It’s worthwhile to consider sourcing stock from overseas. For some it will be a better option, for others – not. Here are some important things to consider.
The traditional way
The traditional method for Australian small business operators to purchase stock has been through local wholesalers. Historically, wholesalers would send their agents overseas looking for suitable products for selling into the Australian market. They would buy container loads of goods, warehouse them and sell them off in smaller lots to their numerous retail shop customers.
This has changed somewhat over, I’d say, the last five years or so. Certainly large retailers have implemented their own departments and strategies to buy more direct from overseas agents or direct from factories.
Good news for small retailers
If you’re a small retailer, the good news is that there are also channels that allow you to buy more directly from overseas, and in much smaller quantities than before. With the advent of sales platforms such as eBay and Amazon; and as a result of events such as the global financial crisis (which resulted in a reduction in spending), many suppliers have established ways of selling their products in smaller quantities.
So, it is certainly worthwhile to at least consider the possibilities of sourcing stock from overseas. For some it may be a better option, while for others the status quo may be best. But you will never know unless you research it.
The truth about pricing
Unfortunately, in a large number of cases, the sole motivation for overseas sourcing is pricing. In other words, a belief that a product can be sourced much more cheaply than buying from a more local source.
While it is true that pricing is one consideration when buying directly, there are a whole range of other considerations that should be taken into account. (My comments are more based on buying from suppliers in China as I have less experience in dealing with those from other countries, but regardless, the general ideas are the same.)
Want more articles like this? Check out the processes section.
Things to consider when deciding to source products from overseas
For every piece of advice available about buying from overseas, there is no one-size-fits-all answer. Each buyer/business is different and therefore different factors will determine whether or not it is a good option.
Having products made overseas
1. Is this an existing product or do I need to have something new made from scratch?
2. Are there any issues affecting intellectual property and if I have a product made, what protection do I have?
3. How do I find a reputable factory or supplier?
4. Does my stock level of products make it worthwhile to purchase from abroad?
1. Is there a cost benefit?
2. What will be the overall costs compared to what I am currently paying? (Include items such as shipping, import duties, insurances and so on.)
3. Does my cash flow support making potentially bigger orders to satisfy a factory Minimum Order Quantity (MOQ), and the time it takes to have the goods made and shipped to me?
Resources / Logistics
1. Do I have the ability / knowledge to start an international supply relationship? Or what resources are available to assist me? (E.g. Shipping agents and customs brokers)
2. What if something goes wrong with the order? What options do I have and what will it cost me?
3. Should I plan a visit to assess the factory in person?
4. What do I need to know to make sure my goods comply with the relevant safety and quality requirements?
It’s important to know the answers to these questions before sourcing products from overseas.
I urge anyone looking to consider buying from overseas to firstly consider their capacity and ability to successfully negotiate a deal with an overseas supplier, and secondly, to understand all the different areas within their business that will be impacted by the decision.
In my next article, I will explore the pros and cons of dealing direct with factories versus seeking assistance from sourcing agents and consultants.
What are your thoughts on sourcing overseas products?