Case study for Importers - Timing and distribution

The process of distribution can eat into what seems to be a healthy profit margin. For example, two naive importers located some cheap gift lines in a trade catalogue from Taiwan. Preliminary market research indicated the items could be sold in Australia at a price which would return considerable profits. The importers requested some samples to test the market in Australia, but were advised that the minimum order quantity was 1000 items. They agreed to purchase that quantity believing that they could sell them in the lead up to Mothers Day. As airfreight was too expensive, they arranged for the cartons to be shipped as a part container load. Unfortunately, the container sat on the Melbourne docks for two months while the importers fumed in Adelaide.

Breaking into the retailing chain was not easy. They were not recognised wholesalers/importers and retailers were suspicious when they approached them. It was a physical impossibility for two people to get around to all the small gift shops who rarely ordered more than 10 items each. The larger stores already had completed their purchases for that season and were linked to major wholesalers for their supplies. Some of the retail chains even imported goods themselves and saw no reason for a middle man. There were distribution companies who were happy to carry their products on their regular calls on small businesses. However, the commissions they charged would have eroded the profits to the extent that the venture was no longer viable. As a consequence, the would-be importers were left with a quantity of goods which they quit at a loss.

The moral of the story is to investigate the proposed distribution channels before launching into a new venture. 'Quickly and efficiently' does not necessarily mean buying direct from a manufacturer and selling direct to the consumer. While you may be reluctant to use a distributor because of the additional costs involved, the alternative in many cases may be no sales at all.

Business class travel at economy cost

I cant bring myself to pay for Business class airline seats. I had a friend who flew first class to Hong Kong and got seat 1A and hated it (you cant get any closer to the front!).

Sure economy class can be a bit cramped - but I have come to the conclusion that if I start in the right frame on mind and I am on a direct flight - I don't care...

So the solution is not to be hurried in going to the airport and enjoy yourself while there. Arrange to meet friends there and turn it into a social occasion or indulge in the luxury of airport lounges to feel like you are at a resort.

If you are not a member to your airlines lounge program, many airports have pay per use lounges.

For example in Hong Kong, the Plaza premium lounge has been my little Oasis on several occasions. The package that includes use of the shower and a massage seems expensive at first look, but its worth it(about $70). This is far cheaper than business class airfare! Tell them Graham Bell sent you and they might even give you a voucher for a free drink! (Also at Beijing, Guangzhou, Hyderabad, Johore, Kuala Lumpur, Muscat, New Delhi, Shanghai, Singapore, Toronto and Vancouver).

Oasis at the Airport!

To get more ideas on doing business in Asia -click here - to visit Business Travel to China BLOG

Rushing into a business relationship is like marrying someone you don’t know

Rushing into a business relationship is like marrying someone you don’t know – If you don’t plan to stay together long – it doesn’t matter... if you are looking for a partner with similar tastes and views – look around to find the right one.

The dangers of low engagement transactions. Business transactions rely on trust to a large degree; “trust has several connotations.[1] The typical definition of trust[2] follows the general intuition about trust and contains such elements as:

• the willingness of one party (trustor) to be vulnerable to the actions of another party (trustee);
• reasonable expectation (confidence) of the trustor that the trustee will behave in a way beneficial to the trustor;
• risk of harm to the trustor if the trustee will not behave accordingly; and
• the absence of trustor's enforcement or control over actions performed by the trustee.”

[http://en.wikipedia.org/wiki/Trust_%28social_sciences%29]

One of the most significant trends in International trade over the last 20 years has been the speed of transactions. As an old-timer – I remember placing orders with suppliers by Air Mail letter and Telex machine. The time taken just to get an order in place and make payment was often 3-4 weeks. Now with the advent of global sourcing sites such as Alibaba etc, people are looking to complete all aspects of a transaction in minutes. This has advantages but also some serious drawbacks especially when dealing with China as this represents a major cultural shift.

http://en.wikipedia.org/wiki/File:Puma_teleprinter.jpg

Some of my fondest memories of China are extended business meetings that flowed on to extended meals and sometimes even Karaoke – when I was on trips to meet with new clients. The idea of meeting with, understanding the philosophy of , and building a solid basis for communication was paramount. This made resolving disputes so much easier after meeting someone as you had some idea how they were going to react. In short you felt you knew whether you could trust them.

It was not always possible to meet every one that you are going to do business with but it is still possible to build a relationship. For new exporters/importers, I suggest working on a “relationship development model”.

For example, an Importer may look at a system like this;

Step 1, send an general email to the company asking about their range of products and whether they already have any local distributors.

Step 2, Ask about the cost of samples for two or three of their products.

Step 3 Once you have the samples ask about packaging, shipment port and warranties.

Once you have this information, then ask about pricing etc.

The idea of this process is that if at any time you feel that you do not get the level of service you expect: consider ending the relationship. The other advantage of slowing down the process is that is gives you chance to look at the value proposition (quality, service, suitability etc) rather than just price.

Governments world wide are reducing red tape and regulations to small business – this is a good thing but it also means that the barriers to entry of new business have never been lower. This coupled with “Gen y” people now going into business means that the values of these newcomers may be different to yours. Some product sourcing and auction sites encourage new starters but some of their clients do not consider customer service to be important and are more interested in turning a quick buck. For many of them it is only a part time income – so if it does not work out after a year or so – they will just shut it down.

Rather than you go from this article feeling that the writer is a grumpy old man, I would like you to consider that the temptation to stray away from your core product focus can lead you into a world of low involvement transactions that just may not be fun!

On a positive note, the many facets of web 2.0 and social media provide the new opportunities for high levels of engagement. Explore, engage, - ENJOY!

Further reading at;

http://www.deloitte.com/us/2010technologytrends_chapter9

Depth Perception,

http://www.slideshare.net/ContentKeith/engagement-understanding-it-measuring-it-achieving-it

Engagement Understanding It, Measuring It, Achieving It

http://www.mediabadger.com/2009/01/passive-active-social-media-high-and-low-engagement/

Passive and active social media high and low engagement

Written by Graham Bell of Bell Management Consultants

Help to import o export - Doing business with China

Lots of helpful tips and resources for business especially if your an Australian business working or plan work with Asia.

This BLOG has tips for cheap and easy ways to get around and "do's and dont's" for business people.

For more - click here: