The overall order situation has improved in recent weeks, and exporters are expecting more orders in the coming days. But still, there are many challenges regarding having enough orders. At the same time, exporters, especially small and medium-level, are very careful to add new buyers, as trust factor is an issue. In such a scenario, buying houses and buying agents play a crucial role, as they are an important key between exporters and buyers. Though working through buying houses and buying agents was not a priority for many exporters, the scenario has changed to fetch orders in recent months; now comparatively, more exporters are keen to work through them.
One of the leading export houses based in Noida which had reasonable orders has also added three new buying houses with itself. One of the senior officials of the company told that it is good to work on their condition rather than keeping the sewing machines idle. Amit Agarwal, Genus Apparels, Faridabad, said, “Yes, we need orders, and we are working with buying agents and buying houses.”
Various such apparel exporters shared with Apparel Resources that though they earlier preferred to work directly with overseas buyers, now they have changed their strategy and are working with not only buying offices but also with buying agents. One of the main reasons for the same is also that various buying agents and buying houses have such wholesalers and importers with them who are comparatively less or not associated directly with exporters.
Stakeholders of the industry accepted that payment terms are being more cautiously reviewed, as earlier open terms were acceptable to most vendors. Now sight LC/advance payment is safer and many buyers are also helping with part payment as advance to give a sense of security to vendors.
Lokesh Parashar, President, Federation of Buying Agents (FBA), shares that most buying houses and buying agents report about incremental business to deal with; the problem being faced by most buying agents is not about the opportunities of business. “We are facing hardship of not having factories that can scale up and are ready to deliver on shorter lead times. Quite a few buyers depleted and consumed their inventories. We are looking for fast turnaround and need stable factories to link up with. There is a shortage of such factories owing to a variety of reasons and that is becoming a major hurdle. Many buying agents are looking beyond their existing sources for factories which are ready to deliver and move fast. So, for us in general, it has been a positive influx of business and opportunities to grow and multiply upon,” he adds.
A top industry professional (she requested not to disclose her identity) who has worked with many top brands and is currently serving a well-known buying house also informs, “As for buying offices, any exporter working with a buying office always looks at what value he is getting in return for the commission to the agent which gets added in the price quoted by him. Since the commission is an additional factor, naturally exporter is not giving it out of his pocket and it is left to the buying offices to strategise costings to customer in such a way that despite the marginal price increase due to commission, the buyer is still able to accept the price and place the order.”
She further adds, “In return for the commission, the exporter gets the value of service and as long as that value remains intact, a vendor will always be more comfortable to have a buying agent as a valuable partner for handling and growing business across the buyer matrix of the given buying agent.”
Buying agencies and buying agents feel that many exporters are currently ‘hungry’ for orders, so they are ready to work with them as they know them, trust them and can easily coordinate with them. For them, what is important is just having orders. Few exporters who never worked with buying agents have approached them now again and are asking for business. They are forced to do this for survival, as there is no change in their mindset about working with buying houses and buying agents.
“With the recent development in the backdrop of COVID-19, buyers now think there is a need to diversify the risk of directly working with factories and which may sometimes put the goods in jeopardy. Also, they want to protect their relations with manufacturers to avoid any problem in the supply chain. Due to these aspects, doing business through buying houses may be stronger as they provide consolidation, multiple resources and counter duplication and add a layer between factory and buyer to avoid any closed road of discussion. Buying houses are now treated like virtual manufacturing units and are challenged with the lowest targets the buyer is getting or as per the buyer’s calculation. If the buying house and its partner factories collectively meet the target, then only they win orders. Nowadays, margins for buying houses come from fixing the inbound supply chain, investing in bulk buying of raw material, negotiation tactics, and a share of marketing cost from workshops to achieve sharp targets,” says, Naveen Jha, Co-founder, Director, Best Sourcing.
On the other hand, it is also important to mention that serving a client directly requires strong infrastructure which many exporters lack; hence, buying offices which give service and value are here to stay. It all depends on the terms and conditions of orders of buying agents and buying houses as well as the order situation from direct buyers. Exporters are also of the opinion that they neither enjoy much working with the buying agents and buying houses, nor they have any such dedicated policy that they will not work with them.
R Sabhari Girish, CEO, Polycycle, Tirupur, has a close eye on all such developments. He shares that exporters have felt that having someone in-between the retailer will be additional support as they take the problems to the brands on their behalf, besides someone is there on their side to vouch for them. “Here is where the buying houses should step out of their comfort zone and start complementing the exporters with their expertise, that might be technical know-how on improving productivity or sourcing better raw materials at a better cost, linking them with the underwriters who would fund the exporters well before the brands pay them and also these underwriters can help them with the forecast on the financial stability of the brands.”
He strongly feels that the exporters might not be thinking pennywise and pound-foolish, as the commission or service charge that they pay the buying houses is near to nothing compared to the loss they might end up with if anything goes wrong for no fault of theirs. The dependency on the buying houses would increase in the following years.
No doubt working directly is preferably a good option for exporters and the majority are working through the same. But at the same time, one can’t deny the importance of buying agents and buying houses. So, it is in the favour of all stakeholders that they work in a way which can lead to a win-win situation for everyone.