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Cambodia Export Diversification and Expansion Program (CEDEP I) High Value Silk Component Market Development By: Sotévy LY, Consultant in Market Development, ITC Date: 26 May 2014

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Page 1: High Value Silk Component Cambodia Export Diversification ... I/High... · Cambodia Export Diversification and Expansion Program (CEDEP I) High Value Silk Component Market Development

Cambodia Export Diversification and Expansion Program (CEDEP I)

High Value Silk Component

Market Development By: Sotévy LY, Consultant in Market Development, ITC Date: 26 May 2014

Page 2: High Value Silk Component Cambodia Export Diversification ... I/High... · Cambodia Export Diversification and Expansion Program (CEDEP I) High Value Silk Component Market Development

IDENTIFICATION OF THE RIGHT BUYERS Define your target market Build up your market entry strategy accordingly Identification of your potential buyers

COMMUNICATION WITH INTERNATIONAL BUYERS

How to identify new buyers How to approach buyers

ORDER HANDLING Study case: •  How to negotiate with buyers – the mandatory points •  How to follow up with buyers’ requests What do you need to keep in mind – checklist

MODULE: CUSTOMER RELATIONSHIP AND ORDER HANDLING

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ANALYZE YOUR PRODUCT POSITIONING (1)

ü  What is my expertise? What am I good at or what I am specialized in? (Weaving? sewing? Etc.).

Ø This will give you the product range you should focus on.

ü  What is my production capacity? Ø This will give you an idea of the type of buyers you can

deal with / want to deal with

ü  Is there a niche market for my products? Ø  This will provide you an idea of the different markets/

countries you can target

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Note: This exercise has been done when preparing your export plan and your brand book

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ANALYZE YOUR PRODUCT POSITIONING (2)

ü  Who are my main competitors? (Other countries that offer silk

handicrafts, or within Cambodia)

ü  Can I compete? If not, how can I compensate? What are my strengths compare to them? (Weaving techniques, silk quality, motives richness, availability of natural dyes, etc.)

ü  How do my products differ from theirs? What is their price range?

ü  What should be the price range for my products

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3 – HOW DO YOU IDENTIFY THE RIGHT BUYERS (cont)

STEP 2: External Analysis : market demand To which countries your products will fit into? In these countries, what products would be suitable with the trends

(patterns / colors / dimensions / shapes) and taste / feel and process (dyeing)?

What potential market your products can fit in? •  Are your capacity and price good for Retailer? Wholesalers? Distributors? •  Is your quality for high-end market or medium market? •  Do you have the ability to serve fair trade buyers? Fashion-led market? Mass

(volume) market etc. ?

Where do you find the buyers with different profile? •  Magazines, then internet. Ex: type “European brand handbags, accessories”, or

”list of fair trade buyers in Europe or USA” •  Walk in buyers in the shop •  Embassies •  Chamber of commerce

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DEFINE YOUR TARGET MARKET (1)

Now that you have a clear positioning of your product offering, you can define your target market, using the following step by step approach

1. Screen potential markets ü Identify 5 or 10 large and fast-growing markets for your

products

ü Identify some smaller but fast-emerging markets that may provide particular opportunities (“niche markets”) as there may be fewer competitors than in established markets.

ü Target 3 to 5 of the most promising markets for further assessment.

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DEFINE YOUR TARGET MARKET (2)

2. Assess the target markets

ü Identify importers, wholesalers and other players in the target markets. Make yourself familiar with the distribution channels

ü Identify the market segmentation (by categories of products, by ranges, etc.)

Ex: Home decor, Fashion accessories Ex: High-end, mass market, etc..

ü Evaluate the price level, market trends (seen last training) and competitors

ü Assess the profiles of the niche markets •  What do they like •  What do they need •  What is their style •  What is their expectations

ü Examine shipping costs from your main ports to the target markets

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DEFINE YOUR TARGET MARKET (3)

After defining your target market, you should assess whether your company is able to enter your chosen market. Especially if your company is new to exporting, you should check whether you can use your resources without jeopardizing your domestic sales efforts.

Elements to be assessed include:

ü  product standards, ü  production capacity, ü  flexibility, ü  logistics, ü  sales force, ü  financial situation, ü  capabilities, etc.

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BUILD UP YOUR MARKET ENTRY STRATEGY ACCORDINGLY (1) To whom do you want to sell?

•  Large international handicraft wholesalers? •  Small specialized wholesalers? •  Foreign retailers/retail chains? •  Fair Trade or other special target groups? •  Intermediary national traders?

Gifts and decorative articles, accessories are often distributed through many different intermediaries like agents, importers, wholesalers and retailers. The following chart outlines the distribution channels.

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BUILD UP YOUR MARKET ENTRY STRATEGY (2)    

Homeware /  Decor Accessories Gifts Fair  TradeHomeware /  Decor Accessories Gifts Fair  TradeHomeware /  Decor Accessories Gifts Fair  Trade

Handicraft  ExportersSeller

Market  A

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Points

Segm

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Prod

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Distrib

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Points

End  

Consum

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High

Mass

Mid

Homeware /  Decor Accessories Gifts Fair  TradeHomeware /  Decor Accessories Gifts Fair  TradeDepartment  Store Concept  Store Chain  of  

Stores  /  Store Website

Mass  Market

Mid-­‐Market

High-­‐EndDec

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uyer profile

Niche

Marks & Spencer Top Shop IKEA Viva Terra.com La vie devant

soie

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BUILD UP YOUR MARKET ENTRY STRATEGY (3)

The most important market entry strategies are:

1.  To supply specialized importers §  They buy a broad range of products, resell and distribute

them under their own brand names to small retailers

§  They are specialized in different retail channels

§  Advantages: §  Reliable partners for exporters long-term partnerships & stable growth via

repeat orders.

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BUILD UP YOUR MARKET ENTRY STRATEGY (4)

The most important market entry strategies are:

2. To supply the retailers / chains of stores §  They buy a selection of products which fit with their style and

they look for new and innovative, quality products to differentiate their stores to other retailers.

3. To work with brand 4. To work with an Agent

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BUILD UP YOUR MARKET ENTRY STRATEGY (5): where to find buyers?

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ü  Identify purchasing offices/agents of large retailers

ü  Attend regional or international trade shows

ü  Participate in trade missions abroad (B2B missions)

ü  Launch mailing campaigns to buyers who you may find through websites, trade directories, trade fair catalogs, etc..

Keep in mind that some buyers are keen to receive new product samples because:

•  They could be a source of inspiration for their collection plan.

•  Also, they do not have the time to scout for new products.

=> Seize the opportunity to contact them and show your products

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COFFEE BREAK

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IDENTIFICATION OF THE RIGHT BUYERS Define your target market Build up your market entry strategy accordingly Identification of your potential buyers

COMMUNICATION WITH INTERNATIONAL BUYERS

How to identify new buyers How to approach buyers

ORDER HANDLING Study case: •  How to negotiate with buyers – the mandatory points •  How to follow up with buyers’ requests What do you need to keep in any case – checklist

MODULE: CUSTOMER RELATIONSHIP AND ORDER HANDLING

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INTRODUCTION : COMMUNICATION WITH BUYERS Now you have identified buyers, how do you contact tem? How do you approach them? ü  Email writing ü  In country visit ü  Visiting buyers abroad ü  Phone call ü  Catalogue, samples offering

–  Keep in mind that buyers are keen to receive new information and new samples as it will help them in their collection making

ü  Newsletter / news update

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Introduction to the case study: Objective is to address the following issues: 1. From your current buyers:

•  How many clients you have kept so far? •  How many clients you have lost? •  How many clients you think there are there, but not

active? •  Why not acting? How to make them more active?

2. How to keep long-lasting relationship with buyers ?

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CASE STUDY

1.  Buyer visiting your shop/workshop 2.  Writing a letter to invite buyers to visit you at the

NY fair 3.  Writing a letter to invite buyers to visit you

Maison & Objet fair 4.  How to answer an order enquiry 5.  Telephone communication 6.  How to write a letter to an old buyer who is not

active any longer

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HOW TO APPROACH BUYERS (1)

THE IMPORTANCE OF GOOD CUSTOMER SERVICE FOR LONG TERM BUSINESS RELATIONSHIP

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Effective communication with buyers relies on 2 pillars:

1.  Good sales kit ü  Company profile ü  Business card ü  Marketing and promotional tools (product catalogue, flyer, website, etc.) ü  Packaging : bags, hang tags, care labels…

2.  Professional communication ü  Is your communication style open and correct? ü  Are enquiries, requests or complaints promptly answered? ü  Can the buyers make the same contact with your staff?

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HOW TO APPROACH BUYERS (1): A GOOD SALES KIT

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A sales kit is a key ingredient for marketing your business, when you meet with potential new clients, follow up on leads, and meet with people at trade shows.

The purpose of a sales kit is to develop a flexible marketing package that explains who you are, what you do, what you’ are doing better than other companies, and specific details for each of your products. Also, it is important that it carries your essential brand codes.

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HOW TO APPROACH BUYERS (2): PROFESSIONAL COMMUNICATION The objective is to show to your customer that his request is being treated professionally, from the time the order is placed until it is shipped.

• Case 1: Buyer’s visit

–  Train the key members of your staff to be able to make a good presentation of their job and to explain in which way they are responsible for the production or shipping of the client’s order.

–  Your showroom / shop decoration: is the most effective marketing tool to convince the customers who visit you. You need to have a proper merchandizing §  How the products are displayed also affects how valuable they

appear §  Present your products as nicely as you can, arranging them by

collection, color §  The buyer should be able to visualize how the products can fit

with his collection

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HOW TO APPROACH BUYERS (3): PROFESSIONAL COMMUNICATION The objective is to show to your customer that his request is being treated professionally, from the time the order is placed until it is shipped.

• Case 2: Communication by email / fax / phone (prior to a visit, or no visit at all)

–  It is possible that a customer will buy from you but will never visit your office, or will visit your office after a while. A mistake many companies make is that they fail to professionalize their office communication.

–  You should ensure that if you have an e-mail, you have a policy that it is checked and responded to promptly. Even if the response is: “We have received your query and will answer tomorrow”.

–  Company telephones are answered by people who speak only the native language and hang up if there is a foreign language on the other end.

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HOW TO APPROACH BUYERS (4): PROFESSIONAL COMMUNICATION, GENERAL TIPS

1.  Writing effective e-mail messages

–  Email should catch the reader’s eyes

•  Begin with a greeting word or a word of thanks •  Then, write your main message in 1 or 2 sentences •  End by stating what you expect from the reader •  Sign-off with a greeting •  Under the text, place your own name, company name, address,

telephone, and fax numbers.

–  When answering an e-mail message

•  Let the subject line remain unaltered •  You should not deal with different subjects in one and the same e-mail,

send separate e-mails (=> easier to open/file them)

–  Example

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EXAMPLE

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HOW TO APPROACH BUYERS (5): PROFESSIONAL COMMUNICATION, GENERAL TIPS

2. Writing effective business letters

•  Contents: Letterhead, name and address, date, salutation, reference, body of letter, complimentary close, signature and enclosures

•  The salutation: it depends on your relationship with the recipient. But always try to personalize the letter by addressing the recipient with his/her name rather than with dear sir/madam.

•  The reference line: the reference line is preceded with the word “Re:”. It should be placed one line below the greeting.

•  The main body: –  Each paragraph deals with 1 point and 1 point ONLY –  Start your letter with the main message –  Give the reasoning or background of your message, tell why you are approaching him/

her: provide details, precise information, arguments, actions you intend to take –  Finish with a closing statement. Do not leave anything open by saying something like “We

look forward to your response” but close with “we will call you next Friday to discuss your feedback on the proposal.”

•  The signature: The signature should be followed underneath by a typed version of your name and your job title.

•  Others: If you include other material like a catalogue, then put “Enclosure” 2 lines below the last line.

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HOW TO APPROACH BUYERS (6): PROFESSIONAL COMMUNICATION, GENERAL TIPS

3. Telephone etiquette: knowing how to answer the telephone is an

essential business skill •  It gives the first impression of your company. Should start with:

–  “Hello/Good morning/afternoon/evening, this is … (company name), How may I help you?”

•  If the caller asks for a certain person, then a proper answer would be: –  “One moment please, I will transfer you to that extension” –  “Mr. A is out of the office at the moment, is there something I can help you with?”

•  If the caller asks a question and you don’t know the answer, a proper response would be:

–  “I am sorry I cannot answer that, let me transfer you to someone who can help you” –  “Can you hold please? I will see if I can get the answer in a moment”

•  If you initiate the call: –  Organize your thoughts before placing the call and make a list of important topics you

want to discuss –  Introduce yourself shortly “ Good morning, I am M. X from …company” –  Then ask “Is this a good time to talk?” …if not, then ask when would be the best time to

call them back. In that case, make sure you remember and call them again at the right time

•  Do not speak too fast •  People judge you by the tone of your voice and what you say – always sound

professional!

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ü  Your product offering should be built up according to the market(s) you may want to target.

ü  To define your target market, use the following step-by-step

approach: (i) Screen potential markets, (ii) assess the target markets, and (iii) and identify the right distribution channels for you.

ü  Effective communication with buyers relies on 2 pillars: (i) marketing materials and (ii) a professional communication.

SUMMARY

The buyer should be at the center of your strategy…and a good customer service will guarantee you long term business relationships with your clients.

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IDENTIFICATION OF THE RIGHT BUYERS Define your target market Build up your market entry strategy accordingly Identification of your potential buyers

COMMUNICATION WITH INTERNATIONAL BUYERS

How to identify new buyers How to approach buyers

ORDER HANDLING Study case: •  How to negotiate with buyers – the mandatory points •  How to follow up with buyers’ requests What do you need to keep in mind – checklist

MODULE: CUSTOMER RELATIONSHIP AND ORDER HANDLING

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NEGOTIATING WITH BUYERS : THE MANDATORY POINTS

Fixing details (1) What you need to be clear on when meeting a buyer: ü  Presentation of the company ü  Types of dyeing, techniques that being used (conformity with REACH) ü  Production lead time of the first prototypes ü  Production lead time and pricing for the first batch of samples (usually, it

is production price * 1;5) ü  Time for production for the order ü  FOB price ü  Terms of payment and methods of payment ü  Estimation of shipping cost

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NEGOTIATING WITH BUYERS : THE MANDATORY POINTS

Fixing details (1 bis) ü  Usually, you have 3 to 4 months to fulfill the order and deliver

the goods. Provide your buyers with a realistic timeframe that you can respect (add a week to 10 days to allow you some time for unforeseen constraints).

ü  Product development : Developing prototypes for the buyers has

to be a quick process •  Fist version : From 10 days to 1 month, depending on the complexity

of the products. •  Second version : as fast as possible. •  Do not wait that prototypes are finished to request precisions. Ask all

details you need to produce it, it will show how precise and serious you are.

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NEGOTIATING WITH BUYERS : THE MANDATORY POINTS

Fixing details (2) What you need to ask to the buyer: ü  Estimated quantity per season ü  Planning of the buyer: when do the buyer need the first prototypes, the

second batch of prototypes? Etc. ü  Terms of payment ü  Who is paying for the first sampling? ü  What the packaging and labeling requirements

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NEGOTIATING WITH BUYERS : THE MANDATORY POINTS

Concluding contracts (3) During the meeting: ü  Sign and hand over copy of confirmed order at the end of the

meeting

- or – ü  Hand over copy of a preliminary order sheet with details on

products and prices agreed upon After the meeting: ü  Send a detailed pro-forma invoice with all details by an

agreed date for confirmation by the customer

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EXERCICE: DEALING WITH BUYERS

A very demanding wholesale buyer places an order of 6000 cushion covers. He wants 2000 pieces per color, and there are 3 colors in total. The challenges: •  Production time: 60 days; •  Bargaining on prices: initial offered price by the seller is $25 FOB, but the buyer asks for $18 FOB; •  Payment terms: no deposit. The trainer will act as the buyer, and will choose the seller among the participants.

Case 1 (inspired from a real situation): Context

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Example : Cushion from Caravane brand http://www.caravane.fr/?i=13&of=4&c=2&se=

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EXERCICE: DEALING WITH BUYERS

How to handle this situation? Production lead time •  Negotiation on the purchase order: split the production as it is unrealistic to produce 6000 cushion covers within 60 days. Explain the technical constraints (set up the loom, etc). •  Negotiation on the production capacity: split the production among the different weavers. Bargaining on the price •  Production engineering: suggest some modifications on the product in order to get closer to the price requested by the buyer. BUT no need to accept the $18 FOB asked by the buyer, as long as you can justify your price, and demonstrate your flexibility and willingness to come to an agreement with the buyer. Suggest the buyer to change the sizes, part of the specifications (ex: no piping), part of the material (ex: cotton lining instead of silk). Payment terms •  Request to split the purchase order. You will be able thus to revolve the fund (avoid cash flow issue) and limit the risk. •  Then you can request for a working capital and charge the interest on the buyer.

Case 1 : Answers

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EXERCICE: DEALING WITH BUYERS

Case 2 (real situation): A small new retailer plans to open a shop in 6 months onwards. She wants to place a first testing order of 20 different cushion covers. She doesn’t have any technical background in weaving nor dyeing. However, she is supported by a significant NGO in Holland and has a strong financial support. The challenges: •  Production time: 2 weeks; •  Bargaining on prices: initial offered price by the seller is $25 FOB, but the buyer asks for $18 FOB; •  Payment terms: payment after the delivery, by bank transfer. The trainer will act as the buyer, and will choose the seller among the participants.

Case 2 (inspired from a real situation): Context

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Example : Cushion from World of Love

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EXERCICE: DEALING WITH BUYERS

How to handle this situation? Production lead time:

There are some technical constraints given the weaving and dyeing processes. Therefore, it is impossible to produce such a different variety of cushion covers within 2 weeks.

a.  Suggest her to select from the available stock. b.  Provide her with a color swatch. She will be thus able to place a proper order in

addition to this first selection from your stock. Bargaining on the price a. Do not lower the price down because this order is very small. Payment terms a.  Quote Ex-works. b.  Request for a full payment before delivery. No need for the buyer or/and

yourself to bear the bank charges for a small amount. c.  Ship under the buyers’ courier account (DHL, TNT…). d.  Be flexible on the payment terms, as the buyer can become a significant buyer

in the long term (do not forget that she is supported by a NGO).

Case 2 : Answers

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DEALING WITH CLAIMS & RISKS (1)

In some cases, you and your customers may fail to meet specific contract obligations leading to losses for one of the parties.

What to do?

1.  Try to settle the problem in a friendly way.

If you fail to meet your commitment, then offer your client: –  A discount of …% on the order –  Collecting the products back and reproduce them properly, as your own expenses ⇒  Never leave your client without an answer/a solution ⇒  You have to demonstrate that you are doing your best in order to solve the

issue Example –  A Tunisian exporter shipped 1000 scarves in ivory instead of white. The client

rejected the scarves mentioning they were not compliant with the approved prototypes.

–  The exporter accepted to reproduce the proper scarves, and suggested to the client to keep the wrong scarves at 50% of their FOB prices.

⇒  At the end, the exporter didn’t lose money 2.  If the problem cannot be solved, arbitration should be considered.

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DEALING WITH CLAIMS & RISKS (2)

The risk of non-payment

•  Facing these risks, it is strongly advised for handicraft exporters to (i) to evaluate the degree of risk with which they are being confronted, and (ii) choose appropriate cover means which can be:

–  Payment anticipated for the goods by the importer before delivery;

–  Stand-by letter of credit; –  Credit insurance which enables the exporter to insure himself

against the risk of non-payment ;

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ü  Have staff with good English skills.

ü  In general, clients may expect to get a reply to their e-mail questions within 24 hours.

ü  To keep your customers you should provide them a perfect service.

ü  In case you encounter any problems, inform your customer about them early.

Some basic rules for customer communication

CUSTOMER RELATIONSHIP MANAGEMENT (1): TIPS

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Some basic rules for a good follow-up on buyers‘ requests and keep contact with them

ü  Buyers follow a specific timeframe to source for new products and

meet suppliers •  In general their collection plan is twice a year : Fall/Winter &

Spring/Summer • But they source at least a year ahead

–  Example : April/May N: sourcing for S/S N+1 –  Thus, you need to have some new designs ready a year ahead

available –  Usually, meetings with new suppliers, new products, new materials

are held during April to June

ü  The international trade fair calendar gives you an indication •  Your products and sale kit should be ready a month beforehand •  You should contact the buyers at least 2 to 1 month(s) before the trade fair

CUSTOMER RELATIONSHIP MANAGEMENT (2) : TIPS

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ü  Keep samples of the product you want to sell ü  Product sheet / specifications ü  Fabric and color swatch ü  Terms of payment

CONCLUSION ORDER HANDLING : What do you need? / Checklist

Objective: Make sure that you will be able to reproduce exactly what you sell to the client

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Make sure you have all the information to fulfill the order according to the request of your client. ü  Product name, product code ü  Dimensions and thickness ü  Colors / color combinations – using the Pantone color swatch if possible to

avoid mistake ü  Type of dyeing Make sure you can delivery on time ü  Check the availability of the material ü  Check your production plan

ORDER HANDLING – What do you need to check?

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ORDER HANDLING – Checklist : Prototype

The importance of keeping prototypes

1. Prototypes are the first trials, from the specifications of the buyer, to production.

2. Final prototypes are made with right fabrics, dimensions, shapes and motives

3. For garments and accessories paper patterns are made

4. Each prototype product specification is recorded into a “Product Specification Sheet”

5. 3 to 4 examples of each final prototype should be made: 1 as a basis for reproduction (store in a dark and airy place), 1 to display, and 1-2 to give buyers as samples

6. For garments, but also bags and accessories, it is important to make patterns so as to maintain the right shapes and dimensions

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For export market, you must organize your production so that it becomes more efficient. To do so, you must follow the blue print:

ü  Product code (initial of the collection, date of production…) ü  Producer name ü  Material used ü  Sizes ü  A drawing of the product/picture ü  If necessary, give production process information ü  Colors and codes ü  Anything else that will allow you to reproduce the item with a minimum

mistakes

Always keep and storage the prototypes so to have a visual support when reproducing them (even more important for your producers who are reluctant to specification sheet).

ORDER HANDLING – Checklist : Product Sheet

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EXAMPLE OF PRODUCT SHEET

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IDENTIFICATION OF THE RIGHT BUYERS - APPENDIX

MODULE : CUSTOMER RELATIONSHIP AND ORDER HANDLING

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BUILD UP YOUR MARKET ENTRY STRATEGY: The impact on your price

Cost components Cost (US$) /Mark-up (%)

Price (US$)

1 Factory price or producer costs of making the products (labor, materials, packing, overhead...)

1.0 1.0

2 Profit of the producer 20% 0.2 Producer’s price/Ex-works (1+2+3) 1.2

3 Inland transportation incl. loading and unloading 0.3 1.5 4 Customs declaration/export clearance, export agent fees 0.1 1.6 5 Port receiving charge 0.1 1.7

FOB port 1.7

6 Ocean freight & Insurance 0.2 1.9 CIF Destination port 1.9

7 Charge in destination port (DDC-destination delivery charge, AMS-Advance Manifest System...)

0.1 2.0

Landed price to importer 2.0

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BUILD UP YOUR MARKET ENTRY STRATEGY: The impact on your price

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Landed price to importer 2.0

1 Import duty (10% of landed price) 0.2

2 Price upon arrival at the port 2.2

3 Wholesaler mark up (warehousing, distribution, marketing, profit) 80%

4 Wholesale price 4.0

5 Retail mark up (store, personnel, advertising, profit etc.) 100%

Final consumer price 8.0