An import business is really only as good as its suppliers.
This truth underscores the importance of ensuring your trade negotiations with overseas suppliers are professional and informed while delivering the desired results. The risks are significant when dealing in unfamiliar foreign markets Here are some tips to help you succeed.
Treat suppliers with respect
Don’t assume that business practices which have served you well in Australia will automatically transfer to other markets, especially Asia. Supplier negotiations must be courteous, and terse emails or angry phone calls are unlikely to result in a positive outcome in major markets such as China, South Korea and Japan, where pride and ‘saving face’ are important facets of business deals. To demonstrate goodwill, visit your foreign suppliers in person.
Forge strong connections in China
China has become a key supplier for many Australian importers, but the pitfalls of dealing in this complex market are well known. Using Chinese-national go-betweens when approaching Chinese suppliers eases entry to the market and helps you avoid any cultural or business faux pas. Good interpreters are essential, too, even if you are meeting suppliers on your home ground. It all comes down to guanxi, the Chinese word for ‘connections’. Ignore this concept at your peril.
Seek the assistance of experts
Trade organisations such as Austrade and chambers of commerce have experienced professionals who can give you cultural and business advice, in addition to connecting you with trusted suppliers.
Good financiers should also be able to offer guidance. Scottish Pacific Tradeline, for example, has a footprint spanning Australia, the United Kingdom and mainland China, where it manages a network of more than 500 approved suppliers (and all of Tradeline’s China team are Chinese nationals). Drawing on this experience and knowledge can make a real difference for importers.
Understand the role of agents and distributors
Most Australian SMEs rely on agents or distributors to represent their businesses in foreign markets, but appreciating the differences between the two roles is crucial in any negotiations.
Agents do not take ownership of goods, acting instead as a representative of the supplier. They are typically paid a commission based on sales generated and often represent complementary, or competing, product or service lines. The disadvantages of agents include often having fewer resources than a distributor, being less committed to the success of your business because they work on commissions only, and giving you less protection from risk of non-payments, currency fluctuations and so forth.
On the other hand, a distributor buys goods and then resells them to importers (often carrying inventory, extending credit for customers and sometimes engaging in marketing). They make their money by adding a margin to products, so their fees are typically higher. Some exporters find that their profit margins are too small to use a distributor.
Get your trade finance sorted out
For all the talk of connections and cultural issues, nothing will better facilitate negotiations with overseas suppliers than using a trusted source of trade finance that ensures fast and easy financial approvals.
For importers, the longer cash cycle can create knock-on effects to the domestic supply chain. Tradeline offers simple, unsecured import finance that helps SMEs buy goods from overseas or domestic suppliers. If you need quick finance to fulfil a buying opportunity or simply to free up cash flows, we can ensure your suppliers are paid. This lets you to purchase goods and turn them into cash within a 90-day repayment period. Once set up, the line of credit can be drawn, repaid and used repeatedly.
What’s more, because we have experienced financiers on the ground in major foreign markets, we can help you navigate the specific financial and cultural needs of suppliers.