The Realities of Selling and Distributing Hardware Worldwide

At the Startup Launchpad conference last October, we had the opportunity to hear from Dana Madlem, VP of sales at Rush Order, a third-party logistics provider that helps startups organize and fulfill orders to retailers and end consumers. Dana spoke to a room full of bright-eyed hardware startup founders to prepare them for the same journey in global distribution that past Rush Order clients, including GoPro, McAfee, and Roku, have successfully embarked.

Assess Government Compliance

The initial box that you should check on your global distribution checklist should be regarding the legalities of your international shipments. As your product crosses borders, consider duties, sales tax, and value-added taxes that may be required for entry into the country. These extra fees can add up, and in some cases, duties can amount to nearly 100% of the product value, as is the case in Brazil. With this in mind, consider if there are countries that will not be included in your international distribution plan — or at least not right away.

Communicate Throughout the Supply Chain

When distributing globally, your partners in supplying, production, logistics, and retail can span multiple countries, and this inevitably complicates shipment schedules. You may manufacture your hardware in Shenzhen and store your product in a warehouse in Hong Kong, but you plan to distribute to sales channels throughout Asia, Europe, and the USA. Be sure that there is proper communication between all the links in the chain to prevent lost or damaged product, or a blow to your reputation. For example, retailers will want shipment notifications to estimate when they can get your product on their shelves, as well as timely invoices.

Make the Most of Returns

Selling-in is not the same as selling-through. Selling-in refers to sales that put products on shelves, while selling-through refers to the percentage of the product that actually reached the end customer through the retailer. At the end of the day, startups will receive payment for the items that sell and stay with consumers, particularly for those that have remained with customers past the typical return schedule of 30 to 60 days after initial purchase; thus, we want to minimize the amount of customer returns to retail stores. Unfortunately, returns are inevitable, especially when selling in brick and mortar establishments, and a startup distributing globally needs a way to handle these. One way of dealing with returns is by creating refurbished products out of them and setting them aside for warranty replacements or selling them at a discounted price.

Customer Service

To continue making sales and earning loyal customers, particularly when selling a “smart” device, there needs to be an avenue for customers to receive technical and order fulfillment support within a reasonable time-frame. Ideally, you should have a team that helps manage these queries that may now be coming from all over the globe. Customers are increasingly referring to online reviews when making purchasing decisions, making customer service a critical and continual goal for startups.

Do not let the challenges involved in global hardware distribution prevent you from taking the plunge after your initial success in e-commerce. In his talk, Dana revealed that no Rush Order clients have ever repeated their original pre-order campaign sales volumes while selling directly to consumers. Inevitably, most well-founded startups will increase their profits by transitioning to indirect channels such as online retailers or major storefronts after their initial direct website sales.