For suppliers of Chinese or other international products, the best strategies for winning B2B eProcurement Reverse Auctions are very different from those of domestic product suppliers. Below are our key tips for maximizing the benefits of international supply and removing any potential associated concerns.
In many cases, US companies will choose to purchase a domestically manufactured product, even if the price point is higher than its internationally produced counterpart. This is driven by two primary factors:
#1 Fear of a Supply Interruption
Knowing that a container of material will take several weeks to cross the Pacific Ocean can be TERRIFYING for buyers, particularly if the absence of that product can or will result in a complete facility shut-down. Even the absence of basic packaging items can bring facilities to a grinding halt.
To be successful, suppliers of international materials must take aggressive steps to remove this concern, through either local warehousing or other feasible options. Also, because exclusive supply positions can be very difficult for international suppliers to gain, importers may need to make concessions for the allowance of a secondary “backup” domestic supplier.
#2 Fear of Poor Quality
It is generally assumed that materials from Asia will have a lower cost than US products, but in many cases the buyer will also assume the Asian material will be of lower quality. Cost savings for the buyer are meaningless if the material does not perform.
“Cost savings for the buyer are meaningless if the material does not perform.”
To have the best chance of winning a reverse auction, suppliers of international goods must work to complete COMPREHENSIVE trails, testing, and qualifications prior to the live auction event.
Again, the bidding strategies for international goods are quite a bit different from the top bidding strategies for domestic suppliers.
Specifically, we almost always recommend suppliers of international goods open the bidding with a very aggressive price, particularly if the other suppliers know Southeast Asian goods will be in the auction.
Because domestic suppliers often enter the auction assuming Asian goods will have a very low price point, they will subsequently assume the auction is not winnable for them on price alone and completely stop bidding, hoping to convince the buyer that international sourcing will be too risky.
“domestic suppliers often enter the auction assuming the Asian goods will have a very low price point”
Suppliers who properly addressed #2 above prior to the auction, however, will make the domestic suppliers strategy highly ineffective. Additionally, because the domestic product supplier stopped bidding early, the price gap (and potential savings to the buyer) can be quite large, providing further incentive for the buyer to make a supplier change.
Conclusion and Next Steps
Combining the pre-auction strategies above with a low opening bid price combine to provide the best overall opportunity for international suppliers. We’ll be covering several industry-specific strategies in upcoming articles, but if you have any questions relevant to your specific situation let us know using the Contact page. We are always happy to help!