DEVELOPING INTERNATIONAL MARKETS FOR HOME ACCESSORIES AND GIFT ARTICLES Export Marketing Guidelines for Vietnamese Craft Exporters Export Marketing Guidelines for Vietnamese Craft Exporters Prepared for: VIETRADE/ITC/WTO/UNCTAD 2 Export Marketing Guidelines for Vietnamese Craft Exporters Table of Content Page Preamble 3 1 Are you Ready to Export? 4 1.1 Market Analysis (External Analysis) 4 1.2 Company Analysis (Internal Analysis) 9 1.3 SWOT Analysis 11 2 Market Entry Strategy 12 3 Preparing a Professional Presence 14 3.1 Marketing Material 15 3.2 Professionalize your Staff and Communication 19 3.3 Professionalize your Company Operations 21 3.4 Understanding Market Requirements to Improve your Presentation 23 4 Preparing Products for Export 24 5 Export Costing, Pricing and Invoicing 28 5.1 Export Costing and Pricing 28 5.2 Quotations and Proforma Invoices 31 5.3 Terms of Sale 33 5.4 Methods of Payment 34 6 Trade Fair Participations 38 6.1 Selecting the Right Trade Fair 39 6.2 Trade Fair Preparations 40 6.3 Participation Costs 42 6.4 At the Trade Fair 43 6.5 After the Trade Fair 44 7 Export Documentation and Shipping 45 8 Dealing with Claims 47 3 Export Marketing Guidelines for Vietnamese Craft Exporters 9 Appendixes 48 Preamble Vietnam is a land of handicrafts 1 thanks to the hardworking and creative Vietnamese people. Fine Vietnamese handicraft articles are exported to over 120 countries worldwide. Products such as ceramics, lacquer, wooden wares, bamboo and rattan products, textile, embroidery etc. are nowadays becoming popular throughout the world as home accessories, home decor and gifts. Vietnam has been extremely successful in exporting craft products during the last few years. It is estimated that 1.35 million inhabitants earn a living from producing or trading with crafts, generating an export turnover of almost 600 million USD per year. However, if compared with the consumption of home accessories and gifts in the world, the above figure only accounts for less than 1% of the market volume. There is still tremendous potential for further export increases. These Export Marketing Guidelines are a manual which aims to provide practical and comprehensive information to a large number of Vietnamese craft exporters. The Export Marketing Guidelines serves the needs of both current and potential crafts exporters, showing them how to enter and get a firm foothold in the world markets in the context of global competition. The authors thank all parties concerned who assisted in preparing the guidelines, notably the Vietnam Trade Promotion Agency (VIETRADE) and the International Trade Center (ITC) project team in Hanoi and Geneva. Prepared by  Handicraft Research and Promotion Centre, Hanoi, Vietnam (www.hrpc.com.vn)  IDC – International Development Consultants, Aachen, Germany (www.idc-aachen.de) Copyright The information provided is aimed at assisting handicraft producers, exporters and business support organizations in Vietnam. It may, therefore, not be used for re-sale, the provision of consultancy services and other commercial purposes. For utilization of this information on a non-commercial basis, the condition applies that VIETRADE is referred to as the source of the information. All other use is prohibited, unless explicitly 1 The handicraft articles covered in these marketing guidelines are defined in Appendix No.1 4 Export Marketing Guidelines for Vietnamese Craft Exporters approved in writing by VIETRADE. 5 Export Marketing Guidelines for Vietnamese Craft Exporters 1 Are you Ready to Export? 1.1 Market Analysis (External Analysis) To decide if your company is ready to export, first of all assess markets in order to identify opportunities in the most suitable markets. Then assess to what extent your enterprise is capable of taking advantage of the opportunities identified in the market analysis. There are a number of promising markets for Vietnamese crafts in the world and it may cause some difficulties for you to decide where you should focus your efforts. In general, you can use the following step-by-step approach. Step 1: Screen potential markets  Obtain trade statistics about handicraft imports in various countries and Vietnamese exports. The General Statistic Office of Vietnam (presently located at No.1A Hoang Van Thu Street, Hanoi) is the best place to find these sources of information, even for your individual product (product codes according to the Harmonized System). Some information about different major export markets is included in Appendix No.2 .  Identify 5 to 10 large and fast-growing markets for your products. Look at them over the past three to five years.  Identify some smaller but fast-emerging markets that may provide particular opportunities. If the market is just beginning to open up, there may be fewer competitors than in established markets.  Target three to five of the most promising markets for further assessment. Consult with experts, the Vietnam Trade Promotion Agency (VIETRADE) and others to help refine targeted markets. Step 2: Assess targeted markets  Identify importers, wholesalers and other main players in the market. Make yourself familiar with distribution channels and business practices.  Identify the market segmentation by users (on demographic criteria, on customer preferences, by price/ quality, etc). Who will want to buy what you can make and why? What is their lifestyle, where do they live, what kind of products do they usually buy?  Examine price level and market trends for your company’s products as well as related products. Ascertain the current supply sources, particularly with regard to major foreign countries the firm is competing against.  Check market entry barriers (tariff or non-tariff) for the product being imported into the 6 Export Marketing Guidelines for Vietnamese Craft Exporters country.  Identify incentives that are given by the Vietnamese government to promote exporting of your products to these markets.  Examine shipping costs from your main ports to the target markets. A company may research a market by using either primary or secondary data resources. When conducting Secondary Research (desk research), a company collects data from compiled sources, such as trade statistics for a country or a product. Working with secondary sources is less expensive and helps the company focus its marketing efforts; as a result, most small businesses begin researching their markets using secondary market information. Although secondary data sources are critical to market research, they do have limitations. For example, the most recent statistics for some countries may be more than two years old, product breakdowns may be too broad to be of much value to a company, etc. Popular sources of secondary data research include:  Trade associations ; for websites see Appendix No.3. There is a lot of information on market statistics, up-to-the minute industry news, trade fairs, importers, and expert analyst opinion which is provided by these associations.  The General Statistics Office of Vietnam (GSO) or other national statistic offices ; for websites see Appendix No.4. Note that, for the effective search of data from statistic offices, you should know well the Harmonized System (HS) codes of your products.  Trade journals and trade press ; for websites see Appendix No.5. These sources can be a good indication of products which are in fashion (like for example “Tableware International”, a leading journal on the international table and giftware).  Books on the home decor, home furnishings and handicrafts sector. Many of these books can be found at the library of the Vietnam Handicraft Research and Promotion Center (www.hrpc.com.vn), or you can buy them at bookshops in Hanoi and Hochiminh City. Most of them can be bought through websites like www.amazon.com, www.barnes& noble.com, etc.  International research agencies like Euromonitor (www.euromonitor.com), KeyNote, Datamonitor (www.datamonitor.com) and Mintel (www.mintel.com), where you can find a lot of information on markets, consumers’ lifestyle etc.  Trade agencies , like VIETRADE, Japan External Trade Relation Organization (JETRO), the Center for Promotion of Imports from Developing Countries (CBI, the Netherlands), the International Trade Center (ITC), Chambers of Commerce and Industry etc Here you can find information on market surveys (segmentation, consumption, competitors, entry requirements), market trends, statistics etc. For websites see Appendix No.6.  Sector-related trade fair websites indicate new trends and often contain complete contact 7 Export Marketing Guidelines for Vietnamese Craft Exporters information about leading market players. For websites see Appendix No.7.  The websites of trend-setting international companies and important fashion companies give good insight into new color trends. In general, a website search of main importers in target markets can increase your knowledge about product portfolios, designs, prices used in the target market.  Information about upcoming trends and colors in the EU, Japan and US market can also be taken from the “Trend Forecast” of CBI (www.cbi.nl), the Swiss Import Promotion Programme SIPPO (www.sippo.ch), Japan Fashion Association (www.japan fashion.or.jp), Trend Curve’s (www.trendcurve.com). Buying or commissioning market research reports can be expensive. For a fraction of the cost, and mostly even free of charge, much of the same information can be gathered from the Internet. The Internet is one of the most important ways in which an exporter can obtain market information. You can find almost everything there by using search engines like Google (www.google.com) and Yahoo (www.yahoo.com). The Google search tools ‘froogle’ and ‘catalogues’ are extremely useful for product design and pricing. ‘Froogle’ shows photographs of products and their prices ‘Catalogues’ is a directory of over 6000 scanned catalogues with images of products and prices (http://froogle.google.com; http://catalogues.google.com). In conducting Primary Research (field research), a company collects data directly from the foreign marketplace through interviews, store checks, trade fairs, and other direct contact with representatives and potential buyers. Primary market research has the advantage of being tailored to the company's needs and provides answers to specific questions. You can cover some of the missing information in your desk research, and you may become aware of hidden feelings people have towards your company, country or product. Even if statistics show a growing market, field research can be crucial to make the final decision on whether or not to go, and if so, how to do it, etc. The field research should be conducted after desk research to confirm the findings of the desk research and fill information gaps. Popular sources of field research include:  Discussions with handicraft companies/exporters who have similar export products  Discussions with potential buyers or sourcing agents in Vietnam  Information from trade promotion organizations (VIETRADE, www.vietrade.gov.vn, JETRO, www.jetro.go.jp, KOTRA - Korean Trade Investment Promotion Agency, kotrahan@fpt.vn, AMCHAM - American Chamber of Commerce, etc.), and private sector development projects in Vietnam (JICA - Japan International Cooperation Agency, www.jica.go.jp/vietnam, VNCI - Vietnam Competitiveness Initiative, www.vnci.org, GTZ, www2.gtz.de/vietnam/ etc.) 8 Export Marketing Guidelines for Vietnamese Craft Exporters  Contact with Vietnam’s Embassies, Consulates, Trade Centers in foreign countries  Discussion with forwarding agencies or shipping companies (see appendix No.8)  Trade fair visits in your target markets or other trade fairs that are close to Vietnam like Hong Kong, Thailand, China, and Japan.  Store visits in your target markets to check trends, prices etc (see appendix No.9). Besides assessing market size and identifying key importers, market research should also include getting an idea of market entry requirements, competition, price structure etc. It is important to define your research need in relation to your export marketing experience, for instance, whether you already have clients in a country or whether this is your first export business venture. When starting to export to the EU, your research needs would probably be to familiarize yourself with the EU market by finding out relevant information on subjects such as market requirements, structure, developments, segments, main players etc. However, when you have become familiar with the EU market and know which opportunities exist, the next logical step is to go further into details and explore the possibilities to increase your sales. You will need a very specific research about customer requirements for individual products and the strengths and weaknesses of the main competitors. Important issues of market research are: A) Market development and opportunities  Market size, sales channels, major importers, agents, distributors and retailers?  What are customer preferences, what is the price level? Who will want to buy what you can make and why?  What sorts of products are selling well (characteristics, dimensions, colours and materials)? What colours are in fashion? What new designs are popular?  What are the prices and margins at each distribution level? What are the most important requirements of the identified sales channels (quality, packaging, etc) and which sales channel is most suitable for your range of products?  What are the major trade shows where your types of products are sold?  How about cultural factors in doing business in the selected markets? Professor Geert Hofstede’s model gives you insights into other cultures so that you can be more effective when interacting with people in other countries (www.geert-hofstede.com). Some other interesting information on cultural factors can be found in Appendix No.10. 9 Export Marketing Guidelines for Vietnamese Craft Exporters B) Market entry requirements  What standards or requirements apply to the quality of your product and are these standards compulsory?  What standards apply to the quality of your company’s management and production?  Are there any labels (e.g. ECO labels, etc.), which create a competitive advantage?  Are there environmental regulations or requirements on the use of dangerous substances for your product(s)? For raw materials? For packaging waste?  What special legislation must be complied with regarding health and safety issues?  Are there any requirements on social accountability (e.g. SA 8000)?  Which import tariffs & VAT duties apply to your export products? Are there any international trade agreements which have a positive effect on tariffs?  What weights and measures are applied in different markets? (e.g. the United States is in its adherence to a non-metric system but Japan is metric measurement)  Some specific sources for market entry requirements are in Appendix No.11. C) Competition  Is there much competition in these markets? Who are the main competitors?  What products compete with yours? Who are the suppliers or manufacturers of those products? What can you make that is different and better?  Who are the main clients of your competitors?  What are the strengths and weaknesses of your main competitors?  How many competitors from your own country are active in the target market? D) Logistics  What type of packing is appropriate for your range of products in the target markets?  What kind of shipping documentation is required? What are the packaging and labelling requirements?  What is the average delivery time in your business line?  What type of transportation is mostly used? What are the cost components of transport from your factory to the buyer’s warehouse?  What are the key seasonal buying and selling periods? E) Price level 10 [...]... respective retail channels they operate in, they have different needs for product groups, price levels, and design specifications Understanding these needs is important for exporters in order to be able to offer them appropriate products 14 Export Marketing Guidelines for Vietnamese Craft Exporters Importers can be very reliable partners for exporters, allowing them to enter into long-term partnerships and... quality by comparison Therefore, to position yourself in the marketplace, you should always produce the best possible quality you can, even for inexpensive items Constantly strive to improve quality 26 Export Marketing Guidelines for Vietnamese Craft Exporters Different products for different customers: In order to make as much business as possible, Vietnamese handicraft exporters tend to offer everything... a US client if you fixed your lamp with a two-pin plug If you are involved in exporting lighting equipment, you need to install different electrical wires for each country, like CE standard for EU, UL for America, UK for England, PSE for Japan and OVE for Australia, etc 28 Export Marketing Guidelines for Vietnamese Craft Exporters Understanding the product sales periods: In Japan, the months of March,... products for the home and garden using environmental-friendly materials for lamps, table, chairs, decor objects At ABC Decor, all of us share a common mission: "To reward our customers with long-term value and product satisfaction for every purchase" Our passion for product is what has made us different from other producers and suppliers 17 Export Marketing Guidelines for Vietnamese Craft Exporters. .. quotation for sea-grass baskets for a Japanese customer Le Nguyen Bao Tram Sale Manager 33 Export Marketing Guidelines for Vietnamese Craft Exporters 5.3 Terms of Sale In any sales agreement, it is important that a common understanding exists regarding the delivery terms Confusion over terms of sale can result in a lost sale or a loss on a sale For this reason, you must know the terms before preparing... companies in term of productivity, environmental protection etc and therefore, in any case, the exporters should consider applying these standards Following is an example of auditing requirements from a larger retailer to its suppliers 1 Employee record Availability: Yes No 23 Export Marketing Guidelines for Vietnamese Craft Exporters 2 Past 12 months’ time card/attendance record Availability: Yes... end art market, where it adds artistic value 5 Export Costing, Pricing and Invoicing 29 Export Marketing Guidelines for Vietnamese Craft Exporters 5.1 Export Costing and Pricing You can define production costs, which may include the components of fixed costs (depreciation of fixed assets – defined as objects with value over VND5 million and being used for more than a year like machines and premises)... provided by or for the buyer CIF stands for Cost, Insurance, Freight: A pricing term indicating that the cost of the goods, insurance, and freight until the final port of destination are included in the quoted price 30 Export Marketing Guidelines for Vietnamese Craft Exporters (will be mentioned in the later part) The following table describes different cost components need to be included for calculating... have sufficient infrastructure to export? Internet, fax, phone, port, roads, shipping containers? Do you know the major freight forwarders and shipping companies in Vietnam as well as their most competitive routes? E) Finance  Do you know your cost structure? Do you have a budget planning for expenditures on sales, 12 Export Marketing Guidelines for Vietnamese Craft Exporters     1.3 advertising,... account is summarized in the following table:4 4 Refer to “A Guide to Exporting Solid wood product” United States Department of Agriculture 34 Export Marketing Guidelines for Vietnamese Craft Exporters The first group (E) has only one trade term EXW, formerly ‘ex factory’ The second F-group The first group (E) has only one trade term EXW, formerly ‘ex factory’ The second F-group indicates the obligation . MARKETS FOR HOME ACCESSORIES AND GIFT ARTICLES Export Marketing Guidelines for Vietnamese Craft Exporters Export Marketing Guidelines for Vietnamese Craft Exporters. 4 Export Marketing Guidelines for Vietnamese Craft Exporters approved in writing by VIETRADE. 5 Export Marketing Guidelines for Vietnamese Craft Exporters