Hello, this is Iino.
In this video, I would like to talk about various types of trade transactions.
I am often involved in various types of trade logistics in my daily work, such as explaining here.
In addition, I have experienced several trade transactions as a trading company in the past, so I would like to explain about them as well.
So let’s get started.
The first thing I would like to introduce is “Direct Trade.”
Direct trade refers to direct transactions between distributors, retailers, and manufacturers on both sides of exporting and importing countries.
It means that there is no middleman, such as trading company, in the transaction, when you negotiate the price and conditions with the company in the producing country.
Since there are no intermediate margins, it’s the best! You may think so. However it is risky for a person or company with no trading experience of Direct Trade.
As I explained in another video, there is a high possibility of mistakes due to language and business practices differences.
Also, there are risks for payment and shipment goods, therefore you should be careful.
D2C – Direct to Consumers
By the way, one of the most getting attention business models these days is called D2C.
D2C stands for Direct to Consumer. It is a way to deliver products that you have planned directly to consumers without using trading companies or advertising agencies.
I am currently assisting a D2C company that transports mangoes from Thailand to Japan, and provides mango juice at actual stores around Japan.
I help them deal with the mango processing factory in Thailand, and transport the mangoes internationally to Japan.
That’s why the consumers can drink very fresh mango juice at an overwhelmingly reasonable price, while they are in Japan.
For more information on this mango juice shop, please click on the link in the comment section, and take a look if you are interested.
Next, let me introduce you to “Indirect Trade.” Indirect trade is a method of doing business using an intermediary such as a trading company.
Trading companies have networks in many countries and are familiar with trade transactions, of course, the cost increased due to using of a trading company, but there is also the advantage of having a trade expert in the middle.
The advantages of indirect trade are as follows.
・Knowledgeable about foreign business practices and trade systems.
・Having Language skills for negotiations.
・Price advantage for small transactions.
・Ability to purchase in small lots.
・They can adjust the delivery date and product quality.
・They can also control logistics well.
Using a trading company that is familiar with trade lowers the risk. And also, it allows you to deal with small lots, which is a significant advantage depending on the conditions.
I think it is important to make good use of trading companies while considering carefully these advantages and what you can do on you own.
Next is a “Parallel Import.”
Even though the company already has a distributorship agreement in the countries, we will be able to deal with this brand product as long as the brand’s fame, trust, and trademark are not damaged.
The important thing in this parallel importation is that the goods are genuine and not imitations (copies).
I had an experience of parallel importing about 15 years ago.
I used to buy American and Canadian brands directly and sell them on the Internet, even though there was an authorized distributor in Japan.
The advantage of parallel importing is that the brand is already well known and easy to sell.
When doing parallel importing, you have to be careful about handling copy products.
Especially in the apparel industry, it is difficult to know whether the brand you are dealing with is genuine or fake. You may be required to prove that the product is not fake at customs.
If you don’t have the know-how in this regard, you may end up handling copy goods without knowing it, which may result in your products being stopped by customs and not clearing customs.
Then, there is “Intermediary Trade.”
Intermediary trade is a transaction in which a third country acts, as an intermediary between an overseas exporter and an importer.
It is also known as off-shore trade.
In the transaction itself, the intermediary purchases the product from the company in the producing country, and sells the product to the destination country.
However, the product itself is sent directly from the production countries to the destinations, so you can reduce the extra transportation costs.
In this type of intermediary trade, the format of the invoice, packing list, and B/L are a little more complicated.
I explained it in detail in another video, so please check there.
Trusted Processing Trade
There is another type of trade called “Trusted Processing Trade.”
In trusted processing trade, you provide raw materials and parts to a factory overseas, have them processed and assembled, and then import the finished products.
The reason for sending raw materials to another country for processing and assembly is to reduce labor costs.
In some cases, it is cheaper to process and assemble the product in another country, even if you have to pay high transportation costs.
In the case of trusted processing trade, the factory must be located in a bonded area. In the case of Thailand, the factory uses the BOI system or the import tax refund system to avoid import tariffs on raw materials.
If tariffs are imposed on raw materials, it will lead to higher costs. In this case, trusted processing trade will diminish the benefits of processing in other countries, so this is a point to be aware of.
And don’t forget about OEM imports.
OEM is importing products manufactured overseas based on their specifications, with slight changes to the appearance and with your brand or logo.
Many overseas manufacturers offer this type of OEM manufacturing.
For example, in China, the minimum lot is usually several hundred or several thousand. Still, in Thailand, some companies can handle even small lot sizes.
If you want to sell your brand of products, it is relatively easy to start.
Finally, there is “Development Importing”. There are two types of developmental imports.
One is the developmental imports of mining resources and agricultural and fishery resources.
Developed countries invest capital and technology in developing countries in mining resources, agricultural, and fishery resources. and then import them.
The other is developmental import as consignment production by distributors.
When you import foreign products, they may have different sizes, standards, design tastes, and preferences.
To sell the product well, you have to change the specifications and standards to fit the importing country.
The difference between OEM and development import is that, OEM uses the main specifications of the product from the foreign manufacturer, and changes only the logo and brand name, while development import is where the main specifications are devised.
The product is developed and imported as a different product.
Now let’s summarize today’s topic. There are various types of trade transactions.
Direct Trade, Indirect Trade, Parallel Import, Intermediary Trade, Trusted Processing Trade, OEM Import, Development Import. Each trade had its advantages and cautions.
As you study and become more familiar with the trade, you will understand which form of trade transaction style is right for your company and use the benefits of each trade transaction.
The current trend of D2C is a little more advanced, but it also has fewer rivals and higher profit potential.
Let’s continue to learn about trade and put it into practice. That’s all I have to say this time. Thank you very much!
Contact to IINO san