These trade tips will not only protect you from making unnecessary mistakes, but it will also position you to capitalise on the trade opportunities available to you. Success lies in focusing on the detail, however small it may seem.
Like Vincent van Gogh, the famous painter once said, “Great things are done by a series of small things brought together.”
Tip 1: Manage your Investment
At first, entering the world of trade might seem terrifying, especially after you’ve calculated the final amount necessary to set up shop. More often than not, importing is cash intensive.
High transport costs as well as VAT and duty charges all tally up to a pretty penny. However, there are ways to manage your investment and lower costs significantly.
As a general rule, the more units you import at the same time, the lower the cost per item will be. Some people think that one calculation can be used for all import products, even if they are the same.
Don’t be fooled. Import costs fluctuate according to changes in your input information (quantities, unit costs, shipping dimensions, etc.) For this reason, if managed well, changes in your inputs can significantly lower your costs.
The mode of transport also influences the overall costs of imports – for example sea is typically less expensive than air. These are all factors to take into consideration when managing your trade investment
Tip 2: Protect Your Payment
Cash is King, and therefore your money needs to be protected. Not everyone can be trusted, especially when large amounts of money are involved.
A lot of first-time importers blindly trust a potential seller, without establishing a good, trusting relationship with him/her. You want to be certain that you will receive your order when a payment is made. For this reason, you need to know who you are partnering with.
You also don’t want your money to get in the hands of strangers. Aim to never wire money directly into a seller’s account if have not built up a trusting relationship with him/her. Rather choose a more secure payment option.
A number of the established business to business trading portals offer an escrow service which you can make use of. For the large payments a letter of credit or documentary bank collection may be considered.
See more on how to protect foreign payments here: http://tradelogistics.co.za/making-safe-foreign-payments/
Tip 3: Keep the exchange rate in mind
These days, a lot of noise is being made about the volatility of exchange rates, especially the Rand. The changes in the exchange rate have a direct effect on imports and exports, whether positive or negative.
The good news is there are ways to manage to risk. Be trade savvy in times of a falling rand and implement the following things to minimise your exposure:
- Transfer the currency risk to the supplier by asking them to quote in South African Rand. Exporters can quote prices in a stable foreign currency.
- Purchase forward cover to protect yourself from currency fluctuations.
- Off-set the risk of the loss of profit made on imported goods by including locally manufactured goods in your product line. Locally manufactured goods may also be exported for additional revenue.
- Add an exchange rate risk to your margins and carry the risk yourself.
Tip 4: Plan Products for Exports
If you have never considered exporting now may be the ideal time to do so. The weak Rand creates a lot of opportunities for exporters. More profit can be made from a sale.
Due-diligence, however, is the key to success. A lot of research needs to go into the type of product you would like to export. Here are a few factors to consider:
- Labelling Requirements
- Country Conditions or preferences
See more information on how to venture into the world of exporting here:
The world of trade is full of opportunities to not only make money, but to also broaden one’s horizons.
If you want to pursue your dream and take hold of what imports and exports have to offer, it might be a good idea to start in 2016.