The Exciting World of Glove Trading
The Industry Overview
Explosive demands for PPE, particularly mask and medical gloves attracted many new entrants into the exciting world of glove trading. Akin to gold prospectors in the early days of the American wild west, people from all walks of life tried their luck with the rubber gold. Many failed and bailed, while few persevered and even fever succeeded in varying degrees. Depending of course on how you define “success”.
Scammers and misguided everyday folks who have no business being in there in the first place are the impediment. How so and why?
Well, the “why” is easy – greed! Let’s examine the rest …
What Went Wrong?
Quick terminology coverage before we do deeper. Common things you’ll hear people calling themselves
MANDATE: Party or parties representing either the buyer or seller side. Usually the former.
ALLOCATION HOLDER: This is the mystique. There are hundreds of glove manufacturers in Malaysia. We are the world’s leader in this for decades both in terms of innovation, production capacity and capabilities. But the pandemic have give rise to the allocation holders and they are thousands of them. Many are fakes. This is an oversimplification but generally this can contain person or companies that runs business with little or sometimes nothing to do with the glove business. They have agreements with (usually) large factories to produce for them X-number of boxes per month under their own brand. Sometimes even under the factory’s own brand (rare).
Generally, the trade is divided into two segments:
- Production lot
Production lots are cheaper than OTG. A commonly used term is “pre-order stocks”. They are a recurring contract for the seller to manufacture and deliver anywhere between 10 thousand to millions of boxes per month for 6 to 12 months. Price per box (100 pieces of Nitrile) at the time of this writing ranges between 4.5 to 6.5 depending on brands and quantity.
OTG or On The Ground are readily available stocks. This could be a one time deal and they can a jumbo deal. This is the holy grail and ones that are hunted down religiously by traders. They are fast and they are typically 30% to 40% more expensive. Once a trader gets hold of genuine OTG stocks’ title holders they will guard the relationship with their lives. Suffice to say, for the last 20 months, securing verifiable friends from the SELL-SIDE first is the optimal strategy.
Problems for both production lots and OTG stocks
For the production contract specifically, there are instances where deposits are paid and production is completed but when the stocks are ready to be shipped out, the buyer had a change of heart. They will lose their deposit of course but the manufacturer also now have a pile of unsold gloves in their inventory.
More often however are negotiations breaking down even before production starts. This happened even when there is only one or two intermediaries and they are usually about commission, payment terms and product related issues i.e. under-spec or lack of certain certifications.
For the OTG, it is mostly the case of fake title holders or problems with first come first served policy. Once verified, you need to take those OTG gloves away from their title holders immediately because no matter he or she likes you, they will let go of those stocks to the first person who pay them the deposit. Thats why they are more “exciting” and fetch higher prices.
If you are a “prospector”, how do you know that this is a zero probability transaction?
Very easy, once your upline or downline starts talking about multi-flavoured LCs instead of the plain vanilla version, ICPO, IMFPA, NCNDAs, POF, POL, BCL, MT799, MT199 and others, then a deal is extremely unlikely to happen. If buyers and are sellers are talking directly, non of the hodgepodge of acronyms should be in discussion.
If you are talking about an OTG deal, however, POL, LOA, and POF will be part of the discussion because buyers would want to see prove of ownership of those stocks and their availability and sellers would want to see that you could really afford to buy them.
Any hope for folks who thought that cranberry was a fruit in this once in a lifetime opportunity?
Never say never, but massive sacrifices are required. You got to drop everything, including your job to dedicate yourself to the trade and make connections within the industry in a short amount of time. Focus on the smaller deals for production lot contracts and work your way up. Also worth mentioning – to set your expectations right. What is “right”? Simple rule is to discount whatever expectations you have right now to 50% – 60% – minimum.
Why not OTG?
Because the “big boys” plays here. There are the folks who knows how to spell “nitrile” well before 2020. The have money, and more importantly they have existing information and network. A former associate of ours managed to get himself a sweet million dollar plus USD in commission just this month (October 2021) from an OTG deal in the US – his maiden deal after 16 months of non stop toil and nightmare. Around March 2020, I recall a rather amusing whatsapp exchange with him (See Below)
So how did he do it?
He quit his well paying job (2 young boys. Wife is a homemaker), got connected with his brother-in-law who is employed in the medical devices distribution business in the US. He’s been without an income since April of 2020 (until Oct 2021), nearly lost his savings and sanity, but he persevered.
Today, he talks as if he’s been in the game for years, thanks to a thousand hours. He can recall vital and non vital information regarding price, product, regulations and shipping options\rates from memory. He made it (barely) because he’s got a vital connection in the US, he’s got a supportive spouse, a decent sized savings account and an even bigger pair of “balls”.
If you are thinking about that million dollar cheque merely by joining a WhatsApp group whilst holding on to your job, watching TV, and playing with your kids with tons of free-time. Think again!
Let’s recap …
- There’s a place for the regular folks, but don’t expect a lot as this is still a domain for the pros
- Be it a pre order or OTG, the main issue is trust. Too many leads came from scammers and hopeful “new entrants”
- Genuine buyers are blocked from having access to genuine sellers and vice versa. Too many layers of intermediaries. This is a unique segment because scammers came from both Buy and Sell sides
- On top of the above lets not forget regulatory and geopolitical issues that pops up now and then such as “slave labour” allegations to some of the world’s largest manufacturers in here in Malaysia and multitudes of shipping, shipment and customs issues
What do we offer here at Majawit & Co?
We a local consulting consortium, not PPE traders. Our extensive network of clients include glove manufacturers who engages us for data sciences, forensic accounting, logistics, digital marketing, branding financing and more. We do not solicit commissions from potential buyers that we send to our clients as our services have been paid for by our clients – the manufacturers
It is easy to see why many horror stories involve an endless chain of agents of other agents involving glove scams. The pandemic causes demand to skyrocket and the lead time to get these “precious” items are easily up to a year or more. We all know that those who require medical gloves during these times, cannot afford to wait even for one week, let alone the entire year. Desperation left many with no choice but to pay a king’s ransom to get their merchandise.
With the virus finally showing some signs of slowing down, demand have also slowed down a tad causing prices to drop but they generally still outstrip supplies. The drastic drop in prices are also not solely caused by demand-supply factors but also from decreasing raw materials prices involved in their productions.
There is a genuine opportunity for overseas buyers to get quality suppliers from less known, boutique manufacturers. Many of whom have existed for decades. Gloves they produce are essential the same quality as those made by their more illustrious counterparts and usually at lower prices. If you are interested in asking them to produce smaller monthly quantities under your own brand – that can also be arranged including related miscellaneous services such as branding and product registrations which can be handled by our team at Majawit & Co.
To Register your interest, visit this landing page.