Conducting global business is very challenging and starts from identifying the right partner to work with. In the apparel export business, many players prefer to go through buying offices and agents to mitigate the risk, as they believe the customer has been vetted and approved by them, hence the chances of getting trapped is minimal. But the last 2 years have changed the dynamics of the trade and a number of buying agents have closed shops with practically no business to keep them going. Smaller chain stores and importers working with this segment of buying agents are now in the market on their own, not to forget new ones entering either because of shifts from China or in search of competitive small orders that other destinations are finding very difficult to produce.
The latest buzz is that the market is flooded with orders and while the bigger exporters have cornered business being generated by regular traditional retailers and brands working in India for many years, the small and medium exporters are struggling to decide which buyers approaching them are genuine. Of course, all agree that grabbing opportunities is important and a certain element of risk is always involved even if traditional safeguards like LC are in place. Today, LCs are no longer a reliable safeguard for undertaking international business and today most of the exporters take calculated risk, choosing to start with fewer orders and 100 per cent payment terms. In fact, many buyers are not even looking at LC as a mode of payment – they are asking for DP and DA which is a higher risk for the suppliers.
When approached with the question -How to check credibility of a new buyer – most of the industry was forced to stop and recall their experiences as this question may sound naive and preliminary in nature, but the reality is that getting to know the buyers and their business track record increases the likelihood of getting payments and is actually a very difficult task and most have devised their own way of going about the process.
Every buying agent and exporter faces challenges when bringing on board a new buyer, not to take away the fact that for the buyer also it is not easy to find the right partner. Of course, he has the advantage of visiting factories, checking existing buyer list, engaging auditing agencies for technical support before taking the plunge. However, an exporter most of the time is dependent on gut feeling after many rounds of negotiation as there are no real documentation that can realistically reflect the intention of the buyer. However, that does not mean that deeper investigations are not required. “Gut feeling alone is not sufficient and before entering any business deal, it is important to check the background of the buyer including other suppliers he works with and if he is a member of any council or association,” says Rohini Suri, an Industry Veteran and Founder President of Buying Agents Association.
Taking the discussion forward, Sanjeev Jain, MD, TQM Global Sourcing shares, “One of the most important things that I look for is the buyer’s ‘Buying pattern’. Most businesses are happy to share their experiences with a particular buyer, whether it is good or bad. Some reviews could be extremely positive while some reviews could be highly negative.” Leela Kanuga, another well respected veteran of the industry who has been instrumental in developing new buyer base for leading buying offices like Li & Fung, Impulse and now with PDS, stresses on the importance of market intelligence. “Market feedback is the most credible way to check a buyer, but sometimes the buyer may be new to India and there is no local feedback. In such a case, go to the company name on LinkedIn, as all credible companies have accounts there. Go to the people section and browse on senior management names, after spending years in the industry you may find a mutual connection which can help in taking the investigation further.”
The emphasis according to veterans is to judge the buyer from a wholesome perspective. “This is definitely not possible by performing a simple search for the buyer or interacting with a couple of sellers who have worked with the same buyer. You need to check whether the buyer is a regular buyer or a one-time buyer. If the buying pattern is regular as well as voluminous, the price is generally prevalent to the market price. In this case, you can be assured that your deal is with a regular person or a company,” reasons Sanjeev.
Most exporters feel that the price a buyer is offering for a product is a very important clue for the credibility of the buyer. The industry prefers to work with a buyer that has prior experience in dealing with the similar category of products (that your company offers) and this is obvious if they quote a reasonable and relatable price for the product. “Many times, we find new buyers asking for unrealistic prices and sadly, some exporters in a hurry to grab orders before others, ignore obvious signs like payment terms. Most of the times, these buyers prove to be a major headache and payments get held up or orders get cancelled on small pretext,” argues Anil Sharma, MD, Art N Craft Exclusive, Jaipur
In today’s digitally connected world, there is no ‘experience’ (good/bad) about a product/service that you might be unable to find on the internet. Social media channels like Twitter, Facebook, Yelp, LinkedIn, etc., are the ideal platforms which consumers (and customers) use to voice out their opinions. Sanjeev points out that it would be disastrous if one ‘completely ignores’ the review comments on the buyer on these social media platforms. “Your ‘buyer credibility checklist’ should take into account the reviews received from social media channels as it is the next big thing as far as online advertising or online commerce is concerned,” he reasons.
Stress is also on the country of origin of the buyer. Adding to the thought, Leela emphasises the importance of finding some contacts in the same country for any local scoops they might know as they are based in the same country and would know better about the reputation of the buyer. If the buyer happens to be from China, then suppliers can ask for company’s business licence. “On business licence there should be 2 numbers. One is license number and second one is tax number. Also, the bank account details they provide should match with business license,” suggests Souman Biswas, Founder & CEO GC Apparels PTE Ltd, China.
Unanimously there is an agreement that ECGC Cover should be taken in the case of new buyers to safeguard payments. “As far as I am concerned, I would always take an ECGC cover for such new customers, and opt for minimum 30 per cent deposit against the FOB Value and Balance against Documents. This keeps you and your payments safe. A vigilant seller can only save himself and his money,” cautions Sanjeev. It is also stressed that Credit insurance firms can check every customer creditability by looking at the yearly financial numbers and payment report of vendors. “When starting with a new buyer, check through his shipping and cargo agent about his cargo movements and also check through the Trade Commission offices in India for that country,” suggests Leela. Adds Rohini on a concluding note, “Get the first order, don’t grab just do what your capability permits and understand his business. Six months communication must be informative and regular not only about your order but about everything related to business and relationship building. To protect your business communication will remain key to creating credibility. Say More, Do More and Maintain the pace.”
CHECK LIST FOR BUYER CREDIBILITY
- a) DnB Report– can be sought by paying a very nominal amount to them. They are considered the most reliable
https://www.dnb.co.in/risk-management-solutions/finance-credit-risk/business-credit-report
- b) ECGC – Though it covers very small percent of the risk, but it still helps in chaffing out the worst where the risk is inevitable
- c) General Intelligence with professional groups – checking with Fellow Business owners helps in gathering some intelligence on:
- payment terms
- whether he is working with other manufacturers in India
- bank he is doing business with
- kind of customers he ships for
- d) Embassy Of India in the country of buyers– sometimes embassies do help in gathering incidences of fraud
- e) Past performance of buyer– there are many websites providing data of past buying patterns of the companies
- f) News – Search for News on the brand – there can be a small splinter found which can soon become big fire
- g) Share Market/Bourses – works best for listed players, see the trends and other info / balance sheet and disclosures etc, available in public domain.
- h) LinkedIn – Reach out toProfessionals at various levels from the company and try to gather some info.
- i) Professional associations– Both in home country and with India can be asked for info available at their end.
