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Anonymous
Not applicable

Value Add proposition-how to overcome the obstacle?

I own a retail/service business in Mexico and I'm facing the challenge of high cost to import goods across the border. Of course we are trying to find cheaper/alternative options to get items in without going thru US, but regardless I have to pass those costs on to the consumer.  The general argument I get is, I can drive up to the US and bring across myself. They drive up, risk not getting caught, and bring items across illegally to avoid paying duty.


So my question to you as business people, how do you overcome that objective of price to the consumers?  My biggest argument is that I am legally importing items and in order to comply I have to pay the fees to get the products you want. Most of my customers are retired so there time they spend driving is not significant to them.  Any insight would be appreciated.  

9 Comments 9
EmilyCowan
Level 7

Value Add proposition-how to overcome the obstacle?

Wow @Anonymous - that's a tough one. It must be frustrating to lose business just because you're playing by the rules.

 

I love that you're thinking in terms of your value-add. Yes, your customers could just run up to the US to purchase goods in hopes that they'll evade customs duty on their way back (although just the idea of getting busted for that would be enough of a deterrent for me!). But I guess there are folks who are willing to take the risk. So. What can you do to make your service so extra-amazing that your customers would gladly pay a bit extra for it? What are your options?

 

@Anonymous, any ideas?

Rustler
Level 15

Value Add proposition-how to overcome the obstacle?

@Anonymous

 

I think you pretty much nailed it, find a cheaper source, and,  until then accept that you will have to sell at a lower margin.

 

Try to make customer service and convenience the determining factor in where they shop.

Maybe online pre-order, drive up, pay for it, and it is loaded up for you.
or
a customer rewards program where they get store credit or a surprise discount coupon at check out which they have to wait to use next time within x-number of days.
or ....

Anonymous
Not applicable

Value Add proposition-how to overcome the obstacle?

This is the challenge.   I think one of the biggest up-sales is the convenience.  To drive to the US is 120 miles each way to the border (350 miles each way to closest distributor) as well as the fact that the weight of our product (batteries) is in excess of 120 pounds each.  Our average client is over 60 so not to many can lift that on their own.  Aside from that most vehicles cannot carry that much weight if they were to purchase multiples.  Gas prices here in Mexico is over $4 a gallon.  Maybe I need to do a side by side comparison showing gas and tax cost to drive up vs buying local?  That is a thought, yes

Anonymous
Not applicable

Value Add proposition-how to overcome the obstacle?

Our product, solar, is really not a quick come back and buy in xx days business.  However I do like the idea for an online pre-order.  We are a partial seasonal business right now based on demand, so as the season is coming up, I could advertise so when the snow-birds arrive we have the items in stock.  

Anonymous
Not applicable

Value Add proposition-how to overcome the obstacle?

Hi @Anonymous! This is Julie, the resident business coach in the Momentum to $1 Million group here in the QB Community, so nice to meet you (and an official HELLO to you too @Rustler!).

 

@Anonymous, you initially posted that you have a retail/service business. I see that you sell large batteries, but what is the service aspect of what you offer? 

 

The largest margin is always in the service, so please share more about your services, and let's see if we can optimize them for increased profitability. 

 

Also, as a small business, competing on price is both difficult and dangerous. Adding value-added SERVICES with very healthy margins can make all the difference...

 

Standing by for your thoughts and thanks for looping me in @EmilyCowan! J. 

 

 

 

 

Anonymous
Not applicable

Value Add proposition-how to overcome the obstacle?

@EmilyCowanThank you for your response.  The service we provide to our customers in regards to the batteries is convenience of being local.  A customer is paying us 3% more to purchase locally "if" they bring across legally.   Their argument is they can drive 350 miles each way(incorporate a shopping trip to the US to justify the drive) and smuggle by not paying the 16% import tax required when you cross into Mexico from US.   The batteries themselves weigh over 125 a piece so #1 a human has a hard time lifting and #2 a car has a hard to accepting the load. It comes down to ethics, and a few $'s that we could wiggle with if need be.

 

Batteries are a small portion of our business, but we need to sell them because they are part of the other products we sell which are solar panels and other off-grid products.   The services we offer are installation, design and lots of troubleshooting.    We are in Mexico where labor is cheap and many Americans expect our professional educated services to cost what they would pay a non-professional educated services.   

 

We really don't get to many people that want just batteries so we have the opportunity to sell them other products and services so we can make up the cost a little there. I'm trying to see if there is any way to appeal to a broader base by appealing to the convenience of our product, which will give us more opportunities to up-sell.  Again majority of the challenge as I see it to tell people in a not so bold way, you are breaking the law, and for a few $'s more we can make you legal. 

 

We understand on the products that we have to pay high cost to import we wont't make much money on and of course where we can mark up we will. It's really the legal vs illegal that is really challenging.

EmilyCowan
Level 7

Value Add proposition-how to overcome the obstacle?

Hey @Anonymous - thanks so much for the detailed response!

 

It seems to me that there's probably not much you can do to sway the folks who don't mind breaking the law just to save a couple bucks (although I can't imagine how much they're really saving if they factor in 700 miles worth of gas plus wear and tear on their vehicle - might be worth specc'ing that out for the sake of argument).

 

But since most folks aren't interested in the solar batteries on their own, you might try setting up tiered system of service packages that offer more savings to the consumer the higher you can upsell them. They may be spending more but also getting more bells and whistles (the kind that don't actually cost much but make the customer feel special).

 

So much of sales psychology is how your customer feels about the transaction. Study after study has shown than even if you're getting a great deal, if it doesn't feel like you are then you're more likely to pass on it.

 

Anonymous
Not applicable

Value Add proposition-how to overcome the obstacle?

I really appreciate your insights.  It's a tough market, because 90% of our customer base is on a fixed income(retired ex-pats) so getting every penny they have upfront to same them in the long run is a hard sale.  They say you have to put your personal opinions aside and put yourself in the customers shoes, but those are shoes I'd never wear.  We will just continue to SERVICE, SERVICE, SERVICE  and ask for referrals.

EmilyCowan
Level 7

Value Add proposition-how to overcome the obstacle?


@Anonymous wrote:

We will just continue to SERVICE, SERVICE, SERVICE  and ask for referrals.


 

I hear ya @Anonymous. Social media can be an incredibly powerful tool as well. Don't forget to encourage your happy customers to post positive reviews and sing your praises among their personal networks! 

 

I hope you'll keep us posted :smileyhappy:

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