Sunday, November 8, 2015

What Buyers Want

A beginners mistake is offer what we want to sell instead of what buyers want to buy, and focus and price and product and not consider the overall offer.  This from the research group:
Novelty refers to people's strong desire to try out new products and new tastes. "Every time distributors came for replenishments, they would ask whether we have any new products, new varieties and new tastes to offer," said Deng. "Distributors face the end-users and their expectation for new products is led by end-users. Since consumers are always looking for new varieties, distributors are also more than happy to give new varieties a try," he said.
This is exactly what I teach, competing on design, even in food.  What few people understand in specialty foods, where you work less for the same amount of money, the buyers’ first question is “what is new?”  You are new.  But their second question is “What is your minimum?” because no buyer knows what will sell.  They manage this uncertaintly buy buying minimal amounts to test.  The solution is LCL MOQ FOB, which, apparently,  I am the only person teaching.  And so universities and industry groups keep calling me back to do it again.

Next, note this problem from the article. 
"Although health is the prevailing trend, we are very cautious about food that claims to be organic. Due to frequent reports of fake organic food, consumers have little confidence in organic food. Moreover, the price of imported organic food is very high, often several times more expensive than similar local varieties. Lack of demand means few end-users." 
This problem is huge: false claims.  Big business is the worst false claimant, ruining definitions for everyone.  So as their reputations suffer, specialty traders can beat the problem with traceability. When a potential customer in Chengdu picks up a package of your product, they can scan the QR code and be brought to your website for verification.  By the same token, you trace your product worldwide.  Win-win.

Next payment standards in small business international trade is covered. You’ll note below exporters are paid in advance, contrary to what is taught by national export promotion agencies.
Yin Tai Hang's current distribution system has wholesalers as its mainstay. Its clients include small and medium-sized supermarkets, individually-owned small businesses, restaurants and online stores. In principle, the distributors also work on a cash and carry basis to reduce liquidity pressure.Deng Zhiyong frankly admitted that the biggest difference between dealing in imported food and local products lies in the return of goods. Local products basically have return guarantees, but this is not the case with imported food because tariffs are involved. A company has to be cautious when choosing products and suppliers.
Again, solution: lcl moq fob, but note in exporting, exporters are paid cash up front.

Now this is where this particular example goes off the rails:
Yin Tai Hang mainly deals in the import of prepared foods and its cooperation with Hong Kong companies mainly centres on condiments, including leading Hong Kong brands like Amoy, Lee Kum Kee and Yummy House. According to Deng Zhiyong, these Hong Kong brands usually market their products on the mainland in two ways: On the one hand, they cooperate with the key accounts and deal with them directly. On the other hand, they choose suitable distributors and deal with them on a cash basis by supplying goods to them at ex-factory price. 
Those are huge brands... and they are competing against themselves in this model, the whole thing is Yin Tai Hang trying to have it both ways.  I would advise they test unknown brands in their markets against the performance (ROI) in specialty with no known brands.  Its clients include small and medium-sized supermarkets, individually-owned small businesses, restaurants and online stores. Yhose customers are brand enough: necessary and sufficient.

Next note how new suppliers are found:
On the issue of contacting and choosing suppliers and products, Deng Zhiyong said Yin Tai Hang mainly relies on food fairs and market observation to collect information on suppliers. After collecting the information and making initial contact, it will decide whether a supplier is a suitable partner for cooperation based on five considerations: First, it will make a net search to find out how the products of that brand are selling locally. Second, it will try to find out the reputation of that brand on the mainland (Yin Tai Hang is inclined to choose brands of considerable fame). Third, give the products a try to see what they taste like and judge according to its experience whether they are suitable for the mainland market. Fourth, understand the price situation and compare the suppliers' price with the market price for similar products to judge whether there is sufficient profit margin. Fifth, understand the supplying channel to ensure the stability of supplies.
New suppliers are found by trade shows,  very good.  But the trade show is a nexus between pre and post show activity, and crucial is to get into a show without spending too much.  How to manage this I am I am happy to detail in an .pdf if you email me for a copy.  

Since from the article you now know what Deng Zhiyong wants as a buyer, your offer would include the answer to those five up front.  Then you would propose he place an order.  If not, he'd be obliged to say why not, and you could then work on overcoming objections. 

Privately, I would not approach this buyer, for I think his model is flawed. I think this is backwards:
As a distribution agent familiar with the mainland market, Yin Tai Hang is mainly responsible for selling goods but will also make proposals to suppliers on marketing and promotion based on its own experience, including conducting suitable brand publicity and printing relevant product catalogues and pamphlets for distribution to clients. 
I say you find a market first, and little to no expense, by testing the product with your known book, and then if you discover contours of some new market for a new product, you then work on finding similar demographics, knowing any money yu spend will go towards reaching known demographics.  I don't like advertising into a fog.

Here again we see how Yin Tau Hang off the rails, quite confused and jumbled... three topics conflated in one...  (it could be poor story editing, though)
Suppliers are mainly responsible for handling the documentation required for the marketing of relevant products on the mainland, customs clearance procedures (this may be entrusted to relevant service providers), delivery and replenishment of goods, 
So 1. Supplier are responaible for docs and clearance ....dead wrong, exactly backwards, this is big biz presumption, and reflects Yan Ting Hang's eerror in pursuing big brand names, who also compete with him.
and brand and product marketing and promotion. "We have come across some good products with great marketing potential, but their suppliers lacked the motivation to get to know the mainland market themselves and wanted to leave everything to their agents, which gave us the impression that they lacked long-term commitment in expanding the mainland market," said Deng. 
So 2, Ungh! Whatl is great marketing potential?  Marketing is a means not a goal. Either the importer has a meand for testing new products, up or down, yes or no, or not.  A specialty company trying to work with commodities is trying to have it bothways  Mistake in the long run.  The lack of commitment s not in the supplier but a lack of systematic testing of the market by the importer.
"In my view, cooperation is necessary to win the market. Doing business is like raising a kid, not raising pigs. You have to come to see the mainland market to fully understand this market and this is the only way to gain consensus for marketing and future development," he said.
So no 3....  No way I am going to go study the mainland market.  The importer is the expert there, I sell LCL MOQ FOB, and the importer either builds market or not,  If not this importer then another.  There is no way for and American to wrap his brain around the China markeet, so why try, and it maylead to sympathy and trying to help out the overseas buyer.  No good deed goes unpunished in int'l trade.  LCL MOQ FOB is necessary and sufficient engagement i tin'l trade.

Finally, this interesting -
"Suppliers must have a clear system for the management of distributors. Without a proper system, chaotic management will result in a chaotic market," said Deng. "A good supplier will always have a clearly-defined system that covers two respects: First its distributors must have clearly-defined regional dealerships. This will prevent competitive pricing among distributors, which will disrupt market order. Second, concessions to and protection of the interests of distributors. Suppliers usually have requirements on the amount of goods ordered by distributors and those with big orders are eligible for concessions. Suppliers cannot set targets for orders at random and must have a full understanding of the market. They cannot compel distributors to hold large stocks or frequently change distributors. They also must deliver and replenish supplies in a timely manner." Suppliers and distributors must work closely together to achieve win-win results. 
What did I say above, this guy has tactical problems... and now he says exactly that.    The  solution to the problem he elucidates is precisely the LCL MOQ FOB ... it is all in there.

Feel free to forward this by email to three of your friends.