American Leather is a Dallas-based producer of high-end furniture with annual revenue of around US$90m. Bob Duncan, CEO, explains that the company was initially reluctant to test foreign waters largely because “the US market is so substantial that you don’t have to expand [overseas] to have a significant business. There was always enough opportunity and no need to go to the expense and trouble [of working internationally] when in the US you know the market and know the regulations.”
As the company grew, it needed other avenues for expansion. “Portions of the US market were getting close to saturation. ‘International’ is a place where we can grow our business,” says Mr Duncan. He adds that American Leather had also matured and was able to handle the risks of expansion.
Mr Duncan expects that eventually 10–15% of sales (less than 3% currently) will come from abroad: “We don’t see it driving the business because the US market is so big, but it is worth the time and money.” Immediate returns are not the objective, however. Mr Duncan believes that tapping into foreign markets “has to be viewed as a long-term effort that will not pay immediate dividends”.
Mr Duncan conveys three main lessons from American Leather’s international experience:
Understand the different risks involved. He recalls how a downturn in Russia rapidly undermined a growing market there in the same way as a peso devaluation wiped out crossborder sales to Mexico, which had shown promise in the 1990s.
Have patience. “We knew that going in,” he says, “but it has been re-enforced. You have to be able to make the investment and wait.”
Devise local strategies. Because every market is different, “strategically you are going to have a different solution in each one. It may mean you are not able to hit as many markets. It may force you to pick and choose.”
