007 checks in...
Set aside there are all sorts of deals, such as percentages based on volumes, paid by the manufacturer, to which an overseas importer may not be privy. Assume the export agent shows his price and the importer overseas, the target customer, then consults the manufacturers website and find the ExW price.
Well, in the MOQ FOB template I send out, the manufacturer's price (ExW) is a separate line item, so we are in fact, and have been showing this all along. What is new is to show what prices the USA customers of the said manufacturer are getting in USA.
So all along the buyer overseas has been able, should be able, to see the markup. The false idea is in every case the buyer overseas will go direct. This is demonstrably not true in the real world.
Yes, ExW is easy for the seller, but the buyer does not want it. In some cases the seller will not go the extra distance to create an FOB quote, for misinformation as to the challenges thereof.
I prefer Hong Kong agents to buying direct in China for the simple reason Hong Kong agents kick ass and take names when things go wrong. Sure I can go direct to ExW, but I am in a jam if and when there is a problem in some cases.
And so the reverse is true. Buyers overseas want someone in-country upon which to rely in case of emergency. Buying ExW Denver means Denver to Oakland is at the buyers risk. A ten percent markup on $2000 in goods with will sell in Germany for $5,000 is cheap insurance to the buyer.
So the "added value" is already built in. If you can also add other value, all the better.
At the same time, if your offer is no value to the buyer, then yes indeed he goes direct cutting you out. Fail fast, fail early. 100 inquiries, zero sales tells you something. Better to find out up front than later. Better to lay out all possible info the buyer needs, and let the chips fall.
And if in fact you do get an order, obviously it is a well considered and solid business basis. Prepayment at that point is not even an issue.
What is the alternative? Truly much business done in USA is based on force and fraud. First our currency, a system that is both force and fraud at once. Second mandatory purchases, such as medical care, which too is both force and fraud. Third voluntary purchases where in we cannot possibly know what we are agreeing to, such as internet service or a mortgage. So force and fraud is in the USA business DNA.
What is the alternative? Total doisclosure, and build a solid business based on transparency and mutual benefit.
This is why I keep saying starting a biz in the USA is the most revolutionary act one can perform. And it is necessarily nonviolent and non-fraudulent.
Feel free to forward this by email to three of your friends.
And therein lies the challenge for a non-manufacturer/export agent. He has to buy wholesale himself leaving no choice but to markup the wholesale price in his MOQ FOB offer. The importer then sees the markup and just buys EXW from the manufacturer, taking out the agent in the process. The agent needs to add more value somehow to make it worthwhile for the importer to deal with him.This gets to fundamentals. I'll first address 007s points, and then I shall bloviate.
Set aside there are all sorts of deals, such as percentages based on volumes, paid by the manufacturer, to which an overseas importer may not be privy. Assume the export agent shows his price and the importer overseas, the target customer, then consults the manufacturers website and find the ExW price.
Well, in the MOQ FOB template I send out, the manufacturer's price (ExW) is a separate line item, so we are in fact, and have been showing this all along. What is new is to show what prices the USA customers of the said manufacturer are getting in USA.
So all along the buyer overseas has been able, should be able, to see the markup. The false idea is in every case the buyer overseas will go direct. This is demonstrably not true in the real world.
Yes, ExW is easy for the seller, but the buyer does not want it. In some cases the seller will not go the extra distance to create an FOB quote, for misinformation as to the challenges thereof.
I prefer Hong Kong agents to buying direct in China for the simple reason Hong Kong agents kick ass and take names when things go wrong. Sure I can go direct to ExW, but I am in a jam if and when there is a problem in some cases.
And so the reverse is true. Buyers overseas want someone in-country upon which to rely in case of emergency. Buying ExW Denver means Denver to Oakland is at the buyers risk. A ten percent markup on $2000 in goods with will sell in Germany for $5,000 is cheap insurance to the buyer.
So the "added value" is already built in. If you can also add other value, all the better.
At the same time, if your offer is no value to the buyer, then yes indeed he goes direct cutting you out. Fail fast, fail early. 100 inquiries, zero sales tells you something. Better to find out up front than later. Better to lay out all possible info the buyer needs, and let the chips fall.
And if in fact you do get an order, obviously it is a well considered and solid business basis. Prepayment at that point is not even an issue.
What is the alternative? Truly much business done in USA is based on force and fraud. First our currency, a system that is both force and fraud at once. Second mandatory purchases, such as medical care, which too is both force and fraud. Third voluntary purchases where in we cannot possibly know what we are agreeing to, such as internet service or a mortgage. So force and fraud is in the USA business DNA.
What is the alternative? Total doisclosure, and build a solid business based on transparency and mutual benefit.
This is why I keep saying starting a biz in the USA is the most revolutionary act one can perform. And it is necessarily nonviolent and non-fraudulent.
Feel free to forward this by email to three of your friends.
6 comments:
John, in your MOQ FOB template the ExW price is a line item. Haulage, FOB-related costs, banking fees, all costs are itemized as well. Cost transparency is our friend. Do you enter the markup as a line item as well with the description "Agent Fee"? Or is that too transparent? It's not the norm to reveal commissions, markups, margins.
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What is new is to show what prices the USA customers of the said manufacturer are getting in USA.
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Are these customers the retailers who buy wholesale or the end-users/consumers? Are you talking about MSRP? Thank you for your innovative small business trade ideas.
If you are an agent, sure! Costco opened telling the world it had a strict ten percent markup (and now 14%) in a rather competitive field. Your customers are going to figure it out, so make it clear.
We won't get the prices other are paying your supplier (although the buyer overseas will check your suppliers price list) so the prices quoted will be the various retail prices out there, high to low.
Now all this assumes the scenario where you are an agent, not taking title or not adding value, or both.
Wait wait wait...When we were in class you said that when you are in your competing on design the price will not matter, now it is almost a turn around here is our price for being a middleman broker ? When I buy products that are competing on design I really do not want to know how much they are taking do I ?
Plan A vs Plan B. If acting as an agent for a maker in exporting, then it is Plan B. If you are a principal exporting, not need to share mark-ups because there is only one price: your price.
No matter how innovative someone else's products are, if they are not yours, you have to add a mark-up or commission.
As one participant asked me: do I market some killer biscuits a guy down the road is making, or do I find my granma's recipe I remember from my youth and make killer biscuits to sell?
Both have pros and cons, but I think your own killer biscuits is the way to go.
Having said that, very many small biz simply do not want to get involved in overseas sales. Showing your markup is full disclosure, but does you no harm since your suppliers will not deal direct wit anyone. Exclusive agreement is not even necessary.
Hope that makes sense.
Why Don’t More Small And Midsize Manufacturers Export?
http://www.manufacturing.net/articles/2010/04/why-don’t-more-small-and-midsize-manufacturers-export
http://thehill.com/blogs/regwatch/business/305411-survey-federal-export-rules-too-complex-for-small-businesses
http://www.susta.org/export/intro.html
That first url I've blogged on before, it is excellent. The second could be good news, who knows. The third does a good job of dispelling myths, but then offers another set. Sigh.
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