Trade Leads - How to use them profitably (Part I)

Trade leads are very important aspect of international business and considered an inexpensive way of getting new buyers and consequently export orders. However, like many other Internet hypes, we need to realistically examine and understand it in terms of who places these leads, why and most important how to use them effectively for expanding your international business.


How Reliable are Trade Leads ?

Mushrooming dot com greenhorns announcing 'yet another' revolutionary market place will like you to believe that these trade leads (also called RFQ) are export orders waiting for your taking and what a fantastic opportunity awaits you from thousands of companies floating millions of trade inquiries. What is wrong with this concept, as is wrong with many other Internet hypes, is the assumption that this additional information can be easily assimilated into a business enterprise and made useful without any cost whatsoever. Nothing could be further from the truth as major problem with trade leads is that many of them are of questionable value.


Does that mean we should always remain skeptic about these leads and avoid them like plague ? This is folly on the other extreme - with care and imagination you can turn them into real opportunities. I have seen them happening and there is no reason why you can not do it. The purpose of this article is to help you look at these leads realistically and offer suggestions on how to deal with them profitably.


There are many kinds of trade leads like business opportunities, foreign govt tenders etc. For this discussion, we take the most prevalent type of offers in WWW- message placed by private company or individual 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 resale. They do not have to place a trade lead to procure anything except in very rare cases. Then why such proliferation of trade leads ?


The advent of Internet has dealt a serious blow to traditional distribution system, specially in overseas trade. In more specific terms, middlemen are in serious danger of loosing substantial business. Earlier, foreign buyers like retailers had little option but to buy from local supplier who usually imported the stuff in bulk and distributed in local area. Importing in small quantity was neither feasible nor economic.


With the advent of Internet, retailers can now reach sellers in distant countries, see their products in websites, negotiate a favourable 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 retailer at a favourable 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 loosing middle players . Agreed, large part of International trade is still dominated by traditional distribution system but the trend is towards marginalisation of middle men, facilitated by an open medium like Internet.


Then why this skepticism ?

Like other things in life, reality is never in black and white - there are always shades of gray. So, alongwith serious buyers looking for serious sellers there are sundry others ranging from window shoppers, arm-chair international businessmen to potential buyers exploring the market. So, we find trade leads posted for variety of reasons like:


  • Advertisement - pure and simple product promotion (seller in the garb of buyer)

  • Find price (usually to put pressure on existing supplier)

  • Find out about competitors

  • Locate alternate or additional suppliers

  • Find suppliers for new product

  • Begin negotiation for a later purchase

The challenge - How to separate wheat from chaff

There is no manual or specific rules - but common sense, observation, care and imagination will help you locate the more potential leads and manage your time and resources that much better. Following are some guidelines (based on my experience since 1997) that you may consider :


Find Reliable and Exclusive Source

If you talk to people who actually sell in foreign markets, they will privately tell you that their best leads are the ones which 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 zillion others or lying in some free bulletin board. The options are clear - either invest in research to locate buyers or take professional help. There is no free lunch - there had never been any.


Be wary of peeping Toms

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 as distributors looking for new lines.


Be careful of large orders

Be very wary of companies who post trade leads for large orders and are not easily located in any company or industry directories. These are often small companies who will issue an RFQ (request for quotation) for large quantities in order to get a lower price and then will try to order a very small quantity at that price.


Mind the language

Do not be unduly influenced by flowery language or very specific requirement. Do not pre-judge the lead - exercise all precautions required in international business. Many small manufacturers get trapped by this.


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, hoping to make a commission on the sale, only to find out that the manufacturer already has representation in that country and will not sell the product to you for resale to that market because 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 any commodity traded on world markets and who are placing trade leads. Traded commodities such as coffee, sugar, urea, oil and gold are handled by well established companies in well established markets. These companies usually do not place trade leads in order to do business.


Do not Believe in Overnight Success

Be very wary 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 you huge profits with no risk. Learn which countries and areas have a reputation for spawning international business fraud and avoid them like the plague. Never respond to business opportunities which require you to make wire transfers in advance of 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 buyer's 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.


Related Links

How to find Buyers: Part I Know your Buyer


Source : FAIDA - Newsletter on Business Opportunties from India and Abroad Vol II, Issue 9; July 25' 2001


Author : Dr. Amit K. Chatterjee
( Amit worked in blue-chip Indian and MNCs for 15 years in various capacities like Research and Information Analysis, Market Development, MIS, R&D Information Systems etc. before starting his e-commerce venture in 1997. The views expressed in this columns are of his own. He may be reached at amit@infobanc.com )


Copyright : A9 All Rights Reserved. Limited permission is granted to publish this article in a web-site or printed in a journal/ newspaper/ magazine provided the publisher takes prior permission from author, do not make any change in the article (i.e. keep it exactly same as displayed above) and cite the Source of this article as The Great Indian Bazaar with a link to this page.


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