Advantages of working through Buying Houses
1 Cost saving
The exporters save the costs on account of following
a) Cost of correspondences which is at times aimless and wrongly directed
b) Courier charges for sending samples
c) Cost of overseas trips
d) Cost of participation in trade fairs abroad
e) Cost of manufacturing irrelevant samples, at times in absence of proper guidelines from importers and also for the importers who may not be serious ones as expected on the basis of exchange of correspondence.
2 Time saving
(a) Substantial time of the exporters is wasted in probing the market & locating the buyers, who may not be as useful as thought to be.
(b) Even after locating genuine buyers, the process of sampling & the time consumed in it is at times frustrating and the whole process is futile if the buyer does not approve the same for any petty reason resulting in loss of business deal. This situation is totally avoided while working through the buying house as the merchandisers are in regular touch with the exporter and any alteration is made during the manufacturing process.
(c) Many times, the importers want to see random pieces from the production lots and if the deal is not through a buying house, the pieces are sent to the importers for confirmation, which is time consuming.
3 Reducing business risks
(a) Risk on account of quality. This is absolutely ruled out as the buying house representative keeps regular control on the quality during the production process. Also, since the goods have to undergo pre-shipment quality inspection also, the exporters are safe as no bad quality claims etc. can be raised when the goods reach the destination.
(b) Financial Risk : Most of the deals through the buying houses are on letter of credit and with no hidden clause attached. The only common clause is the inspection certificate of the authorised representative of the buying house, which the exporters obtain after the goods have passed the quality control inspection. On the country, in case of L\C opened by the importers for direct orders from overseas with post arrival inspection clause is usually risky and the exports get trapped by unscrupulous people.