Don't let intermediary impede your importing success
What does a global procurement officer from a large technology firm in Boulder and a hobbyist selling dresses from Argentina have in common?
They're both importers, taking goods from a foreign country and bringing them into the United States. Importers range in size, scope and specialty. But they all share the same potential pitfalls and roadblocks.
There are two main ways to import: directly and though intermediaries. The intermediary may be called a trading company, importer, buyer's representative, agent or a host of other titles.
There are several advantages to using an intermediary:
- They tend to know what they're doing.
- They understand the exporting country's language, culture and business practices.
- Intermediaries know how deals are done and can avoid complications.
- Intermediaries may do much business with factories you're interested in. Hence, they may have larger buying power and receive better service.
- They often offer one-stop shopping (freight, customs, arranging payment, perhaps even quality control).
- They often have relationships with factories, so they can find suppliers with greater ease.
- They should save you time.
However, there are many disadvantages to using an intermediary:
- They charge for this service. Often a buyer has no idea how much they're paying this person. Trading companies may say they're being paid by the seller (and that may be who writes the check), but in reality the buyer is putting all the cash into the deal.
- The best intermediaries will try to keep some mud in the transaction, never revealing the true costs and terms.
- Often, trading companies work with friends of theirs or other preferred suppliers who may reward them better than other suppliers. This means the buyer may not be getting the best deal.
- Intermediaries try to keep the buyer and seller apart. Think of buying a house through brokers. They wish to handle all the transactions and never allow the buyer and seller to meet. This means the buyer and seller never develop a relationship.
On a one-time deal like purchasing a house, this may be acceptable. But if you're running a company that's dependent on constant flows of imported product, it's always best to build a strong relationship with your supplier.
- Other deals can suffer. When using an intermediary, you get to see only one side of the supplier's business. Maybe the supplier can benefit from doing other deals with you (consulting agreements, inventory control processes, importing your products into their market and co-branding relationships all come to mind).
The intermediary, however, will sell from his bag and not necessarily look at other revenue streams that can emerge.
- Organizational learning suffers. The buyer never gets the savvy to effectively do other deals in other places because they're always relying on the intermediary.
Enno Fritz, president of Euro Espresso Imports in Lakewood, which imports high-end coffee-roasting and coffee-making equipment from Europe, has been a direct importer for many years.
He cautions it's essential for the overseas factory to understand the U.S. marketing plan if they're to work together. "They need to understand the plan, and understand your business," Fritz says.
Almost every factory he's dealt with in Europe has had failures in the U.S. market. "This is usually because (e.g.) Italian manufacturers will prefer to deal with an Italian national in the U.S. That person may not be a good importer and marketer, but gets the factory's trust because of nationality."
Fritz therefore stresses that good importers need to overcome this nationalistic prejudice and make sure they go to the factories, get to know the people and explain the market strategy.
Another common problem is that since foreign factories don't understand the U.S. market, they rely on the importer to educate them. However, an importer may feel that the less the factory knows about the U.S. market, the more power he has.
Fritz disagrees with this approach. He said there should be a partnership with the factory in the market. The importer can discuss things such as where the factory can invest money, which product modifications will do well locally and which trade shows should be attended.
Fritz also makes four major cautions to potential importers:
(1) Be careful of new products. Make sure they're released at the appropriate time and the market has accepted any modifications.
(2) Order the right amount of product. Order enough to make the sales you need, but never so much product that the market changes or your capital gets consumed in unneeded inventory.
(3) Try not to own the product for too long. If the factory owns the product while it sits in your warehouse, it will be more inclined to repair, modify or replace product when needed. When importers own product, it becomes the importer's problem.
(4) Last, try not to be in a situation in which you're fighting both the factory and the market forces.