Slow and methodical. That’s how Zachary Barry characterizes Aladdin Light Lift Inc.’s approach toward exporting. The Huntsville, Ala., company manufactures electronic motor and wench systems designed to raise and lower chandeliers and decorative lighting.
Like many small manufacturers, Aladdin couldn’t afford to take on great deal of risk. Barry, the company’s international sales manager, led an effort to diversify the company’s market base outside of North America. The company, with average annual revenues of about $6 million, had grown steadily since it opened in 1991. It was already exporting to Canada but didn’t have an overseas presence.
In 2007 the company began experiencing the impact of the Great Recession. Barry was trying to find ways to grow the business and make himself more valuable to the company.
“We rode the housing market straight up, and we rode it straight down,” Barry recalls.
During a global logistics summit in 2007, Barry listened to a speaker from The U.S. Commercial Service discuss why large and small companies should export. Two days later, Barry called the speaker, David Spann, who advised him on how to begin exporting. Barry realized that Aladdin had a specialty product that wasn’t widely available outside the U.S.
Barry started looking at the electrical requirements for international markets, including certifications and what it would cost to build compliant lifts. He also looked at the total landed cost, including shipping rates and taxes.
“I had to be able to present to our board why it was going to be fruitful for us to export,” he said.
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Barry began tracking data from the company’s client services website to see what type of products customers around the world were requesting. He also conducted online market research to identify the company’s potential competitors in foreign markets. He discovered there were only about five major global competitors. The initial exploration phase took about a year. The company closed and restarted the program several times in that first year, Barry says.
“The program was new, and we didn’t have a whole lot of backing for it just yet,” he says.
At the time, testing the product to meet international standards and making changes to the electrical requirements were cost prohibitive. The company didn’t want to make the investment while the economy was still shaky, Barry says.
Retooling for New Markets
For example, in the European Economic Area (EEA), products must meet CE standards. CE is a marking that indicates products sold in the EEA meet high safety, health, and environmental protection requirements. The company had to hire a third-party firm called Intertek to conduct the CE testing.
“For an electrical product, you need to have a testing house certify that your product can handle the increased voltage – you’re looking at certain ratings for the motor, the wench and the electrical circuit for the chandelier,” Barry says.
In addition, in the U.S. most electrical products operate off of 110 volts and 60 Hz. Most other countries use the 240-volt, 50-Hz standard.
“So when you have a product that’s only rated to 110 volts, you have a pretty good R&D and time investment in getting those same parts rated for 240 volts,” Barry says.
The company made the decision to finally move forward with the investment after Barry spoke with several international buyers who wanted a higher-quality product than what they were receiving from China. The U.S. Commercial Service, the trade promotion arm of the U.S. Commerce Department’s International Trade Administration, also conducted an international partner search for Aladdin, which helped the company identify potential customers in Australia. Barry worked with a U.S. Commercial Service industry specialist to help promote the product. The service cost between $500 and $700, Barry says.
“They’ll go out on your behalf and represent your product and see what kind of feedback you get from local people,” Barry says. “You don’t have to touch down in Australia and go out and cold call.”
In late 2010, Barry took that feedback to upper management and convinced them that the company could sell into some of these markets, he says. The redesign process to comply with international requirements was fairly seamless.
“We had already been in the business around 20 years at that point, so we already had a good grip on our parts suppliers and knew what was out there and what needed to be sourced,” he says.
Overcoming Export Barriers
Aladdin has now been selling to the Australian firm for about six years, Barry says. Overall, the company exports to 12 different countries outside of North America, including Russia, New Zealand and the European Union.
A country like China may seem like a logical destination for overseas exports, but Barry quickly realized the market presented several challenges. For one, he didn’t speak Chinese. Also, the company’s product didn’t translate well to the Chinese market. In the U.S., two-story foyers, where high-reaching chandeliers are often found, are much more common than they are in China’s densely populated cities where apartment living is the norm.
In addition, one Chinese manufacturer was already producing a motorized lift similar to Aladdin’s, which meant the company would have to compete directly with the Chinese producer on its own turf Barry says. The similarities also raised concerns about intellectual property protection in a country known for IP breaches.
These issues prompted Aladdin to exit the Chinese market about two years ago, Barry says. Instead, Barry chose to focus on markets that were less risky and more culturally similar. Australia is now the company’s largest market.
“The strength lies in the similar business culture, climate and common language,” he says.
Aladdin’s competitiveness also played a role in its entrance into the Australian market, Barry says.
“The Chinese already had good footprint there,” he says. “They (Australian customers) were looking for a higher-quality alternative.”
Another challenge was complying with customs standards. The Middle East and Russia both have strict import requirements. In some cases, Aladdin had product rejected and returned for compliance failure, Barry says.
“I had some stuff sent back,” he says. “I wasted some money shipping – not doing customs documents right.”
Barry says he learned through trial and error and “a lot of hand-holding” from the U.S. Commercial Service. Exports outside North America only account for about 5% of Aladdin’s overall business, but Barry believes that figure will continue to grow as the company continues to reinvest in the export market.
“For any small manufacturer, I definitely recommend it,” Barry says. “It can be a drawn-out, arduous process, but we also weren’t pumping a bunch of money into it either. We let it pay for itself, and then if there was any money (coming in) we reinvested it. Our international business hasn’t cost us a dime. It’s always a value-add.”