Companies share tips for opening new markets abroad
By: Ramneet Kaur
These are real people—they are not numbers. They are heartbeats. These are people that are doing this for their own family, for their own hopes, for their own dreams and for their own aspirations.
—Bo Short, CEO, Elevacity Holdings LLC
There are four important pillars of importance to consider, with trust overarching: planning, basic business infrastructure, consumer expectation and the people.
—Greg Martin, Founder, Japan Power and Gas
There are many things for direct sellers to consider when making a global expansion—from timelines, rules, and regulations to cultural differences, compliance issues and compensation plans.
The World Federation of Direct Selling Associations (WFDSA) reports that direct selling is a $180.5 billion industry worldwide that encompasses 119.9 million independent representatives, based on its 2020 release of global statistics. What does it take to enter a completely new market, and what important factors should be considered?
Building Around People
Bo Short, CEO of Elevacity and a 30-year veteran of opening and managing international markets, says, “Expanding globally requires a deep understanding of the role that leadership plays in growing a specific market. You should not open a market hoping people will come to you. You must target markets where you have field leaders to build with and through.”
Besides having physical presence in the territory, as well as making sure you are legally compliant, Short adds, “You must be mindful of the products you offer, the compensation plan must work globally, and there must be a training platform to teach people how to build their business. Most importantly, there must be an understanding that you are not simply connecting dots on a global map.
“These are real people—they are not numbers. They are heartbeats. These are people that are doing this for their own family, for their own hopes, for their own dreams and for their own aspirations.”
Short recently took over as CEO of the parent company to The Happy Co., a health and wellness company that is planning aggressive global expansion. The latest milestone is Europe. The Happy Co. is expanding its footprint into 21 European countries with its Global Happiness Initiative. “The Happy Co.’s customer-centric NFR (not-for-resale) model is our first introduction into the European market,” Short says.
To prepare for this expansion, Short attributes the success to mapping out a strategic roadmap. “There is nothing left unanswered about the plan we put into place. There is a methodology to creating a foothold in Europe first, then further around the globe. Our only job now is to execute the plan to ensure success for the company, our Brand Partners and Customers.”
Advice from a Canadian Expansion Expert
Lewis Retik, a partner at Canadian law firm Gowling WLG, advises when considering global expansion, Canada is a logical place to start
“Direct sales is dependent on person-to-person relationships, and what two countries in the world have the greatest relationship? Canada and the United States,” Retik says. “Apart from strong ties and close proximity, a shared language can make for a smooth expansion as well.”
Drawing on his 20 years of legal experience, the strongest advice that Retik has to give to executives contemplating expansion is: “It is always better to get me [legal counsel] involved as early on in the process as possible, even when looking at your compensation plan. Get us involved early so that we can provide the input to your compensation plan from a Canadian compliance perspective. So you’re making less changes in the future.”
Companies are more likely to find success internationally if they invest in the territory and make an effort to understand its people, Retik says.
“One example is running events in Canada and giving the Canadian business its own marketing material—making the distributors feel engaged as if they’re not just an extension of the U.S. distributors,” Retik advises.
Expansion will often run into setbacks, but these can be avoided if a proper plan is put into place and thorough research is conducted beforehand. Retik reports that 90 percent of the time a company is its own biggest holdup.
“Canada is typically the first country that most U.S.-based direct sales companies expand to. When they go to the next country, I call it the ‘Canada car wash,’ because this first step forces a company to think about things they might not think about before expanding overseas.
“When a company starts up in the U.S., they have an idea. They think about certain things and risks but do not typically think about these things again until they are growing into Canada. Once they move into Canada, they now have a business to protect—not just to grow but to protect,” Retik says.
He provides a look into what the process looks like when extending a business to Canada.
First, a company sends a submission to the Competition Bureau, which can take six to 12 weeks. Quite a bit of time can go into preparation for the submission to ensure compliance with Canadian law. Provincial direct sales licenses are also needed; every province and territory other than Ontario, British Columbia and Yukon requires a direct sales license. This can take anywhere from four to six weeks, Retik advises. In addition, there are corporate considerations such as creating a subsidiary and then registering that corporation across multiple provinces. Additional details including product compliance, product registration and special approvals on products could take as few as 60 days, or longer than 200.
Strategic Planning Critical for Europe and Asia Nature’s Sunshine, a health and wellness company, began its initial international expansion into Canada in the 1970s.
“What happened in the ’70s and the reason that we expanded to Canada quite quickly was simply our customers taking us there,” says Dan Norman, executive vice president and president of Asia Pacific at Nature’s Sunshine. “This was completely customer-distributor-driven where people were saying ‘wow’ and were taking these products by the droves.”
“On the other hand,” he says, “Nature’s Sunshine’s fairly recent expansion into Asia was a bit
Norman has helped expand the company globally and has opened businesses in more than two dozen countries in Asia, Europe, and Latin America.
When mapping out international growth for Nature’s Sunshine, Norman reports, “It has been more strategic, going to the right markets. An important question to ask is: What distributor leaders that you currently have operating in existing markets are willing to go recruit and get going in other parts of the world?”
He also adds that when entering any market in Europe, companies should anticipate that they will need to move into others within the continent because there is so much cross-border activity among distributors and customers who have contacts all over.
“With our moves to Asia, China, Russia, Poland, continental Europe, you really have to be aligned these days to be successful,” Norman says. “A big corporate team has to be prepared. This includes everyone from IT to your supply chain and customer service. You have to make sure everyone is ready to expand into that market because there’s a huge investment and many requirements needed to open successfully. If you don’t do this strategically, you will fail due to the cost alone,” he says.
To prepare for expansion, Norman suggests doing some initial trips to seek out legal counsel and funding. This gives companies a feel for what to expect in the way of direct selling regulations, timelines and capitalization.
Bryant Yates, executive vice president and president of Europe for Nature’s Sunshine, stresses the importance of preplanning and meticulously mapping out the steps.
“If you make one or two mistakes, it can cost you a lot of money, and it could actually make it so you can never do business in that country. So that’s why it’s so important to make sure for the first partner you have that it’s definitely legal. If you don’t do it right and spend the money upfront, you’re going to pay for it down the road.”
Yates advises that when planning an expansion, “Take your time, localize, find someone who’s familiar with the territory. You have to really check and make sure what you have and what you’re going to be sharing, or providing, or selling makes sense for that region or that country.”
There are regional differences to take into consideration as well, he says.
“One thing you quickly learn is don’t assume things are alike in any market. Every market has specific laws and regulations. Once you start talking with attorneys you will find which territories are easier, more simple to get into. One other thing that I notice as you go to different parts of the world is price sensitivity, based on just how the economy’s going. Don’t assume that you can price and sell every product in every region or part of the world,” Yates says.
Norman also warns against taking a universal approach to all regions.
“I would say there are some aspects of marketing you can do globally, but also be prepared to localize a lot of aspects of your business for success. Don’t go into a country and try to do everything the American way. If you know you need to go in and look and understand their customs, you need to partner with them and localize as much as possible,” he says.
Russian Government Presents Challenges
Yates says that the success of Nature’s Sunshine in Russia is not only attributed to learning the culture in these regions, but also understanding the infrastructure and whether a business has the ability to ship products directly to distributors and customers in these areas.
“Twenty years ago there was no infrastructure in place, and shipping products was difficult,” Yates says when speaking about the challenges of getting a foothold in Russia.
“This is still difficult now, so oftentimes companies should consider building their own distribution centers. This is slowly getting better over time.”
He also advises about unique regulation considerations in Russia regarding product pricing, packaging and labeling that may require more attention than in other regions.
“Russia is a very touchy market because of the government,” Yates says. “We found that we were better off going in with a partner under a Russian entity. That is one of the reasons that it took us a year instead of maybe two or three—because we had a partner on the ground.”
“Nature’s Sunshine did a great job in Latin America, especially in the early days because we set up distribution centers,” adds Norman. “So, in the beginning with Russia, we opened up 10 to 12 centers, which eventually grew to thousands of distribution centers. But, over time, the infrastructure has improved. So we will slowly start to cut back on distribution centers that we have.”
Japan’s Unique Market
Greg Martin, founder of Japan Power & Gas, knows first-hand the importance of identifying the unique aspects of a country’s business culture to establish trust among the people of that country. Martin went to Japan to set up the direct selling company after Japan deregulated its power market.
“Japan is very unique. It is a very homogenous country, and outsiders are outsiders. So, when I took my crew over there, I focused on building trust, I focused on the intersection of new business and direct selling.
“There are four important pillars of importance to consider, with trust overarching: planning, basic business infrastructure, consumer expectation, and the people,” Martin says.
When planning a move to Japan, he advises that all aspects of the process will take longer than expected. “Establishing an LLC or C Corp, setting up a bank account, all of these things take longer in Japan. What may take 2 hours in the U.S. may take a month and a half over there.”
Also, the pillar of business infrastructure should be addressed by leaving all assumptions behind, Martin advises. “Things that you depend upon, that you don’t even have to think about in this country—setting up bank accounts, getting credit—go vet it first and make sure your concept exists.”
He also described the flexibility required to adjust and adapt to huge cultural differences in consumer expectation.
“We went over in 2016, 2017 and were building 2018, 2019-style tech tools and tech platforms, thinking about fast efficiencies, economies of scale and slick user experience. Forget about it. It was way too advanced for consumer expectation.
“The Japanese consumer was paper and pen, mail envelopes, fax machines, and showing up at the office with cash payments, “ Martin says.
The final pillar, according to Martin, is to assemble a good team to assist with the previous three pillars.
“Get good people,” he says. “They do exist, and you can find them and get them early so they can help you understand everything else on the list—the planning, timelines, basic infrastructure, and local consumer expectations.”