Wednesday, December 10, 2008

Trade Leads - How To Use Them Profitably

Trade leads from Internet is an important aspect of international business and considered an inexpensive way of getting new buyers and consequently export orders. here are many sources onb2b trade leads which readers can easily find through search engines. However, for effective and profitable use of these trade leads, we need to understand who places these leads, why and how to use them for expanding international business.

How Reliable are Trade Leads?

It is important to distinguish between trade lead and export order. Trade leads or 'RFQ' (Request For Quote) are enquirers from unknown buyers published in public bulletin boards or b2b marketplaces r sent directly to suppliers. These are certainly not export orders - though some of these could be converted into firm order after successful negotiation. At the same time, many of these could be of questionable value.So, how do we identify trade leads from serious buyers ? Let us look at these trade leads critically and find out ways of dealing with them profitably.

There are many kinds of trade leads like business opportunities, foreign government tenders etc. For this discussion, we take the most prevalent type of offers in WWW - message placed by private company or individuals to buy or sell a specific product/service within a reasonable period of time.

Who Places Trade Leads ?

Foreign distributors know exactly where to go when they want to buy something for re-sale. Normally, they do not need to post trade leads for sourcing.

Then why such proliferation of trade leads ? How come there are so many thousands of trade leads populating hundreds of trade bulletin boards ? To answer this question - we need to understand effect of Internet on conventional distribution channels.

The advent of Internet has dealt a serious blow to traditional distribution channels, specially in overseas trade. In more specific terms, middlemen are in serious danger of losing substantial business. Earlier, foreign buyers such as retailers had little option but to buy from cal distributors who usually imported the stuff in bulk and supplied to retailers in adjoining areas. For retailers, importing in small quantity from unknown sources was difficult and uneconomic.

Internet has helped buyers and sellers from different countries to interact freely. Retailers can now reach sellers in distant countries, see their products in websites, negotiate a favorable price and buy in small quantity. There is no dearth of exporters who are prepared to sell in small quantity at regular intervals.

This direct buying by retailers at a favorable price, in turn puts pressure in local market and distributors feel hard-pressed to find new suppliers, new products and most important lower price. So, what was once a rather lengthy distribution chain of seller to exporter to importer to wholesaler to buyer, is increasingly losing middle players. It is true that large part of international trade is still dominated by traditional distribution channel, but the trend is towards marginalization of middle men, facilitated by an open medium like Internet.

Then Why this Skepticism ?

Like most other areas in life, reality normally lies in shades of grey rather than in black and white. So, along with serious buyers looking for serious sellers there are sundry others ranging from window shoppers, arm-chair international businessmen to downright fraudsters and conman populating the market. As a result, one can find trade leads posted for variety of reasons such as:

  1. Self Advertisement - pure and simple product promotion (seller in the garb of buyer

  2. Find market price (usually to put pressure on existing supplier)

  3. Find out about competitors

  4. Locate alternate or additional suppliers

  5. Find suppliers for new product

  6. Begin negotiation for a later purchase
The Challenge - How to Separate Wheat from Chaff

There is no specific rules - but common sense, observation, care and imagination can help you locate potential leads and manage your time and resources that much better. Following are some tips on this regard based on my experience since 1997:

Find Reliable and Exclusive Sources

If you talk to people who actually sell in foreign markets, they may privately disclose that their best leads are those that they generate themselves, usually by direct mail. It is far easier to cultivate a trade lead into business when they come from exclusive source, not available to million others or displayed in free bulletin boards. The options are clear-either invest in research to locate buyers or take professional help. The days of free commercial information from Internet are over.

Keep a Watch for Competitors

Look for keywords that might indicate the intention - if the guy is gathering information and has no intention to buy. Be suspicious of companies who ask for detailed information about manufacturers' prices but do not identify themselves distributors looking for new lines.

Be Careful of Large Orders

Be cautious of companies who post trade leads for large orders but can not be located easily in company or industry directories. These are often small companies who issue 'RFQ' (request for quote) for large quantities in order to get a lower price. Ultimately, such companies order smaller quantities to 'test' the supplier, making the deal uneconomic for seller.

Observe the Language

Do not be unduly influenced by flowery language or very specific requirement.Do not prejudge a lead - exercise normal precautions necessary in international business.

Check the Market

If you are not a manufacturer and outsource products - be careful of locked market activities. This trade lead will specify a particular product. Your company contacts the manufacturer, only to find out that the manufacturer already has representation in that country and will not sell directly to you for resale as they want to protect their distributor relationship.

Letter of Intent ?

Generally Ignore trade leads offering "letter of intent" or "letter of interest".

Jack of all Trades ?

Generally ignore companies who claim to deal in all commodities traded on world markets such as coffee, sugar, urea, oil and gold. Normally, these are very large deals handled by well established companies in well established markets. Such well established companies usually do not place trade leads in Internet.

Do not Believe in Overnight Success

Be cautious of international business scams designed to separate you from your money. Be suspicious of anybody who prefers phone conversations to written documents. Do not get sucked into fantastic business opportunities which promise to yield huge profits with no risk. Learn which countries and areas have a reputation for spawning international business fraud. Never respond to business opportunities which require you to make wire transfers in advance for receiving goods or services.

Understand the Virtue of Patience

Understand that most foreign distributors do not make fast buying decisions. It is not at all unusual for an initial order to require 9-18 months from the time of the initial solicitation depending upon the cost of the item.

Develop Relationship

Instead of treating the leads as 'export order' with a hit or miss attitude use the opportunity to develop lasting relationship. Understand buyers' requirements and offer solution accordingly. Do not indulge in monologue on your products-make it a dialogue on how both the companies can stand to gain from a mutual understanding.

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