Hack #4: Export Like a Drug Cartel
Want to increase your exports? Learn from the most successful exporters to the United States over the past 30 years.
Welcome to the 4th post in our #Hacks series where we provide you with all the tools you need to solve your most stubborn challenges in 2 hours (or less).
We recently worked with a wood furniture manufacturer in Guatemala who was struggling with the #1 challenge we come across when dealing with businesses in Latin America. “How can we increase our exports to the United States?” At Lateral Labs, we’re big fans of stealing ideas from other domains, so we asked him a very simple question — “Who have been the most successful exporters from Latin America to the United States in the past 30 years?” His initial response was “wood floor manufacturers” — not quite what we were expecting!…but it’s a typical reaction to focus on areas close to home. We pushed him to think broader. “Fruit” — he said, much closer we thought — but not the most successful exporters in the past 30 years. The most successful exporters from Latin America to the US in the past 30 years are the drug cartels — we set out to find lessons we could learn from their success.
Copying the Cartels
In 2016, the UN estimated that 106,000 farming families lived off coca in Colombia. The vast majority of coca production ended up as cocaine sold by the cartels in the United States. How were they so successful? What are some of the key techniques the cartels use to be such effective exporters to the USA?
Use Free Samples to Get People Hooked
Many products exported from developing countries suffer from the perception of poor quality. There’s one glaring exception to this rule — Colombian cocaine. Ask anyone where the best quality cocaine can be found in the world and the majority will say Colombia.
How did they create that reputation? I can’t remember any persuasive advertising campaigns being run by Colombian cartels on US television. Instead, they let the quality of the product speak for itself. They used small samples to get the product in the hands of consumers so that they could experience the quality of the product first-hand, get hooked and become customers for life.
Ship with Unrelated Items
Cartels are masters of disguise when it comes to drug transportation. We’ve all seen movies or TV series such as Narcos where the drug cartels transport drugs in spare tires, fruit, even inside people.
Only the most brazen (or stupid) drug trafficker would transport substantial quantities of drugs on their own. As far as the cartels are concerned, it seems that the more unrelated the item, the more effective the shipment.
Build a Dedicated Local Sales Network
You may not have seen Pablo Escobar wandering around the streets of New York City drumming up business for his cocaine empire (although he did make a famous trip to Disneyland in 1981), however Colombian cartels have always ensured that they have a trusted and dedicated local sales network. During the 1970s, the main point man for the Cali cartel in New York was Jose Santacruz Londono. Jose was not any old member, he was a co-founder and believed to be the #3 figure in the cartel. By controlling the entire supply chain and having core personnel involved in its final distribution, the cartels ensure that their product is always truly championed at the local level.
How is This Relevant to Guatemalan Furniture?
So how can the techniques employed by cartels possibly be adapted to help a Guatemalan furniture manufacturer increase their exports to the United States? You’d be surprised of the possible parallels.
Use Samples to Get People Hooked
Exporters from developing countries need to work overtime to convince buyers in the United States that they are selling a quality product. The furniture manufacturer in Guatemala we worked with said that the perception of their quality was lower than their main competitors in China. He knew that this was simply perception, not reality, but it was still hurting sales.
He wanted to get his product in the hands of potential customers, but when you’re dealing with large items like furniture that’s simply not an option. So, we turned to the drug cartels for inspiration. A drug dealer won’t give you a kilo to “try”, they’ll give you a gram. We came up with the idea to ship smaller items made from the wood used in the manufacturing process, where potential customers could feel the product first-hand and witness the durability of the product through use on a continual basis. Our idea — to ship chopping boards, trivets and coasters to key potential customers in the USA.
Ship with Unrelated Items
Shipping costs are often prohibitive for businesses wanting to export to the United States. Such costs make up a substantial percentage of the final sales price. This is especially the case for smaller manufacturers who simply don’t have the size to secure bulk shipping rates. Some manufacturers try to secure cargo space in tandem with other producers in their industry in an attempt to drive down prices. However, these opportunities are few and far between.
To secure the cheapest shipping prices, manufacturers must be as flexible as possible. Furniture manufacturers shouldn’t be waiting for spare capacity in furniture shipments, they should be looking for spare capacity in any shipments. They should learn from the cartels and ship with unrelated items, tires, fruit, you name it. As long as the integrity of the cargo is maintained, who cares what it ships with?
Build a Dedicated Local Sales Network
Furniture exporters in Guatemala often suffer from poor representation in the United States. They are simply too small to exert any influence and are not a priority for distributors. As a result, the owners end up doing it all themselves — that’s simply not sustainable, for any business. But, how could they possibly form a dedicated local sales network like the cartels?
Our idea was for Guatemalan furniture manufacturers to collectively hire a dedicated distributor. Someone who has first-hand knowledge of the true quality of Guatemalan products (just like those cartel members knew the quality of Colombian cocaine). But, this wouldn’t be any distributor. This would be the “Chief Executive Officer of the Guatemalan Furniture Export Association”. Yeah, it’s something we made up on the spot, but which customer wouldn’t take a call from such an important (sounding) person?
Wrapping Up
We often feel that innovation has to be something completely new. However, something that’s old in its design, but new in its application, can still be revolutionary. Next time you’re struggling with a challenge, think “Who has solved this before?” Stealing is often the best policy, just ask the cartels.
