With an overabundance of textile and apparel export companies to choose from in today’s crowded global marketplace, not only is the ball still in the buyers’ court, but their grip on the market is now stronger than ever. Given the current climate of trade, large international buyers are taking advantage of all the options available to them and cherry-picking partners that best fit their short- and long-term business needs.
That’s why suppliers need to come prepared with the right formula for success when approaching these buyers, or else they won’t be able to make the proverbial—or literal—cut.
This article covers tips on how to approach payment terms with your potential customers and how export factoring can help in this process, plus how to find customers in the first place, and the qualities that will make you stand out, including being informed and communicating in the right style.
Setting payment terms
To start, before exporters can even get ready to prove themselves to a potential buyer with their portfolio, samples or metrics of success, there’s one thing that will surely pique the buyer’s interest: the ability to offer and accept open account payment terms.
Exporters may balk at such an idea, considering the shaky times the retail sector has been experiencing in the past couple of years. Why would you sign up for payment 30, 60 or 90 days after the sale was made and goods have already been shipped? It turns out that given the steep competition in export markets, buyers are pushing for open account terms and sellers are extending credit to them, especially abroad. In fact, according to the World Trade Organization, over 80 percent of global trade is now conducted through open account terms.
To make these terms less of a scary choice and more of a profitable decision (bigger buyers, bigger orders), and to keep up with the times, export factoring can adroitly come into play here so you can both offer payment on credit and get paid upfront.
Here’s how it works: a factoring company can purchase your business’s accounts receivables and advance you the majority of the total value of your invoices. The buyer then pays the factor the full amount of the invoice upon maturity, and the factor, in turn, sends you the remaining balance.
Some trade finance firms, such as Tradewind, adjust their funding as your sales grow, so you continue to receive the cash you need even as orders increase. If you’re still hesitant, some of these same firms can also provide credit insurance in the chance the buyer becomes insolvent.
Ultimately, by offering open account payment terms with the help of export factoring, your business will be able to win more big buyers and take on larger orders.
Making a connection
You may then be wondering, “How do I find buyers in the market for new suppliers?” Like many things, it’s all about developing your network and leveraging your relationships with others in (and out of) the apparel and textile industry to help your company achieve greater visibility. Your existing buyers may know another retailer in need of your products, or one of your own vendors, such as a fabric mill, can introduce you to an apparel company they work with.
At the same time you’re researching new buyers, they may be conducting a search on you as well. As the Internet is one of the most widely used tools to vet prospects, your website is especially impactful in making a first impression on a buyer. If designed and maintained well, it can lend your company credibility and lead the buyer to reach out.
Just as the buyer will perform its due diligence on you, you should also investigate the buyer if you plan to ultimately win over its business. It’s important to evaluate if your company aligns with the buyer’s values, such as clothing that is both aesthetically pleasing and functional, sustainably sourced or produced in a factory with fair labor laws and wages.
It is also beneficial for you to check up on the buyer’s financials for your own sake. It’s no secret that retail is in a bit of a transitional state, with e-commerce magnates like Amazon eating up traditional brick-and-mortar business. Doing your homework on the buyer can save you from the detriment of a harmful relationship down the road.
Establishing a working relationship
If you feel that your company is a good match with the buyer’s, you may proceed to the next checkpoint, which is making sure that your business is differentiated, flexible and agile enough for the buyer’s needs.
Zara is currently the kingpin of retailers for a reason: it picked suppliers that can adapt to consumer preferences and external factors such as weather—like unseasonably mild autumns when consumers have to ditch the corduroy, for example. Zara’s suppliers push out items from their factory, skipping the customization and made-to-order options, and continue to produce different styles throughout the season. This method allows Zara to replenish its selections and cut lead times rather than stocking up on inventory in advance.
Not only is it important to be able to calibrate to the retailer’s requirements, but you must also come to the table with your own playing chips, offering a product that is unique and set apart from your competitors. Theoretically, anyone can make a T-shirt, but not everyone can make a T-shirt that leaves a mark and will plant a feeling of brand loyalty and the desire to make a return visit in the consumer’s head.
Additionally, given such an uncertain time in retail, your company must be willing to play ball even in tough times. Retailers are looking for suppliers that can guarantee shipments even when their stores are in a time of distress. They also expect transparency from their suppliers. This means communicating with your buyers when you foresee issues or delays. An open line of communication with their vendors, as well as consistency, are key qualities for retailers. Don’t try to be smarter. Don’t be sneaky. Do what you promised.
When making your pitch to buyers, honesty is imperative. Buyers will of course have their list of expectations for their new supplier, but that doesn’t mean you will be able to meet them all. In this situation, be upfront. Inform the buyer of what you are able to do with your existing capabilities and suggest higher business goals you’d like to achieve if you are met with the resources you need in the future.
On the same token, stay away from exaggerating your company’s capabilities, products, business model and so forth. The golden rules of communication apply here: stay clear and concise, don’t bore your potential client and don’t oversell. Buyers will unlikely give you a second chance if you misfire your pitch initially.
Lastly, there are the usual suspects that will get a potential buyer on board with your business: the quality of your product, the cost effectiveness of doing business with your company, the strategic partnerships your business can avail the company with, and the management and technical capabilities you have in place.
Tradewind provides innovative international cash flow solutions tailored for global clients. Focused on the mid-market, its core products are non-recourse factoring and supply chain finance. The group has built an unrivaled reputation for the depth of its international finance expertise by maintaining a network of offices around the world including the USA, China, India, Hong Kong, UAE, Turkey, Bangladesh, Pakistan, Iceland, Bulgaria, Hungary, Peru and its headquarters in Germany. Combining financing, credit protection and collections into a single trade finance facility, Tradewind offers streamlined, flexible and best-in-class services.
To learn more about Tradewind, visit tradewindfinance.com.