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Testing New Markets With A 3PL
Testing new markets can always be a risk for a company. Most avoid exploring the unknown, to ensure they can remain in a safe position and avoid unnecessary risks. While this may keep companies secure and feeling safe, they may never know what opportunities they have missed from never taking the dive into new waters.
Utilizing a 3PL’s services can greatly reduce the risks of testing new markets.
However, to better understand the security and benefits a 3PL can provide, it is important to understand the risks associated with entering a new market.
Entering New Markets: 4 Key Risks
We know that entering a new market can come with risks. Here are a few of the most common problems that can come from expanding into a new market.
While working alone can allow you more control when it comes to entering a new market, the cost and commitment to the start up can be intense. Alongside finding a location to sell your product, whether new to the shelf or new to the area, you must find:
- warehousing space
- distribution methods
- vendors to carry the products
These can all be costly and time consuming to find, which can set you back financially and may cause more problems to arise in the future.
The first risk comes from being inexperienced in the new market, and not allying yourself with an advisor or partner who understands the market you’re entering. No one is obligated to buy your product once you first set up, nor are they obligated to return after they do purchase something.
In comparison, you wouldn't set up a ski equipment shop in a geographical location where skiing is not a viable option. You would be betting on a small number of local customers who travel, to utilize your services and products. This analogy can be applied to the food industry and more.
This is why it is crucial to understand the market you are targeting, where they are located, and why they would purchase your products. Finding this information out can be hard when you test the waters alone. And with poor reception to your new extension, comes minimal customers and a loss of income for your new venture.
High costsIt is not cheap to pick up a side of your business and market it to a whole new clientele. Even if you're not relocating geographically, you are likely increasing production, which means hiring more employees. And with increased production comes increased need for storage space and distribution.
All of these changes can be costly and the process of researching the benefits and drawbacks can be time and cost consuming. Especially when you are planning on entering a new market outside of your already established operating zone.
The cost of transporting your goods, storing, and having a location to sell can add up quickly. And these costs can be enough to sink an unprepared company before they make any headway with their new idea.
Long Term CommItment for Investment.The long term commitment associated with entering a new market can also be detrimental to a company. After purchasing new equipment, space, vehicles, and employing new workers, it can be hard to pull away from a business that is sinking when so much has been put into it. If you lease vehicles or space, they may also come with a long minimum time you’re stuck in agreement to use their resources. Getting one year into an expensive three-year agreement and realizing the market isn't receptive, or your business succumbing to supply chain disruptions could result in a significant loss of money, and feel like wasted time.
The above risks primarily affect those who decide to enter a new market alone and unprepared. However, there is a way to increase your chances for success.
6 Reasons to Make a 3PL Part of Your Plans To Enter New Markets
Working with a 3PL partner allows you to enter new markets with ease. Their location, experience and many solutions allow you to focus on the business side of your venture while they handle the rest.
Outsource to other locations
Typically, a 3PL has other locations, or partnerships they can utilize to help you expand into a new market outside of your geographical location. The 3PL’s ability to outsource or use another location means you don’t need tor worry about finding the best location for your new warehouse or distribution center, since they have it covered.
Preexisting warehouse space
Working hand in hand with the ability for a 3PL to outsource to other locations is the fact that a 3PL already has warehouse space. This removes the need for you to start from scratch, you are able to find a location that works for you, and utilize their preexisting locations.
Much the same as a 3PL already having their own established locations for warehousing, they will have distribution measures set up in place for each location. This means finding and managing distribution methods is another thing you don't need to handle.
Local Insight and Expertise
Maybe one of the largest benefits of working with a 3PL is their local insight. As mentioned as one of the risks above, poor reception of your products can often mean the end of your business there. However, since the 3PL works with companies and clients in the area around them, they have a better understanding of the market, and can help you decide if the area is right for you to pursue. Besides their local insight, a 3PL partner has expertise in many subjects related to many businesses. Their knowledge and insight alone can be one of the most valuable reasons to use them when entering a new market.
Another of the many benefits of working with a 3PL to enter new markets is the integrated solutions they offer when you sign up with them. These usually come after paying their service fees and often include:
- Last Mile Optimization
- IMS (Inventory management system)
- OMS (Order management system)
- Delivery confirmation and more
3PL partners are incredibly flexible and this is a huge advantage to have on your side when entering a new market. Once you are established with your 3PL, you are able to use as many or as few of their services as you require. This is great when first starting out in a new market, as you can use very little of their warehouse space or distribution vehicles to keep costs down. But then as your business begins to grow, you can increase what you require from your 3PL. This flexibility allows you to grow at the pace you need, while still knowing that you are supported by your 3PL.
Experience the Benefits of Entering New Markets With Birkby by Your Side
Birkby offers state of the art technology, flexibility, and over 100 years in the industry. When you choose Birkby as your 3PL partner, you will receive the best advice and solutions for entering your new market.
Looking for a 3PL Provider?
Contact us today to learn more about Birkby’s comprehensive 3PL solutions.