19 Sep how to buy from overseas
In our world, the customer is king. Many executives and small business owners who buy internationally feel that since they’re putting all the money into the deal, the vendors must bend to their ways and follow their rules.
The Golden Rule (he who has the gold rules) doesn’t always apply internationally. When purchasing goods and services from abroad, there’s a lot more finesse needed than when dealing with domestic vendors. Poor supplier relationships and uneducated buying techniques can hold your company hostage, disappoint your customers and hijack your budget.
Follow these tips for better buying from overseas:
Avoid single-source purchasing. This in one of the top mistakes I see in international vendor relationships.
If only one firm can make your product or part for you, you may need to re-think your business model. If it can’t be avoided, try to get a stake in the vendor.
Avoid single-country purchasing. Political and trade risks always loom. Governments may change, tax each other unduly or without notice, appoint dictators (or morons) to run trade policy or nationalize your supplier. The best way to protect your firm from this is to have suppliers in multiple countries.
Don’t count on “exclusives.” I can’t begin to count the number of exclusive-rights arrangements that aren’t exclusive. Factory owners can re-label products, have a brother-in-law open another factory or simply change their mind. While you’re spending money suing them, you have no product, no clients and almost no chance of winning overseas.
Plan for circumvention. One vendor who sells bathroom fixtures to a large houseware chain was surprised to see the Chinese manufacturer selling his own product directly to the store. While there are now lawsuits, the lesson learned is to plan for this eventuality.
If the U.S. firm could have added something to the imported product to increase its value, or invested in better branding, merchandising or financing options, it may have been able to control the manufacturer.
Watch the changing terms. Prices are usually quoted for finite amounts of time. If you’re offered ball bearings at $3,000 per ton, is there a time limit for that quote? Do you need to order within the time frame, or pay in full or receive goods? Business proposals are like milk; they have an expiration date.
Hedge currency risks. If you’re purchasing from Japan and paying 100 yen per piece good (and 100 yen equals $1 U.S.), then what happens if the yen gets stronger (say, 50 yen is worth $1 U.S.)? You’ll now need twice as many dollars to buy the same goods, $2 U.S. to buy 100 yen worth of product.
There are professionals who can hedge these risks, purchase options for currency or set up accounts for a buyer in a foreign country so they can take advantage of exchange rates at the best times.
Don’t try to deal with U.S. or international customs without help. Imported goods can sit at the dock for hours, days or months if they don’t clear customs. Customs offices have jargon of their own. The rules are difficult to understand and often change.
If your firm buys bicycles and sells them to stores, you don’t need to be the one dealing with the customs issues. A good customs broker will pay for himself on every order.
Prepare for communication challenges. Douglas Cisneros, of Fusion Global Partners in Denver, negotiates international development agreements throughout the world. He says communication is the No. 1 problem in buying internationally.
“You can’t know the rules without good communication,” he said. So his firm spends a great deal of time and money building and maintaining relationships with his buyers, which foster good communication.
Make no assumptions. This speaks again to communication, but also to culture. Many firms will assume that buying a product implies the seller will manage such tasks as packaging, labeling, shipping, customs clearing and insurance.
Find an international payment specialist. There are experts who can consult with your firm about which international payment mechanism make sense, whether it’s prudent to open a buying office in the vendor’s country, and how to avoid unnecessary taxes and delays when purchasing.
Retain one of these experts early on, before costly mistakes are made.
Don’t forget: A vendor-client relationship is still a relationship. It’s up to both sides to invest in the relationship. Many cultures that offer bargains on products also present deficiencies in being intuitive and creative when solving problems.
By investing time and resources as a buyer, your seller will be more closely married to you and much more likely to warn you about business problems.
Bill Decker, managing director of Partners International, which consults with firms on global business and creates partnerships in foreign countries, can be reached at Bill@partnersinternational.com.