Knowledge is power

As local fashion designers gear up to export their Rosemount Australian Fashion Week orders, independent international development consultant Caroline McIntosh offers some advice to the next generation of exporters.

Let's start at the beginning. When working with Australian designers getting ready to export, there are a few key things I look for:

* How many stores currently retail their range in Australia? I generally would hope for at least 30 to 40 stores in at least three states (VIC, NSW and QLD). This would give me a clear idea of their ability to sell their range, manage and deliver stock as well as indicate they have a reasonable cash flow. Should an international order be cancelled, it also means they have existing markets to sell the stock to.

* Do they understand the cost involve with exporting goods? Large orders means that they will need to have sufficient cash flow to purchase materials and start manufacturing. International buyers will often not pay for the orders in advance and, due to the differences in season in the Northern hemisphere, an order will be dispatched six months later and payment will be received six to nine months later.

* Do they have proper logistical processes in place? For example, do they have an established relationship with a freight forward who can help them with export documentation, custom clearance issues in country of destination, packing their products appropriately for export and other important considerations?

The common mistakes that Australian textile, clothing and footwear exporters make are:

* Not taking into account all costs in their pricing and not understanding international buyer requirements and expectations. For example, many American and UK buyers will expect goods to be priced and delivered right to their doorstep. They expect all customs clearance to be done and international freight, local freight and import duties to be included in the price they were quoted. Payment terms expected by large department stores or retail chains can be up to 60 days from the delivery date of the goods. Promotional pricing: Designers will be expected to fund it. Too often they realise too late that they in fact didn’t make any money on the goods sold internationally or worse lost money.

* Not making and allowance for an agents commission even if selling directly to a retailer.

* Not researching the international market: The Australian Trade Commission (Austrade) has a large international network of offices around the world and can provide "free of charge" general market information, import regulations, import duties and so on. There are already some basic recommendations on their website: www.austrade.gov.au

* Not understanding quota limitations. Many Australian designers manufacture goods outside of Australia. The USA and UK have import quota limitations on goods coming from the China. If a shipment contains even one single item subject to quota and the quota is maximised at the country of destination, the whole shipment can be turned around. And it would be a lost sale and very difficult to gain back the retailer’s trust.

* Not running appropriate due diligence on the buyer. Buyers will ask for payment terms, they expect you to trust them. Designers need to get buyers to complete an account application form with complete company details and at least 2 or 3 existing business references so they can verify their solvability. If it is a large department store or retail chain, they will have some very specific requirements and a designer will be completing a vendor’s application form. And they will be provided with some very strict requirements suck as type of packaging for the goods, markings on the packaging, delivery time frames and so on.

There are a few export challenges especially unique to Australian designers:

* Australia is in the Southern Hemisphere, so we sell winter when buyers have just bought summer and vice versa.

* Our domestic market is small so our manufacturing cost is high as we do not reach minimum manufacturing volumes to be able to negotiate better cost.

* Australian manufacturing capability is getting smaller and smaller every year so designers are forced to look for manufacturing overseas. As a result they cannot take advantage of Free Trade agreements negotiated by Australia as their goods are no longer of Australian origin.

I recommend designers research the markets they want to export to, the buyers, export documentation requirements, cost of freight to destinations, import duties at destination and any quotas. Ask questions! Too often designers think that not knowing may make them look unprofessional but the key to success is to ask as many questions as possible. When does the buyer expect delivery, are they happy to look after the freight and Customs, would they recommend a freight forwarder? What type of packaging do they like?

By Caroline McIntosh