TALES FROM THE ROAD 34 – SO YOU WANT EXCLUSIVITY? PART 1

I am sure you have heard it before. You start discussions with a potential distributor and almost the first thing they say after ‘Hello’ is ‘Of course we would want exclusivity’. Now presumably your market research indicated that the people you are speaking to are good candidates or you would not have approached them, right? And it isn’t always just an opening gambit. Very often they are absolutely serious, and you need to be able to handle that.

So start by putting yourself in their shoes. They are approached to distribute your range of products, the first time they have been introduced to their market. You offer something new, and maybe they can gain reputation by being the first to have access to it. It may give them competitive advantage, and they will want to protect that. What would you ask for if you were them? Exclusivity I imagine!

Spain had proven to be a very difficult market to penetrate as I strove to carpet as many of Europe’s offices as possible with premium quality carpet tiles. The climate in most of the country doesn’t really lend itself to their use, and my modest successes in the first three years were through retail stores. I travelled to Madrid, Barcelona, and Bilbao, to gather market information, visiting the British Embassy in Madrid and the Consulates in the latter two, and making appointments with a number of distributors in each city with very capable interpreters in tow. Our competitors were doing well there, embedded in fact, so why weren’t we?  For the whole trip I felt like I was missing a trick.

For about a year prior to that trip, I had been working in collaboration with a manufacturer of raised access flooring, and a manufacturer of adhesives, on the principle that we could offer our products together as a package: carpet tiles adhered to raised access flooring panels was the jist of it. We met every few months to discuss opportunities, and in one of those meetings, the panel manufacturer suggested he introduced me to a number of his distributors around Europe, with the deal being that I would reciprocate. One of their most successful distributors was based in Spain with offices in both Madrid and Barcelona, and as only an occasional seller of carpet tiles for a competitor, they had crept under my radar. Here were three dynamic guys, supported by a great team, and I had somehow missed them!

My main problem was that I was starting from a position of weakness. The distributor knew I was finding it hard to enter their market because the panel manufacturer had told them, so they knew they could play hardball. Their position was that they wanted exclusivity, and my position was that I really didn’t have an alternative other than to concentrate on other markets and leave Spain out of my portfolio. However, at the time there were a large number of major construction projects across the country, and if I didn’t get our products specified then our competition certainly would. And it wasn’t as if I was going in blind. The company I was talking to had a track record with the panel company and some experience of getting carpet tiles specified in the commercial sector.

In this case I knew before meeting them that exclusivity would be the deal breaker, and I was prepared to take a calculated risk and offer it to them, on certain conditions:

1.    If they wanted exclusivity, then I did not want them selling any competitive products.
2.  I required a full list of ongoing projects where they had specified the competitive products, and the company should try to change specification to our products where possible.
3. I would give them six months free reign In the market without contacting any other potential distributors, and I would refer any enquiries from Spain directly to them.
4. That they accepted my payment terms of 30 days from the date of invoice.
5. That the distributor took a certain amount of stock, albeit at discounted rates to get the relationship started.

Well they were okay with points 1 and 2! I knew that point 3 was fairly meaningless because they knew I hadn’t found an alternative, but it was important to give notice that they would have to perform. Specification selling doesn’t happen overnight because you can’t change the timescale for the construction of a building, so it would have been pointless to also insist on a sales target for the six month period. I also knew they would ask for 90 day terms, so we agreed on 60 with a commitment to review based on performance, but taking stock was not an option for them because they would then have to second guess what products and colourways would be most likely to be specified. So in the end we met half way I suppose.

It actually took the best part of six months to formalise a contract between us, and I was glad to have been introduced because their performance for the next few years was fantastic, to the point where when I left the company, they became the official office in Spain for our recent new owners. This is one occasion where it was the right thing to accede to their demand for exclusivity, and the reputation they had gained with the raised access company provided a good degree of confidence, and smoothed the negotiation process.

In this case, the answer to ‘So you want exclusivity?’ was ‘Oh alright then!’, and it was absolutely the right decision. The next Tale is of an opposite experience. 

Inside the World Customs Organisation (WCO) (11) Day Two with ROO – and I finally passed out

Today I finally passed out – ok jokers, it had nothing to do with the beer last night!  The Customs & Trade WCO Knowledge Academy ended today with an awards ceremony. I am pleased to say I got my certificate and I am a proud member of the Class of 2013, The experience is indescribable – though I’ve had a go – the mix of cultures, opinion, politics, the law, fun, regulations in the making, case studies, term of reference, fun, different cultures, fun, learning new things, being reassured that you did know other things … did I mention fun?

Receiving Academy Certificate from Kunio Mikuriya, Secretary General of the World Customs Organization

My last session of the Academy was Rule of preference origin (again) – the law makers and the harmonisation.  Couldn’t have been better for me; a bit advanced for some and irrelevant for others, but great speakers and really useful information.  Hopefully by this time next year we will have one big EU Free Trade Agreement with a single regulation covering preference with 46 Euro-Med countries. ASEAN are attempting the same.  I’m afraid I did do a bit of basic origin training for some of the delegates in the break and lunch time, but you can’t keep an old trainer down – I even got my Japanese and Chinese friends to understand the joke about international trade being the 2^nd oldest profession in the world. I heard them sharing it with the guys from the Congo … oh, dear, what have I started?

We were awarded our Certificates by Kunio Mikuriya, Secretary General of the World Customs Organization and he made a nice (short) speech about collaboration between trade and customs being important to forge a safe international trading future with interaction, communication and understanding.  It was an honour to shake his hand.  And now most of the delegates are flying home 12-30 hour flights not unusual).  I’ve received offer to visit Trinidad & Tobago, Papua New Guinea, Brazil, Stockholm, the DR Congo and Nigeria – just to mention the ones I can remember right now.  Who knows?

One thing I do know is that there is nothing wrong with the knowledge and commitment of Customs & Trade in the big “bad” World.  I’m glad this career chose me – maybe I can sneak back next year in a speakers’ slot?  Greg????  Ready for my close-up Mr Pilkington.

Me, Ayumi and Ethan on the town, our last night in Brussels

How can strong and Herd LLP

Essential Guide to Customs Procedures

Advanced Guide to Customs Procedures

Tariff Classification

Understanding Origin & Preference

Click Here to sign up to our free Spotlights!

Subscribe to our free information emails covering international trade topics .... Spotlights on key topics SAMPLE      

CLICK HERE to subscribe

TALES FROM THE ROAD 33 – CAR HIRE BLUES

One of the things I have found most important when travelling abroad on business is to have as much control as possible over my transport arrangements. I’m sure many of you have been in a situation where key points in negotiations are stalled until the last minute, so that your need to clinch a deal before your taxi arrives to take you to the airport becomes more of a focus than getting the right deal. That only happened to me once, and I chose to take my taxi rather than a deal that would not have been good for the company. It was the right thing to do because the onus was then on the other party to make a concession, which they eventually did a few weeks later. Think about it. If a deal is that important, then first you will ensure your flight plans are flexible, and second you will probably arrive and leave under your own steam, and hiring a car is one thing that will give you flexibility.

I have had far more good experiences of hiring cars than bad. And in most of the bad cases, there has been something I could probably have done better. If I had my life over again, the one I would change would be the ‘economy’ car I hired with a colleague to take us from Chicago Airport to a small town in Michigan where we were to visit a potential woodworking machinery dealer.  Both of us were big blokes, and we imagined an economy car in the USA would be on a par with a Ford Mondeo or similar medium sized saloon. Well it wasn’t. Instead we were introduced to the smallest Chrysler in the world!

It was one of those occasions where we actually had more time than we thought between our flight arriving and the meeting time, so we could have dug our heels in for something better or tried another car hire company. In the end our need to get on the road in not the best of weathers, caused us not to question what was on offer. Mistake. Why is it that heating systems on cars only ever fail spectacularly in extreme cold weather? It was okay when we left the airport for our two+ hour journey, crammed into our seats like an oversized child on a kiddie’s fairground ride (that happened to me too. When I was 12. But I’m not telling you about that – too traumatic!). Then about half an hour into our journey as the snow started to fall, everything suddenly went perishingly cold.

As we drove along the interstate in our tiny and grossly underpowered aluminium can on wheels, with huge trucks passing us and spraying large chunks of dirty snow onto our windscreen, we drove into a sudden ice storm that rendered our wiper blades next to useless. The condensation from our breath inside the by now unheated car then froze onto the inside of the windows and in that sorry state we battled on to the next service area, which thankfully was only a few miles distant, with the windows open wide enough to lower the cabin temperature, but not so wide to cover us in ice. The storm passed soon after we stopped, but of course the delay made it touch and go whether we would reach the meeting venue on time.

Although we did get there on time, our journey had not been the best preparation and I don’t think either of us performed nearly as well as we should have. So five mistakes never to be repeated:

1. The timescale was too tight. Flying in the previous day would have been a better option
2. We should have hired the right car
3. We should have checked the weather
4. We should have worn warmer clothing. Suits just didn’t hack it!
5. We should have arrived fresh and ready for business 

That was in the mid-1990’s, since when we have been blessed with the invention of a vast array of communication aids: both mobile phones and a SatNav would probably have helped us with our journey, and in the case of that particular meeting, a video call would probably have told us most of what we learned there anyway – that they were not the right dealers to sell our machinery!

It is important to try and make every business trip as efficient as possible, with all available time filled. However, there are now few occasions when I travel these days where I do not reserve one day for rest and consolidation, or just to make sure I am in the right place at the right time, ready to do my job to the best of my ability. I think running my own business has taught me that sometimes it can be quite productive to give yourself a non-pressure day, to walk round the local town or city, to plan, or just to feel attuned with your surroundings and ready to tackle the task ahead. It clears your mind, and helps you to perform. I will leave the other bad car hire stories for another Tale!