Importing stock from overseas is a lot more complex than picking up the phone, placing your order and waiting for the goods to arrive. However, it’s understandable why many would want to hop on board the bandwagon one of the biggest reasons being that it can be much cheaper than sourcing from manufacturers based in the UK.
Indeed, it seems to be an increasing trend, with the ONS having recently revealing there were more small firms trading (292,900) in 2014 than medium (13,800) or large businesses (4,100). Its Annual Business Survey” even found that in January 2016, the value of UK trade imports was over 31bn.
This was explained by James Sinclair, of Trade Finance Global, who said: In todays global economy, it is possible for SMEs to look further afield, due to the availability of local partners, technological advances, accessibility to transportation routes and, most importantly, new financing mechanisms that allow importing of goods not previously considered by SMEs.
He put together three tips to help bosses decide whether the allure of cheaper prices or better products from overseas is as attractive a proposition as it might appear to be at first glance.
(1) With currency depreciation set to continue, businesses must act now to mitigate risks
In a study by American Express FX International Payments, over one third of UK SME bosses trading internationally cited currency fluctuations as their top concern when conducting business overseas.
Given the relative strength of the pound versus currencies such as the euro and US dollar, importing products from abroad may be cheaper than building them in the UK,” Sinclair explained. This is also due to the raw cost of goods and labour availability in other countries.
In the past, many SME bosses chose to focus their attention on Europe, however, largely due to the Brexit debate being in full swing, firms are now looking far beyond the EU. This was highlighted by the Western Union Business Solutions International Trade Monitor,” which revealed that less than half of SMEs see Europe as a primary import market, compared to 78 per cent three years ago. Britains key importing areas have now been deemed as China, the US and Canada.
Of course, being able to import from countries you previously werent able to does not come without its risks.
Business leaders may not have the resources or networks in the regions they are looking to import from,” claimed Mark Januzewski, CEO of Designer Habitat. It is vital that this is developed in the early stages. The ability to spend time and money visiting overseas partners may also be limited.
Other challenges may include regulations and delays in production. As a relationship between the SME and a seller abroad could be relatively new, the seller may demand upfront payment, meaning the buyer or importer could be faced with a 30-180 day payment gap until they receive final payment from their end customers,” added Sinclair.
Read on to find out how to foster a trusting relationship with your overseas supplier.
(2) Having a trusting relationship is essential
Creating a relationship with suppliers, as Sinclair suggested, is key if you are to truly foster trust. Of course, this can prove challenging given barriers such as languages.
“Wed recommend broking a relationship in another market through a local specialist or at least a linguist who speaks the language,” said Sinclair. Also, using a local UKTI branch, or approaching the UK Chamber of Commerce in the specific country or market can help leverage a partnership or assist in getting in touch with a specific person that may be key in the transaction cycle.
Furthermore, any potential suppliers would need to be vetted to ensure there is no risk of fraud. This due diligence process should always include credit checks and a delve into history and business relationships.
Read more about importing:
- How to import: A beginner’s guide
- Toucan Fruit innovates the exotic fruit import process
- The strength of the Made in Brtain brand in Brazil
(3) Dont put all your eggs in one basket
After youve found yourself a supplier, it wouldnt hurt to have a face-to-face meeting, further ramping up the trust factor.
“What you might find works in your own culture might not necessarily work in the culture you want to do business with,” said John Mardlin, partner and executive coach at the Pinnacle Practice. Flexible behaviour is very important, as is patience.
Sometimes the smallest cultural acknowledgement can break the ice and help relationships start,” he explained. Face-to-face contact is invaluable. If you arent able to visit on a regular basis then Skype can be the next best alternative to help strengthen relationships. This will also prevent misinterpretation, which can often happen with email or phone communication.
However, Januzewski explained that SMEs shouldnt merely concentrate on one supplier, He claimed that in order to mitigate the risk of business disruption through poor partner performance, back-up partners for key services/products can help although these can take further time to develop.
An increase in UK exports has been a rare good story amid an anaemic recovery. But when picking which country to target next, SMEs need to be mindful of thesehilariousbanned imports.