Friday, 19 December 2014

Buy Your Way to Profits

Business is all about profits. Commerce is largely about Buying and selling. While we at BA focus a lot on selling, we just thought to put a couple of articles on Buying and Negotiating while buying. This is the first part and will deal with Buying and some ideas that would benefit the dealers, retailers as well as distributors entering into buying for ceramic goods.
In Ceramic Industry, buying is a long term association of the buyer and the seller. It is a continuous activity and needs real good care while finalising the supplier. Moreover, being a continuous process, it needs the buyers to build a positive relation with the suppliers and largely manufacturers in our case. So let us look at some points to be watched onto.
Choose the Brand Wisely
Ceramic Industry in the past few years has changed drastically and has attained proportions of global scale. It is not just small SSIs manufacturing products and selling to whoever comes along to buy. It has matured into an important industry for the building and construction sector.
The manufacturers have all made efforts to build brands. However, all the brands do not have the same value. The brands value as perceived by the buyer is most important. A valuable brand at a meagre extra cost actually turns out to be a better business deal than a low value brand without much brand recognition or respect. While the former builds your own brand as a local supplier, the latter puts you in the category of Bulk Dealer for the masses, and impression, you want to avoid.
A brands value is not just built on advertising. At no stretch we mean to say Advertising is not necessary. But brand value is built on product trust, quality, designs, the way it is put into the market and the delivery propositions.
Let us say a tiles manufacturer, Mr. A, has a good logo, slogan and products range. He has a string advertising strategy to promote all three. He makes an effort to pack tiles well and also puts laying instruction and helpline on the packaging. He also ensures that all this information is on his web site as well. He has put an easy to understand FAQ section in the web site as well as the package. He has a system in place to permit easy questioning and answering.

Further, the same manufacturer has also taken the pain to promote laying and products care to Architects, Interior designers as well as labourers laying the tiles. All these processes are Post Production. However, all these add to customer value directly or through supply chain.
Both ways, the tile manufacturer is taking the pain to develop the brand trust.
There is his competitor, Mr. B, with the same manufacturing facility and capacity. However, his post production includes packing and delivering the goods to the dealer. There is no after sales support as such.
Which Manufacturer would you work with? No marks for guessing, it is obviously Mr. A. (If it is Mr. B, you are really disillusioned)
When you as a buyer select a good ceramic brand from the market survey alone, 25% of your work is done. Do remember, there are a lot of companies in Morbi who have had strong management and vision to carry out all these after sales activities. Morbi is a town of entrepreneurs and they believe in giving and taking good quality service.
So the Next Step…..
Observe the Un-presented
We are sure you will plan a visit to the ceramic company and meet the founders or the sales team before finalising. This is a very important part of the deal. YOU as a buyer must know the people behind the show. As we know, most of the entrepreneurs in Morbi have come up out of sheer guts and largely their own fundamentals of management and behavioural values. Not all will match your attitudes and approach to business. It is very vital to meet the founders.
The Entrepreneurs of Morbi have lately started employing smart kids to present the products, brand and the production facilities to you. Largely, they will try to strike a deal and tie up with you. It is a good business practice, but with a loop hole. You do not get to see the real brains behind the show. You do not feel the real principles. You will never gauge the philosophy of the company.
Do not strike the deal. Make it imperative, without asking, to meet the founders. This gives you an insight into values system and ethics and morals the company will hold. Remember, culture flows downwards. This also gives you a chance to increase your credit limits, stock allocation, and other supply conditions that you can negotiate to your advantage. However, the key is to see the un-presented and observe what your pros and cons are, in relation to the prospective supplier.
Another aspect is observing a few things promised like laboratory, testing equipment, raw material stores, finished goods storage. Labourers and supervision system. If a company boasts of ISO or other certification, you can check whether they actually follow quality management system, or they just highlight the certificate.
Kindly note, none of these will be told to you. You have to silently observe and make mental notes. These are indication of the credibility of the ceramic manufacturer.
For tiles you can also see whether the company has latest technology or they are just working on old equipment. Are their workers working with a strong system or are they highly un organised. Do they have a dress code, which implies good discipline? Do the worker smoke within the shop floor or not, another sign of discipline.
For sanitary ware, the main thing to observe is the moulds and the pressure casting systems that they have. This gives you an idea of the real capacity of the company. Do they own their moulds or they buy out cast parts? Do they have simple manual casting or they have pressure casting? Do they have dust free zones in Glazing or it is just written on their web page? All this and more will give you an idea of the company’s standing. These aspects will also be helpful at the time of negotiation.
Once you have checked the above two, it is best to finalise at least Two to Three brands depending on your strategic decisions. Kindly note, always visit the founders before finalisation. They should be a part of the final deal and financials. It makes your later working smooth and easy.
Ask for Non Financial benefits
Ceramic brands are all very brand savvy and understand the importance of advertising, promotions and dealer support. Always demand what support they will give on all the three aspects.
A consistent meeting with influencers like architects and interior designers. National and local advertising. Attractive promotions to retailers. Local Trade show representation. Banner and hoardings at key spots and retailer point of purchase. Some fringes like foreign trips and other benefits which are too long to express here all add to your business value.
A Smart buyer would largely focus on benefits that increase sales and improve foot falls and demand at their door step. Every thing else though attractive, should be put on second priority.
Markets Are Dynamic : be alert
Ceramic goods’ markets are dynamic. The price variations are quiet hectic. The past few years have witnessed too many spikes and troughs in the pricing. Always be alert and take a weekly stock of things in the market.
Over supply conditions always present great opportunities for buying at very competitive prices. Also keep an eye on impending price rises in inputs, which can take prcins higher. It is best to book some quantities in advance to when such an event is anticipated.
Look for stocks all along the highway. Be in touch with transporters, they always know the peaks and the troughs. Find indicators of seasonal nature. Like in monsoon sanitary ware and roof tiles sectors witness very low production, while summers have high through puts. Make the most of these seasonal variations.
Why are we enlisting this after finalising the Buyer?
These indicators help you to keep your rates floating and hence take maximum advantage of the situation in your decided brands.
Further, working with more brands also gives you a good flexibility to negotiate at every stage.
The article will be continued in later issues. Do read on…

Happy Buying!

1 comment:

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