It’s not always smooth sailing for startups planning to work with a new market. When it comes to markets like China and other Asian countries, there can be significant challenges for any startup not versed in the business culture or intricacies of that market, such as the negotiation of payment terms, quality of stock and fraud prevention.
For those looking to work with suppliers in these markets, we’ve put together some advice that you may want to consider.
Without a proven track record, startups often have to negotiate with sceptical suppliers. In most cases, suppliers will require a percentage of the purchase order up-front, with final payment due when goods are ready for delivery. Do not be embarrassed to ask for a cash settlement discount in these cases and ensure you’re getting the best possible outcome.
Once the first transaction has taken place and supply chain finance has been replenished, startups can continue to build the quantities of orders with the supplier, eventually leading to more flexible payment terms.
It’s important to ensure the product you’re looking to purchase is of sound quality before entering into a contractual relationship with a new supplier.
The best way to do your due diligence when dealing with a new supplier is to get references from existing buyers, and request a sample of each product you plan to order before you enter into a purchase contract and make the initial deposit payment. Although the sample should dictate the standard of each unit ordered, it’s a good idea to start with orders of smaller quantities, allowing you to review the quality of each order or product.
It is also extremely important to ensure the supplier is capable of delivering the supplies you’ll need as your business grows.
Don’t just rely on one supplier even in your growth stage — any disruption they experience will then be passed on to your business.
To minimise the risk, explore a selection of suppliers, even if you only select one supplier to engage with in the end. This way you have an idea of what other suppliers you could work with in the market, without making sacrifices on quality, should any unforeseen circumstance occur with your current supplier.
When you think about the ideal customer or partner for your own business, it’s usually people who are friendly, transparent, reliable and pay within set terms.
Your suppliers are no different. Whether you’re engaging with a new supplier, or there is a long standing procurement relationship with the supplier, ensure you keep in regular contact and make the effort to visit them at least once a year.
Do some research on cultural traditions, such as etiquette, language, and customs practiced by the supplier in the country you’re dealing with. Demonstrating an understanding of these go a long way to make your supplier feel at ease and respected, and also ensure business runs smoothly. For example, a religious or national holiday may impact supplier output.
In addition, it’s important to take into account the nature of the country you’re working with: is it an established market? Is it a specialist market? The answers to these questions will help distinguish whether you’re in the right place.
Engaging with suppliers in a new market can be risky, so it’s understandable that some small businesses opt for a sourcing company to help show them the ropes.
For a fee, sourcing companies will work with you to identify the right market for the supply you seek. They also help negotiate pricing, order samples and on some occasions also take you out to meet the supplier in person.
Stepping out and engaging with a new market such as Asia takes courage, but for many businesses it’s a risk worth taking.