Product simplification, alternative materials ways to reduce prices

MANILA, Philippines - Exporters are encouraged to consider alternative materials, product simplification and production volume discounts as ways to make their prices competitive in the international market.

This advice was given by Delfin Bibat, former Foreign Buyers Association of the Philippines (FOBAP) director and country manager of Southgate Ltd. (The Connor Group), in a seminar for exporters of gifts, toys, travel goods, furnishings and furniture.

“If you participate in a gift show, the targets might be there but you don’t really know the buyers there. So vendors have to be ready with alternative pricing, we have to because we are usually higher price than the other Asian markets,” he said.

Bibat said sellers have to consider alternative materials when they undertake product development which is also crucial in lowering prices.

He said product simplification, on the other hand, may require some industrial engineering.

“This is one of the weaknesses that we have as a country and as an industry - we don’t make an active stance in simplifying a product. Simplification is a major trend so we must do it. Usually, the simpler it is, the cheaper it is,” he advised.

Bibat said pooling or clustering is an option in order to meet big volume orders of the buyers.

“In China, if the order is too big for them, companies still accept this because they can subcontract some jobs to their competitors. It is not that in the Philippines that is why, we are at a disadvantage. It is very rare that people are willing to share production,” he noted.

Bibat’s recommendations could help address concerns particularly of foreign buyers of handicraft products.

Salvio Valenzuela Jr., executive director of the Philippine Chamber of Handicraft Industries Inc. (PCHI), bared that major buyers in the recent Ambiente fair in Germany were concerned about higher costs of local products.

“One hundred percent of them were saying that price is really the problem of the Philippines. Our prices are 20 to 30 percent higher than competitors not just China but also Thailand, Vietnam and India,” he said.

“The price is high enough for them not to source in the Philippines,” he added, quoting a buyer who decided to source its products from India as saying.  

To address this, Valenzuela cited the need for the country to address its supply chain management from raw materials to inputs like electricity cost, labor and logistics.

He attributed the high cost of shipping raw materials from regions to the National Capital Region, the major producer of exports-based companies, to lack of proper infrastructure facilities.    – Philexport News and Features