Types of export

Manufacturers can choose from various methods to arrange the export of their products. The essential differences in export methods are due to the nature of intermediaries, the number of intermediaries and the location of intermediaries (Exhibit 3-5). The way when the manufacturer directly sells his service to a foreign customer without intermediaries is often found in the business-to-business segment. Manufacturers of parts, components or raw material miners often conclude direct contracts with their customers – business partners. For example, an organization that manufactures car steering wheels usually exports them directly to the car manufacturer, or an organization that manufactures seats for airplanes also supplies them directly to the airplane manufacturer.
The situation is reversed in B2C sector. A manufacturer rarely or never sells his products directly to the end user. For example, a person who wants to buy a car cannot buy it directly from a manufacturer located in another country. It is very rare that the end user can buy clothes, food products, shoes, household appliances, electronics, and furniture directly from the manufacturer.

Ex. 3-5 Types of export

Keywords: types of export, B2B, B2C, final product, raw material

Manufacturers sell goods directly to end users, except in their own country in the so-called branded stores of the manufacturer, but for export, this type of sale is rarely found. E-commerce has enabled manufacturers to export goods directly to end consumers, but this is found in very few industries. For example, some apparel manufacturers make it possible to import these goods directly to end users. However, in other industries, manufacturers avoid exporting end-use goods directly to the end-user (He et al., 2013). There are several reasons for this. First of all, economies of scale play a role during distribution and transportation. It is too expensive to send one item every time to another country, unless the item itself is expensive, and the cost of transportation is relatively a small part of its price. Another argument is the well-established sales and logistics channels available to trade intermediaries. Manufacturers in the B2C segment usually seek to export using the services of intermediaries. In most cases, manufacturers no longer need to worry about product positioning, logistics, inventory management, or sales forecasting. Sales agents, brokers, wholesalers, and sometimes retailers do this for manufacturers. A very large part of consumer goods is sold in supermarkets, which have already become well-recognized international brands. The giants of US, European and Chinese retail chains serve hundreds of millions of customers and have accumulated much statistical information. Big data-based information about consumer expectations, interests, best-selling products, and pricing are becoming an essential tool in global business.
Due to market dominance and direct contact with the consumers, retail giants have this tool and often they use it. Often, retailers take the role of a wholesaler and arrange distribution and sales contracts with manufacturers.
However, not all manufacturers supply goods directly to retail chains. Some manufacturers seek to maintain their production by establishing their own or franchise bases in cooperation with local sales representatives. To achieve exclusivity, manufacturers sometimes grant exclusive marketing rights in a specific country to only one or a few selected representatives. Thus, whether the manufacturer will enter into a direct export sales contract with a retailer operating in another country or a trade intermediary depends on the specific case and on the chosen distribution strategy.
The COVID 19 pandemic has dire effects on people’s lives and health, but at the same time it has revealed new opportunities for remote work and e-commerce. Before the pandemic, the prevailing opinion in retail was that a physical store is a “must have” and an e-store is “nice to have.” After the pandemic, these two paradigms have switched places, with a growing number of retail players saying that an e-store is a “must have” and a physical store is “nice to have”. The rapid growth of e-commerce has brought about changes in supply chains and logistics. More and more companies that export goods are choosing e-commerce and shipping goods according to a separate order of a customer, instead of distributing goods through intermediaries by sending goods to their warehouses. E-commerce has led to the centralized storage and distribution of finished products from one central warehouse directly to the customer, bypassing the intermediary warehouse system (World Trade Organization, 2018). This type of export is safer for the exporter, as it avoids the risk of sending a large amount of production to number of distribution warehouses in foreign countries, because these products may not necessarily be sold. Of course, the method of e-commerce export from a centralized warehouse requires different logistical solutions, shipments become small, high speed and reliability requirements are placed on transport operators. Part D of the book talks more about the variety and details of logistic principles.