Buying Overseas: The Risks and Rewards

Globalization of the jewelry industry has opened new doors to the U.S. retail jeweler. For independent jewelers, buying directly from overseas sources can offer big advantages, including price breaks and access to unique merchandise.

Some experts note that foreign sourcing puts competitive pressure on U.S. suppliers, which means better deals and better service for retailers. Dealing with overseas companies also can expose a small retailer to new technologies, research data, marketing strategies, and other innovations that can help them expand their businesses.

But direct overseas buying entails risks as well as rewards. According to experts, potential problems include:

  • Difficulty reordering best-selling items quickly and efficiently;

  • Difficulty monitoring and maintaining quality control from thousands of miles away;

  • Inability to easily change or customize items from your initial order;

  • Dealing with different time zones, language and cultural differences, customs issues, and foreign taxes, duties, and other regulations.

Mixed opinion. “We have done quite a bit of overseas buying in the past, but we haven’t had great success with it,” says John Ballew, owner of Ballew Jewelers, a three-store chain based in Freehold, N.J. “I’ve had far more success dealing with suppliers in this country.”

Even so, Ballew notes some advantages for independent retailers who buy from overseas sources. First, of course, is the price issue. Because labor costs in some overseas markets are dramatically lower compared with labor costs in the United States, U.S. retailers can find bargains they never would have gotten through domestic channels. Second, if a retailer wants to set his store apart by offering items his customers aren’t likely to see anywhere else, then buying directly from overseas sources can work to his advantage, Ballew says. Finally, “Overseas buying promotes competition, which makes suppliers here work that much harder to service you,” Ballew explains. “Knowing that they have competition not just across the street but halfway across the world results in a more competitive, sharper U.S. supplier.”

On the down side, if a foreign-supplied item turns out to be a strong seller, reordering may be a problem. “You can’t argue with the cheaper labor prices overseas,” Ballew says. “But unless they have an agent here in the United States, it could take weeks or even months to get your reorder. There’s just no way to reorder quickly and conveniently; there are no catalogs, no support. And if a customer likes what they see but wants it in a different stone or setting, for example, there’s not much you can do about it unless you customize it yourself.”

Another issue is quality control. It’s hard to keep a steady eye on the quality of product being produced for you overseas, Ballew says. “Basically, if there’s a problem with a product, or something goes wrong with your order, you eat it.”

Although some independents have pointed to language, cultural, and travel issues as significant obstacles to doing business overseas, Ballew says e-mail and the Internet have solved much of this. “The Internet has opened up the independents’ sphere of contacts tremendously,” he says. “And you can communicate via e-mail with no time zones, travel, or language barriers to worry about.”

For Ballew, it’s just easier to deal with importers and distributors who will make the trip overseas, handle any international issues that may arise, and bring back merchandise for independents to consider. “Price is certainly the biggest advantage when you buy directly overseas, but it’s not really the biggest factor for me, particularly for lower-range items,” he says. “I’m also looking at quality, consistency, and the availability to reorder. And in higher-range items, craftsmanship and uniqueness are very important.”

An easier route overseas. Richard Kern, owner of Churchill’s Jewelers in Santa Barbara, Calif., has purchased both loose diamonds and finished jewelry from overseas sources. Most of the company’s direct imports, however, have been antique/estate jewelry pieces from England and France.

Among the problems Churchill’s has run into when dealing with overseas suppliers are coordinating shipping for items purchased, quality control (specifically, items aren’t up to standard when they arrive, and the items received may not be the items ordered), and hassles getting items through Customs. Kern also notes that, unlike their U.S. counterparts, few overseas suppliers are willing to offer loose stones on consignment to foreign buyers they may never see again.

After mixed results in buying directly from overseas suppliers, Kern insists on dealing only with foreign companies that have agents in the United States. “When they have an agent in New York, Los Angeles, or somewhere else here, you at least have someone to go to if you have problems,” he says. He also believes “there are enough vendors in this country” so a retailer doesn’t have to go overseas to find new styles or get better deals.

Breaking into the foreign market. One cost-effective way to see what’s available overseas is to check out the foreign exhibitors at major U.S. trade shows like The JCK Shows in Las Vegas or Phoenix or the JA New York Show. Another option is to attend a foreign international show, such as those in Basel, Vicenza, Turkey, or Hong Kong.

According to Denise Harned, owner of Raymond Jewelers in West Hartford, Conn., attending foreign trade shows is a great way to make contacts and establish relationships with foreign suppliers. “Establishing strong relationships with people overseas is a big key to doing business successfully with them,” she says.

Attending a foreign trade show also gives buyers an opportunity to get a feel for the culture, market, and business climate of a region; allows them to compare notes with local and regional retailers and suppliers; and provides an opportunity to make appointments and visit contacts outside the show as well as meeting them for dinner or in other social settings. But retailers must have a specific idea of what they want to accomplish, Harned stresses.

“We did the Hong Kong Show specifically to find new sources for pearls,” she says. “And we did the German show in Idar-Oberstein specifically to find new colored-stone sources.”

One big advantage of buying merchandise directly overseas is that it’s a “hook” to attract customers into a store. “We’ll let people know when we’re going, and they’re excited to see what we’ve brought back,” Harned says.

But Harned cautions that it’s important to have some contacts wherever you’re going—to help you get around and introduce you to the people you came to see. Also, a contact in the region can help you deal with unforeseen problems.

Although cost may be an issue for some, Harned says it’s possible to attend foreign shows even if you’re not part of a buying group that gets a special rate on travel, etc. “There are many good shows out there that are very economical,” she says. “The Madrid show and Paris show aren’t that expensive to attend, for instance. Brazil is another great, reasonably priced show to visit if you’re looking for colored stones. And it’s not as expensive as you think to visit the Bangkok show.”

Other tips from Harned: If you’re working with a new foreign vendor, never prepay; make sure they take U.S. dollars; and if you plan to carry items back to the United States, declare everything in Customs to avoid any potential problems.

The service issue. Wixon Jewelers in Bloomington, Minn., attends the Basel Show and has found some great merchandise. Nevertheless, the firm doesn’t buy a great deal of product directly from foreign sources. According to owner Daniel Wixon, the retailer depends heavily on reordering fast sellers—and with overseas suppliers, that can be difficult to do. “When you factor in the price of Customs and the time it takes to ship an item, it really isn’t worth it,” he says.

Wixon adds that his store, one of the largest independent operations in the country by volume, is big enough that “many sources come to us—we don’t really have to go to them.”

While acknowledging that overseas buying can be a good strategy for jewelers looking for one-of-a-kind pieces, Wixon stresses that it isn’t as effective for his store. “You have little control over the process,” he says. “It’s hard to deal with someone on an 8- to 10-hour time difference, they often don’t speak English very well, and it’s very difficult to change anything on your initial order. We like to sell things we can replace quickly.”

But if a U.S. retailer and foreign supplier can work together to make the process more efficient, it would be a major advantage to both sides, he says. “If they have an agent here, and you can find a way to make the process faster, it would be a much more attractive, effective strategy.”