Sourcing from international vendors is both an art and a science. Lokesh Parashar gives tips on how to ace this game
Blurb: Once bitten should not imply the end of the road for sourcing great products from the overseas markets.
Long ago when I was in the business of coaching, my brother-in-law gave me a lot of tips on how to make a business profitable. One valuable tip was – put extra effort in negotiation when you are on the buying side. True to his words, those few cents that I saved in buying merchandise or services multiplied five times to give me bigger net profit, each time I completed a transaction.
Here are a few things to bear in mind when you are saving those few cents, especially when you are sourcing from international markets:
Explore the unexplored by asking the right questions
As soon as you have wriggled into your swim suit, don’t dive into the pool. Stand there observing, ready with the gear and start asking fellow swimmers what to expect. I know this is tricky. Why would a fellow swimmer bother about sharing tips on how to swim with speed and no loss? Take it from a veteran, he will. People want to talk to people and network, even by the pool side.
Therefore, the first rule of the game is – become a member of your industry association and start attending all the meetings. I have personal witnessed how small company owners chat with the biggies over endless cups of steaming coffee or lavish dinners. Some even get to travel with their mentors and benefit from the hand-holding experience.
Know your strengths not just the source country’s strengths
Once I had the opportunity to serve an organization that was literally fighting to survive the odds of sourcing ceramics from India. After spending all their resources and energy on the fruitless exercise they discovered ceramics is not something India is strong in!
Another client was literally thrown out of business when he went to source mix material metal furniture from China! Once aboard our service ship, they quickly knew what is best sourced from India and what’s best in China. There on, they hit the jackpot. I also remember an importer who gets decorative candles shipped out of India six times a year, and his profitability is three times higher than his regular X-Mas decoration buying from China.
Draw up a list of three top-selling product categories and see what are you looking for from a particular sourcing market in any, or all of those top-three product category sellers, and you will never get it wrong.
Start one category at a time
Multitasking is good. But it can also lead to multi-trashing. When you are doing international sourcing, do not do it all at once. Each step in the process — right from communication, sourcing, product cost negotiation to product development and order management, including quality control/logistics – are time-consuming sub-processes. Go slow, and category-wise (pun intended). There is a wholesaler I know, who started with miniscule amounts of ladies’ scarves five years ago now sources over five million dollars’ worth of that same product.
Go fishing with ace swimmers
Spending hundreds of hours and investing hard-earned money as advance on an order placed overseas is not an easy task. The choice of which factory to work with must be taken with caution. However, hiring an expert in the sourcing country could have cost implications. This person/organization could make or break your business very quickly. Do a cost-benefit analysis. Grill them with a long list of questions. You will have best judgement when different people give different answers to the same set of questions.
Ask for references and double-check with them. Also explore minimum two or three options before you zero in on one.
However, appoint a local representative only if you have budgeted for his services. Otherwise, it might be best to tap the local business association you have aligned with for helpful tips and information. The scale of the business you intend to do, and the expected turnover you intend to source from overseas will be another determining factor in deciding if it’s worthwhile to undertake this exercise at all. And if it makes sense, decide whether to dive in on your own, or engage a local hand.
Last but not the least, never, ever give up
One super successful wholesaler I know brought in furniture first. That turned out to be a total disaster. His second buying spree was worth over a million dollar in sales! And he has not looked back since.
My mother always said — never be judgmentally wrong, in love, life or business. Once bitten should not imply the end of the road for sourcing great products from the overseas markets. Maybe you got it wrong the first time. Who doesn’t? Ace cyclist are not born overnight. Big decisions like marriages can fail. Hence never ever close a book, if one of the chapters did not turn out to be interesting.
(The author is the Convener of Buying Agents Federation. The views expressed here are his own)