—and communicating and selling internationally becomes easier than ever—I expect many more businesses will see the appeal of serving international customers. You can gain a competitive advantage by doing it sooner than later.Print this article