Doing Business With Overseas Suppliers: A Primer

The U.S. jewelry industry, like so many others, has witnessed a remarkable growth in imports in the past two decades. We are now part of the global marketplace, with more than 50% of the jewelry sold here of foreign origin.

It’s important to note, however, where this growth has been. The manufacturing of promotional jewelry has gone overseas because of lower labor costs. The watch category is dominated by imports, and certain generic jewelry categories, such as machine-made chain, have been taken over by Italian manufacturers because of their innovation and efficient production.

But what of the well-made, better-quality jewelry you may have seen at jewelry shows in Basel, Vicenza or Hong Kong or in the foreign pavilions of U.S. shows? It doesn’t seem to end up on Main Street, in spite of retailers’ awareness that they need to show their customers “something new and different.” Style is only part of the formula for success.

Some overseas companies have identified the demands of the U.S. market and are steady suppliers. But too many others have weaknesses that make business difficult for a U.S. buyer. Many problems arise because these vendors are not located in the U.S. and don’t automatically abide by the same regulations, laws and customs that are standard practice here.

Here are some key points to cover when beginning to negotiate with an overseas supplier. You will need to make adjustments based on the nature of the product lines, the degree of service you require and how eager you are to acquire the line. Following these guidelines will help you to protect yourself against unexpected costs and other problems. It also will go a long way toward building a good relationship or avoiding a bad one.

  1. Order size. Shipping and insuring small orders can be disproportionately expensive. Not all shippers, such as UPS or Federal Express, operate in all countries. You also need to check customs fees and comparative shipping costs. The vendors will have suggestions because they know their local markets well. Ask if they do any bulk or combined shipping to a freight forwarder in the U.S. In certain goods, this might be applicable.

  2. Quality control. The hardest product problems to deal with relate to quality and standards. Determine the company’s policies on defective jewelry work, broken stones and, worse yet, substandard gold fineness. If European, the vendor should belong to Emagold, the European jewelers’ cooperative administered by the World Gold Council. Emagold establishes and verifies gold standards and compliance. Find out what the vendor guarantees on stone treatments, hallmarking and total stone weights. Also establish what recourse you have in case of problems – especially if prepayment is made on the goods – and how you will get satisfaction.

  3. Timely delivery. Assume that if you place a smaller order, you may not be on a priority shipping schedule. Ask whether the vendor will fix an outside delivery date, after which you must be informed of the reason and length of delayed shipment. If this happens, request reconfirmation of the order or refuse the shipment when it arrives. It won’t take long before you know which companies are conscientious about their commitments.

  4. The bottom line is money. All other issues aside, how and when a vendor gets paid is the critical question. Both sides start out with at least some caution on the issue. The vendor feels totally exposed, often having little or no access to reasonable credit information on your business. Be prepared to provide references.
    Most vendors will ask for cash terms, requiring payment “against documents” (which is when the U.S. Customs Service reports possession of the shipment) or by wired funds in advance of shipment. Checks are sometimes acceptable, but vendors often frown on them because of the typically high bank charges and the time they take to clear.
    Overseas vendors are shocked by the terms offered by U.S. suppliers, including memo, seasonal dating and stock balancing deals. Accept that overseas vendors are unlikely to offer these kinds of terms. On the other hand, it’s not unheard of for terms to become more flexible as relationships mature.

  5. U.S. office. Life becomes a lot easier if orders and reorders can be written locally – perhaps even with a rep in the store – and all the issues of importation, payments, repairs and returns can be handled by the vendor’s U.S. office. Though not every vendor will have one, once a company attains a relatively modest U.S. business base, a domestic office is necessary to build a broad business. The presence of such an office, or lack thereof, is a measure of the supplier’s commitment to the U.S.

  6. Promotion and advertising support. Top-of-the-line jewelry companies overseas are keenly aware of their images. They frequently develop excellent promotional and sales materials – high-quality photos, coordinated displays, fliers and stuffers. Often, you can get the materials free because the supplier wants to promote its name and products in any way possible.

  7. Merchandise returns. A U.S. office makes the return of merchandise somewhat easier. But many foreign vendors consider random returns one of the great abuses by the U.S. market. Still, it’s a subject worth discussing to gauge attitude. On a reasonably sized order, you may get some allowed percentage return. For example, the vendor may ask that the goods be returned in the U.S. to a company representative just before a major show. This will allow the company to resell and reship the merchandise in the U.S. There also may be merchandise that you could describe as “experimental” for your market on which the vendor may be willing to accept returns.

Defects are a different story, and here a clear policy must be established. At the least, the vendor should have a U.S. contractor that will do the repairs, allow you to do them at cost or give you the option to return the piece for full credit.

Most overseas vendors want U.S. business. Whatever flea-market mentality still exists – the instinct to just show up at a major trade show and hope the crowds and orders will be big – is going to fade quickly in the years to come. With business in Europe and Japan in the doldrums, suppliers inevitably will refocus on the world’s biggest market.

The overseas companies that will serve you best are those that realize the customer rules the roost, especially in this era where manufacturing capacity exceeds what the retail trade can absorb. If vendors can’t meet the admittedly complex demands of the U.S. market to a meaningful extent, they may just have to pack their pavilions and go home.

Ben Janowski of Janos Consultants Inc., New York City, specializes in the U.S. jewelry industry. He has worked for many European and Asian companies interested in entering or knowing more about the U.S. market. His clients include De Beers, the government of Greece, various international publications and large and small manufacturers.