Sector Specific Business Advice

[BonaFide]

Where can one find resources specific to a certain market sector?

I am looking at expanding my business interests outside of our current scope of business.

To be more specific, we are looking at bringing in a clothing and apparel related product (sole rights for the brand), but before we do, I need to ascertain how the market segment works specifically in relation when having to deal with the retail stores and where I can find the resources to ascertain how distribution through this channel works.

[Yvonne]

Not easy to find specific industry information, especially "tips" on the insider stuff that can sink a new venture.

As someone who has been directly involved in quite a few ventures which failed (although we never ever went bankrupt!), including having a sole agency to import a world recognized brand of sporting goods!

No matter how well thought out your plan is, or how many negatives you considered, there will almost always be an aspect which you did not consider.
(Trust me!) I have all those T-shirts - Been There! - Done That! - and thought I could succeed by doing it differently!
Almost like a challenge hmmmm!

In almost everything I have been involved in during my life, and listening to friends in business as well, there are always factors one would never consider which have a major influence. We never realise the constraints of a particular industry until we experience them ourselves. Sometimes that experience comes at a higher cost than we thought possible.

Personally I would consider it money very well spent to do all I could to find someone who had a business importing clothing and apparel, who had been successful for a number of years and then either sold or "closed" the business.
Pay that person a consulting fee, for all the insider information and factors that affected his business. In fact - employ him as your adviser on a commission!!!!!

Please make sure you note that this is not legal or financial advice -
just friendly "signposts!"

Be realistic, which is really hard to be when desire for the venture will control your thinking (Much as someone newly in love completely overlooks ALL the warning signs!!!) it is as "emotional" as that. Honestly!

For example if I say - getting your International suppliers payments through the banking system can almost loose you your supplier - don't just brush that off with the mental thought that you will not have this problem. Story way too long to list here.

You don't say what line of business you are presently in or what experience you have to date, so perhaps this advice is unnecessary!

I have heard that the Department of Trade are "super" helpful, so perhaps they can provide you with information which might lead you in the right direction for industry specific information you may be seeking.

Please do not take this as a "negative" - strangely enough I feel the more constraints that you have to overcome the less likely you are to have too many competitors! or any that stick around anyway!

Wish you success

Yvonne

[BonaFide]

Yvonne

Thank you for your reply. It most certainly is not easy find industry specific information in the least. We have been bandying this idea around for the last year and to date have been unsuccesful in finding the right resources that will allow us insight into the way this segment of the market works and being a rather cautious fellow (brought on by past failures and non-starts), I feel the need to ensure that I do the proper due diligence before running off into the great wide yonder.

Having said that, as with most new ventures there is always an elemnet of risk one knowingly takes, but I do believe that one has to perform proper research before embarking on a new venture. Hence my post.

If you do not mind my picking your brain, given your foray into a similar line and it unfortunately not paying off (please correct me if I am wrong on this point), what were the stumbling blocks that led to the venture failing?

Your point in finding a reputable consultant is a very valid and valuable one, but it is finding these people that poses the problem.

At this point I am very realistic, and generally do not let emotional attributes of the human personality lead my decision making. Being pragmatic, emotions are the very last aspect of my personality that I let take precedence over my decisions.

I currently have a small IT business that I am growing, am involved in a Directors position of a non-profit oragnization, but derive my main income from being a Facilities, IT and Project Manager for a multi-national Formwork company.

I must be honest that I have found the DTI to be most unhelpful, but it is possible that I am not speaking to the right people there.

Would you mind expanding slightly on your statement in regards suppliers payments through the banking system? I am sure I have enough time to listen to your story

Kind Regards

Craig

[Dave A]

I don't know if this is still the case, but standard terms for the rag trade used to be 6 months. That's a bundle of working capital if you're having to pay FOB on imports.

It was because of the seasonal nature of clothing, but in this day of cheap Chinese imports, chain stores and JIT stock management it might have changed. I really don't know what the current situation is.

[BonaFide]

I don't know if this is still the case, but standard terms for the rag trade used to be 6 months. That's a bundle of working capital if you're having to pay FOB on imports.

It was because of the seasonal nature of clothing, but in this day of cheap Chinese imports, chain stores and JIT stock management it might have changed. I really don't know what the current situation is.

We won't actually be bringing in clothing, but will be bringing in an accessory which will be a seasonal item to an extent, but of late has more to do with fashion. FOB?

[3x-a-d3-u5]

Have you looked at getting an import agent to quote import costs? They can help with most of the majors and give you a fairly accurate pricing structure. They usually charge a percentage of the total order for the initial order but there after you should be able to manage it yourself PM if you need an agent. (No not me :O just a contact )

Also, some distribution channels are managed by one 'delivery' company. These would be your best bet to market clothing quickly.

(Please note views are entirely my own and I cannot be held responsible for actions taken by yourself. )

[BonaFide]

Have you looked at getting an import agent to quote import costs? They can help with most of the majors and give you a fairly accurate pricing structure. They usually charge a percentage of the total order for the initial order but there after you should be able to manage it yourself PM if you need an agent. (No not me :O just a contact )

Also, some distribution channels are managed by one 'delivery' company. These would be your best bet to market clothing quickly.

(Please note views are entirely my own and I cannot be held responsible for actions taken by yourself. )

We havent as yet, but I did do my own investigations into the import duties and costs, but I do believe that in the interests of having all my bases covered, I should contact an agent to be sure. Would really appreciate the contact

Interesting. Do you have any idea of how I can get in touch with this single channel entity?

[Yvonne]

Craig,

Our present company is an International Franchise, we have MAJOR problems paying our international accounts, especially invoices for International Insurance, royalties and support costs.
We had to apply (only your bank can apply on your behalf!) for a permit which went to SARS, Deptartment of Trade & Industries, and Foreign Exchange.
This "permit" carried a cost of approx R800? - to date (Two and a half years later!) we have not received the permit.
All of our taxes have always been completely up to date, Workmens Comp - up to date - we had to provide our certificates of good standing.
We have operated a "Squeaky clean" business for over 13 years!
Our company has never operated on an overdraft, and we (touch wood!) do not have any issue whatsoever which could have influenced not receiving the permit to transfer the funds - at that time an acculated total of R300,000!
We do not transmit large sums of finance overseas, in fact we used to bring in a fair amount of funds into South Africa for services we had provided Internationally.
The amount due has increased substantially due to exchange rate fluctuation, all the while this money was sitting in our bank account with no interest!

As the bank had advised that they could not keep us "notified" and the funds could be transferred at any time that the permit was granted.
We should have bought forward, but who would have thought that such a ridiculious situation could occur!

We did everything we possible could to appeal for assistance from every avenue we could think of!
Even employed a full time accountant - because I thought my inexperience and incompetence may have something to do with it!
Auditor tried to assist.
Ex banking expert tried to assist us.
Eventually we got some feedback, weeks and hours of telephone calls! -
We were required by the Govt (Can't remember the specific department!) to have the franchise agreement (10 years old!) rewritten as they refused to permit the wording minimum franchise, or 2% of turnover, whichever was the highest! the payment being for support or royalty payment can't remember the wording they finally insisted on.)
The words Minimum payment had to be removed from the contract.
What international company is going to do business with South Africa without having their minimum costs covered?
Insane!
We did as they asked paying courier costs for documentation to go back and forth from The Netherlands!, submitted everything they asked for, including a letter from our auditor confirming our business operations!
Training School, Consultation and Packing Company, this was due to all international bills being for services rather than physical goods which had an evidence trial of importing!

Eventually we just "gave" up!
We had no choice but to cancel the application to ensure at any given moment the bank would not just debit our account.

If our long standing relationship with our associates was not based on trust we would have been out of business!
Would you believe someone who owed you money when they said they had problems with their government and could not transfer the payment????

Presently we are in the U.S.A. moving the majority of our business interests here, as to be totally honest we just don't have the will to keep trying to "work within the system"!

So that is the banking problem.

If you are only paying international accounts solely for goods, perhaps not going to present a problem for you!

The import venture which failed - due to unconsidered problems probably will not apply to your venture either - Just a comment that very often there is something you dont consider at the start up!
We started an Importing Agency for sporting goods.
We managed to obtain an agency for the Converse Brand of Sporting Goods, and a few other - top name brands.
We had a wonderful, perfect partner and thought we had covered all bases.
We had a "hot" product - we thought!, sufficient funding.
Our partner would be our main client! 50% of our goods were guaranteed "sold!"
Complete control and running of the business!
We genuinely thought we had found our "Eureka" business!

Delays from date of payment to actually having the goods available for distribution can be three months! My husband was in the Shipping C & F Industry!, so believe me we got our goods as fast as humanly possible!

Often a good prospective client would only order the goods if they were on consignment!!! let alone 30 - 60 days.
Our capital had already been tied up for approx 60 - 90 days by the time we delivered the goods - let alone the shelf time whilst we sold the product!
Advertising costs, and attendance at international sporting show were substantial.

Our failure was partly due to the large corporate company's deciding that they would decide our selling price!, and I promise you I am not exagerating!

A genuine "@#!$#$" from one of the largest retail chains actually had the audacity to tell us that they wanted our cost price less 5%.
My husband who is an excellent sales person, naturally just stood up and wished the youngster well! Assuming he would not last long in that position, and he would be the exception! we were wrong!
There was a similar attitude from all the large retail companies, most even told us that if they felt they had sufficient market for the product they themselves would import it directly!

We had the right contacts - our "silent" partner had branches accross South Africa, (This was prior to the large retails companies carrying sporting branded goods!), all our "guaranteed" sales were in all the major shopping centers, and we thought this was an advantage!
Not so!
Sporting Goods shops in all the centres refused to purchase the same brand, if another tenant in the center had the product for sale!
How things have changed! Hmmmmm! Today they "have" to have the brand names to have any credibility!

So there is very definitely a right time and place, and the "first with the in! don't always win!
At the time it took over 6 - 9 months to turn our capital around! We thought we had sufficient capital, but underestimated the length of time it would take to recover our capital.
Import costs at that time, about 10 years ago! Were 25% of the value of the actual purchase cost.
We did quite a bit of investigation into that and it was pretty standard at the time, but as customs and duties have changed a lot, you need to verify today's total import cost.

Today South Africa pays a premium cost for shipping due to "inefficiency" in our ports,
so I would be interested if this adds a higher cost to the cost of the goods today?
Also, Customs are much more vigilant today in stopping containers for inspection, this can lead to delays and additional costs which you can do "nothing" about! So if you do try this venture, make very sure you have thoroughly investigated all customs issues.

We eventually closed the business and our partner ended up having to purchase most of the stock, it was just not viable.

Realistically our lesson was that we ran the business without any drawings, and provided a interest free loan, and about 18 months supplies of goods to our partners retail chain, naturally he purchased goods at a favourable markup.
Once we needed funds for replacement stock, our partner felt he should not have to pay for "his" goods - as after all it was his own investment!
You cannot blame him for working it out that way.
His investment - 50% of the cost of the goods, plus the markup added, so that was "profit" and could wait for payment?
Our capital was tied up in the unsold stock, or waiting for payment!

We genuinely thought we had covered every potential problem - we never thought that possibly we were too ahead of the time (Branding value!), and never thought of the interest free loan aspect, as our partner had invested as much as we had!
We did not lose our capital, but got it back very slowly, so it was difficult to rebuild that capital for another business!
Thinking about it from my perspective of today, perhaps it was our own fault, as I think we tried to be way too cautious.
Had we had sufficient capital and time on our side to wait for the "Branding virus" of the time, we could have been successful.
Our ex partner is a very succesful business person, and we were very fortunate that we had such a good partner as there were a number of "Tricks" he could have pulled, he had the leverage to have got all remaining stock at a "Bankrupcy" price - which he did not do!

Apologies - Told you these were very long stories!

Yvonne

[Dave A]

FOB = Free on board

[BonaFide]

FOB = Free on board

Thanks Dave. I have already brought in stock for marketing to distributors purposes. We worked on the basis of FOB Destination, Freight Prepaid and Add.

The seller assumed the risk for lost in transit or damaged goods.