I once met a businessman who did not know english, but I was surprised to learn that he was a very successful trader with Germany as well as the UK. It took me sometime to realize the reason for his good business results. When I approached him regarding my intention to be a wholeseller in his leather products, he immediately said, "That can be arranged, and would you like to reserve some dates? You do not need to be exact. Just give me some tentative dates, and for those dates to be reserved just invest in the production, which will be factory price for any item you choose."

This type of arrangement was new to me, but I liked it, so I asked how much would the factory price be for an overcoat. Since it was to be a genuine leather coat, the price was $50. at the time. I agreed and paid. He gave me a receipt.

When the dates were near, he contacted me and asked me where to ship, and that I have to choose whether it is going to be just coats or any other leather work, to which I replied that for this time it will just be the coats, and only 50 coats to start. I gave the place where it was to be shiped.

When I asked him how much was I to pay, he said, "Good friend, not now. Only after you sell them, and that too will be minus the amount of just one coat which you already paid in advance."

Now you see, ladies and gentlemen, why most probably he was such a wonderful person to work with.

Trust is the requirement from both sides.

Good Business to one and all !

GentlemanSheridan.

Nice story.

But let's be realistic here - it is not just sellers that can be dishonest, buyers can be dishonest too. And it is not just dishonesty that puts an end to these types of 'generosity' it is late payments, short payments, non payments etc...

There are established manners of doing business that are proven to work. In the case of import and export from manufacturers in foreign countries there are almost no credit terms. It works and both sides make lots of money from it. Why rock the boat by paying 100% upfront for product, or expecting sellers to send you product without first receiving payment?

I am not trying to ruin your story here, but I think it is worth pointing out that this guy would stand to lose as much as he would gain over the course of time.

Quoting from [Egernia]:

In the case of import and export from manufacturers in foreign countries there are almost no credit terms. 

That's crap. Credit extended by manufacturers to importers is both a critical and huge element of international trade. You are obviously drawing only on your smallish trading experience and through learning in these Forums ... neither of which accurately reflects the real world of seriously large international trade. In one sense, the latter is an endless series of relationships between parties who trust and rely on each other, like for example several Chinese manufacturers who extend credit to my company for our mutual benefit.    

I didn't write that credit does not exist so please do not draw conclusions from my post that do not exist.

I wrote that credit offered by overrseas suppliers is almost non-existent which in the terms of this forum and the users here is correct. In 'credit' I am referring to 30, 60, or perhaps even 90 day payment terms like what they may get back home from local suppliers. Is it possible? Yes. Is it likely? No, not in my opinion. Even the biggest buyers are lucky to get credit from China suppliers. It would be misleading to suggest to users here that credit terms from manufacturers in Asia is a likely possibility. Sure if they can build up to that over time then good for them, but it should not be banked upon when starting out.

Credit is about trust? Really. I know of very few companies that offer credit purely on trust. Credit is generally offered for convenience and is generally only offered once the buyer has provided the seller with all of the financial information that can help almost guarantee the return of any monies 'borrowed' by way of the credit offered. It would be nice to think that the world could operate on a trust basis but as I wrote in my earlier post clearly not all buyers are as honest as we would like them to be.

So Aussie what do you think about the trading technique used by the individual described in the original post? I have suggested that in my opinion it is not a particularly valid technique on the whole - do you disagree? If so feel free to outline why. Discussion forums are for discussion of topics afterall!

PS: Reference to me and my experience has no relationship to this discussion and what you wrote is actually factually incorrect. Probably best to stick to what you know!

Nice discussion,nice thought.   Reality is different. First of all,International trade works mainly on cash payments though the instruments maybe different. Secondly, extending credit terms in todays world of commerce is like committing Hara-Kiri. Those who wish to live to enjoy their hard earned money should not conduct business on credit basis.

Quoting from [GentlemanSheridan]:

I once met a businessman who did not know english, but I was surprised to learn that he was a very successful trader with Germany as well as the UK. It took me sometime to realize the reason for his good business results. When I approached him regarding my intention to be a wholeseller in his leather products, he immediately said, "That can be arranged, and would you like to reserve some dates? You do not need to be exact. Just give me some tentative dates, and for those dates to be reserved just invest in the production, which will be factory price for any item you choose."


This type of arrangement was new to me, but I liked it, so I asked how much would the factory price be for an overcoat. Since it was to be a genuine leather coat, the price was $50. at the time. I agreed and paid. He gave me a receipt.


When the dates were near, he contacted me and asked me where to ship, and that I have to choose whether it is going to be just coats or any other leather work, to which I replied that for this time it will just be the coats, and only 50 coats to start. I gave the place where it was to be shiped.


When I asked him how much was I to pay, he said, "Good friend, not now. Only after you sell them, and that too will be minus the amount of just one coat which you already paid in advance."


Now you see, ladies and gentlemen, why most probably he was such a wonderful person to work with.


Trust is the requirement from both sides.


Good Business to one and all !

GentlemanSheridan.

you are lucky.

 

Gentleman Sheridan.

It was a truly inspiring story you provided. Me too luking for a leather jacket manufacturer for a very long time.

could you refer the name of that gentleman and will be greafull to you always,

Best Regards,

Shajahan Hussain

I have a saying "buyers are liars" and they are.I find they wont pay half the time, so i dont ship until full payment hasbeen received.

Quoting from [GentlemanSheridan]:

GentlemanSheridan.

    It is a nice story, and greeting to that gentleman! I think this kind of story can not accour in current business times, there is trust trouble between the buyer and seller, you can image, just by the word or the talking by the two persons who sitting beside the computer, dare you to believe him/her and remit some certain money for the goods? especially you donot see the goods(maybe you checked via the pictures).

   Business is based on the trust basis, and friendship is based on the long-term cooperation! Trust will be the top problem between the merchant and the supplier! hope it will be smooth in the coming future!

     And hope China will have more chance after the Olympic games!

 

Regards

Jason

Jason I think that you make a really good point here.

In the past buyers and sellers would have had more personal interaction at trade shows and factory visits etc. and therefore would have gotten the chance to know each other. These days a lot of business is done via the internet and it is not unusual for whole orders to be done without the two parties ever meeting. It would be a careless buyer or seller who would place trust in someone they have never met and either sent payment or product without first securing that transaction.

In the past I worked for a global procurement company whose customers included what we called second tier retailers, which for us meant the largest retailers in their respective countries but not necessarily with a global reach. So we are talking about some very big companies here. Every single one of those customers paid on a TT or LC basis i.e. not credit, but payment up front. Some of those customers had been dealing with our company for years but still did not receive credit. Our company did ourselves secure * after 7 days payments to some of our regular suppliers but on the whole probably upwards of 90% of our payments were made on LC at sight terms. Some of the orders were very large so we never did TT.

Interestingly in the small trading business that I now do in China some suppliers have sent production to me without first securing payment but that was never something that was agreed to so was not credit in the real sense of the word. It was simply a case of convenience on their part, but it surprised me nonetheless. I am fortunate to be able to spend my time out in factories meeting factory owners face to face so perhaps that is why they were willing to take this risk, but I would never ask for credit from my suppliers as I know that it is not something that they would be happy to offer and it may therefore create an uncomfortable situation for both of us. A cultural gaffaw if you will as a factory owner loses face by saying 'No' to the customer!

So the question of credit is not a question of small company, big company, but more a question of whether a supplier in China is willing to take the risk of putting the goods out there without first having a guaranteed payment mechanism in place. Clearly the example in the original post would be a nice way to be able to do business, but in the reality of what is international trade credit terms, at least from suppliers in China, are not something that most buyers should expect to be able to get.

I think that credit terms are a possibility but would likely only come after an extended period of business together and with substantial security in place. Even then most of the factories that I have dealt with in the past would not consider anything beyond *. Credit as far as 30, 60, 90 day payment terms or payment upon receipt of the shipment is something that I doubt many legitimate suppliers would be willing to offer but perhaps in some niche markets it does exist.

Quoting from [GentlemanSheridan]:

I once met a businessman who did not know english, but I was surprised to learn that he was a very successful trader with Germany as well as the UK. It took me sometime to realize the reason for his good business results. When I approached him regarding my intention to be a wholeseller in his leather products, he immediately said, "That can be arranged, and would you like to reserve some dates? You do not need to be exact. Just give me some tentative dates, and for those dates to be reserved just invest in the production, which will be factory price for any item you choose."


This type of arrangement was new to me, but I liked it, so I asked how much would the factory price be for an overcoat. Since it was to be a genuine leather coat, the price was $50. at the time. I agreed and paid. He gave me a receipt.


When the dates were near, he contacted me and asked me where to ship, and that I have to choose whether it is going to be just coats or any other leather work, to which I replied that for this time it will just be the coats, and only 50 coats to start. I gave the place where it was to be shiped.


When I asked him how much was I to pay, he said, "Good friend, not now. Only after you sell them, and that too will be minus the amount of just one coat which you already paid in advance."


Now you see, ladies and gentlemen, why most probably he was such a wonderful person to work with.


Trust is the requirement from both sides.


Good Business to one and all !

GentlemanSheridan.

Well, that at best could be cited as a 'wind-fall'. Nothing to do with ground reality. What i know from my own personal experience is that more often than not it is the hectic price fluctuations that causes all the up-heavel/s & non-performance of specific clauses of the Sales & Purchase Agreements (SPAs)...If the price goes up than the Seller does not want to perform and vice-versa on the part of Buyers in case of falling prices. No body is born 'CHEAT', 'FRAUD' or 'SCAMSTER' . You are 'innocent' unless proven guilty.....

The credit system in vogue, though is help-full to some extent, is price-pushy. It only helps to hype or inflate the price due hefty interest rates in place.....besides heavy 'BANK CHARGES'.....

I would like the 'whole' system to be re-vamped & refurbished and to do away with 'credit' system - Buy & Sale strictly 'CASH'....This way the prices will also come down and the 'MISUSE' of 'SOVEREIGN FUNDS' will also be checked to some extent....

I know it may sound cynic but this is the only way out: 'CASHISM' as opposed to 'CAPITALISM OR SOCIALISM OR COMMUNISM......Let's strive for a world free of; INTEREST, DUTIES & TAXES or atleast to bring them down to realistic & realisable levels & values. The recent upsurge in OIL & FOOD prices has brought home this scarry & un-savoury realisation that 'HUGE' un-tapped & surplus 'SOVEREIGN" Funds have had a free play in all the known 'world' markets....the resultant confusion is all but 'history'....