Those who still have a trading business today notice that even now the market is changing again. Customers have much more information about the origin of your products and sometimes know their way around better than you do in a short time. In some business columns, trading as a specialized activity has even disappeared altogether. Where some industries used to rely on agents, importers, distributors, dealers and resellers, we now see more and more direct contact between manufacturer and end user. A trader who still wants to keep a spot in the market will have to change tack.
Until fairly recently, a trading company could sustain itself by having a wealth of logistics knowledge. It knew the markets in far-flung, specialized producers and thus tied supply and demand together. Because of the Internet, the world is getting smaller and you, as a merchant, run the risk that your added value will become too small. Yet we see trading companies doing successful business. In doing so, I recognize three types of companies:
The trade advisor
This trader operates in transparent markets. The price and origin of his products are widely known. He adds value to his clients by advising on the right purchasing times and channels. He identifies production surpluses and shares the benefit of that knowledge with his clients. His revenue model is shifting: Previously, he was paid from a mark-up on purchasing, now on a percentage of his purchasing profit, possibly combined with agreements on inventory, supplier and credit risk.
The product combiner
This is a trading company that supplies products (mostly semi-finished products) and has learned from its customers where its products are used and what combinations it can make to better serve its customer. For example, a trader of carrier materials that now combines the degradable information carrier with bio-based adhesives, etch.
The stockist remains an important trading partner for its customers. Yet you see that even there companies are more successful than others. Successful companies talk to their customers about the integral cost of their products. This includes not only the cost of the product, but also the logistics and handling costs at the client. Sometimes you can already be of service to a client by, instead of a daily invoice, bundling the invoicing and thereby significantly reducing administrative costs at the client’s (and yourself’s) end.
All in all, the days when a trading company “divided” the risk between customer and producer are now gone forever. That, in addition to risk for the merchant, provides a better margin if all goes well. In addition, if you manage your sales, marketing and logistics costs well through smart solutions like (I like to advertise it) the Customer Factory Sales Machine, you are on the winning team. Trading companies that handle those risks and costs better than their competitors become the winners.+