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Buying from China: Tips for Small Business Owners.
Buying From China: Importing Tips
Having been involved in the Import/Export Business for over 25 years, I've come to learn a thing or two about Importing products into North America or shipping them around the world and I would like to share a little of that experience with you.
Since you took the time from your busy schedule to read this article, which I really appreciate, then I'm assuming you are interested in knowing more so I will not waste your time with useless information.
Everything I'm about to tell you are facts based on day to day operations in the Global Purchasing & Logistics Industry so please take a few moments to read on.
If Importing products from China or anywhere else in the world is of interest to you, I promise it will be well worth your while.
OK. Here we go
Whether your small business is already established and you are thinking about expanding your current product lines or maybe you are thinking about starting your own new venture, you have to look at the products or services you will be offering the public, whether retail or wholesale, extremely carefully before you start investing your hard earned time and money.
I'm not going to get into your business plan strategy in this article but I would like to jump ahead and talk about products you would like to offer your customers or maybe products you are already offering but you would like to buy directly from the manufacturer instead of a middleman (wholesale supplier) for greater profit margins.
If you haven't figured it out yet, nearly everything on the shelves that you see in the big box stores comes from China but how do we, as small fish in a big sea full of giants, compete with big boys? The answer is simple. Do what they do. Buy Low/Sell High and I'll explain how to do it very effectively.
Now obviously I'm assuming you don't have the same buying power as Walmart for example, who spend an estimated 10 Billion Dollars a year in China alone and I'm sure that figure is low, but on the flip side of that coin, we don't have their overhead to worry about either which can make you very competitive with anybody out there, whomever they are.
Although other countries like India and Brazil are becoming economic powerhouses very quickly themselves, China is still known as the World's Factory and for good reason. The Chinese are extremely efficient, very professional to deal with and because of their unfortunate labor laws, their products are very inexpensive to buy.
Great for us, bad for their labor force but it's how all the major retail players in this world are making fortunes and you can do it too. All you need is a little Inside Information on how they do it so keep reading and you'll find out how to do it yourself.
The first step is deciding which line of product/products you want to offer your clients so if you do/don't already know yet, the first step is to get on the Internet and start researching Chinese Suppliers or any other manufacture in the world that makes what you are looking for.
There are some great websites out there that make that task a lot easier.
A few of the most popular ones, as I write this are: Made in China, Alibaba and one of my personal favorites, Global Sources.
I like Global Sources because they will snail mail or electronically send you full colored catalogs containing names of suppliers, their ratings as a company, their products and all their contact information in whatever industry you want to pursue.
Great reference guides to have handy in your office. For example: Electronics, Furniture, Fashion, etc. etc. etc.. The list is endless. There are millions and millions of products to choose from so pick a few that excite you and get started.
Lets assume you've decided on what products you want to sell so look up these websites I listed above and enter key words into their Search Database tool bars.
Another bonus you will receive when you start searching for products is that you will discover very cool items that you never even knew existed or none of your competition carries, that also compliment what you already offer.
Tip: From my experience, I have found that when you bring in a new product line that no one else carries and it becomes extremely popular, you have roughly a 2 year window to exploit it before everyone starts carrying them.
We all know that if you are making money, everybody wants in so if we understand and accept that factor into the equation, then make sure you have a very aggressive marketing and distribution plan in place before you even place your first order so you can hit the ground running as soon as the products land at your doorstep.
You want to achieve product recognition in the marketplace as quickly as possible as the company to deal with before your competitors even know what hit them.
If you found a manufacturer that has a patent on the product you want, maybe you can set up a contract as the sole distributor of their products in your country and you can build a network of retail distributors. Something to consider but that is another article in itself so lets stick to the subject at hand for now.
Taking pre-orders from clients is not a bad thing either. It gives you needed cash flow which is always a good thing but I would not suggest it for your first order. Get to know your supplier and the entire ordering process along with all warranty issues first so you don't get into trouble.
Don't let your excitement of becoming rich and spending all your money before you make it cloud your judgment. Again, there are many factors to look at when making that decision but it's ultimately your call so take your time and plan your moves very carefully.
For these and many other reasons, I always suggest to clients to stay with products that compliment what they already offer or they are already quite familiar with, to begin, not only for up-selling your customers with your current product lines but you won't have to make many expensive changes to your entire infrastructure. Stick with what you know.
Make your money first before you start spreading yourself too thin. Make sure your foundation is secure first before you take greater financial risks.
To begin our search, let's say we enter Consumer Electronics as key words into those website's search toolbar I suggested.
Those websites will immediately show you a list of suppliers and the products they offer along with their ratings as a company. Usually a 5 star rating, like a resort, is the highest rating they can receive as a solid, verified company which is who I like to deal with if they offer what I am looking for.
If not, I'll keep looking at lower rated companies but that still doesn't mean that they are not good companies to deal with. I've been to many 4 star or less resorts and enjoyed everything they offered. The same scenario lies with foreign companies.
When you start getting into 3 star and lower you are taking your chances but that is why getting to know your supplier and their products is so important.
They might also be new start up's with exciting new products to offer and charging their way up the rating system. You won't know until you begin. I call them P.H.D's. Poor, Hungry & Determined.
Exactly what I like to see in my new sales representatives so we can mold them into exactly what our company needs and they share our vision for it's future growth.
Open up some of those supplier websites and start looking around at what they have to offer.
If you see a product you are interested in and feel it would be very popular over here, then send the supplier an email telling them that you are interested in Importing their products into your country and need specifications, price per unit, payment options, discounts on volume purchases, minimal orders, etc. etc. and always ask about samples
TIP: Always be very polite when dealing with the Chinese or any other foreign companies. They do not respond well to arrogant demands so be very respectful in your requests and they will gladly oblige to all of your requests but keep them direct, very clear and get to the point of what you are looking for. Treat them like you want to be treated yourself.
PLEASE is a very popular word around the world. Try using it as much as possible
Now a lot of times most of these suppliers have minimal orders you have to buy, depending on the product but for conversation sake, let's keep using consumer electronics as an example.
So let's say their minimal order requirements are somewhere between 100 to 1000 units for example but that doesn't mean they won't negotiate. North Americans are the largest consumers of goods in the world and all foreign suppliers/manufactures want in on our markets.
They want your money so they are open to any/all ideas but before you get to the point of putting in your first order, you have to make sure that the products you are interested in are exactly what you want so ALWAYS, ALWAYS, ALWAYS ask for a Sample first, especially if you do not plan on taking a marketing trip to some trade shows in China or anywhere else in the world to see them for yourself.
Now if you want to sell Hot Tubs for example, a free sample might be a little too much to ask for but say it's the newest cell phone technology you are looking for.
Just because your product looks good in a picture on a website, that doesn't mean anything.
You have to make sure that it is well made and exactly what you are looking for so a Sample will answer a lot of your questions.
You also want to know how this company handles any issues with their hardware and return policies, which is another great reason to deal directly with the manufacturer if possibly or you might have to carry a lot of spare parts or additional inventory to handle any customer issues.
You also may have to pay a little more for a single unit (sample) to have it shipped to you but it's a lot cheaper than ordering a 20 or 40 foot container load of products, investing all that money and come to find out that you can't use any of it for a million different reasons because if you do, tough luck. They will not take your order back and refund your money once it is shipped out of their warehouse. Expensive learning curves really suck and believe me, I know as well as any other business owner out there.
Depending on the type of product, many foreign companies will send you a Free Sample, which I always like. I'll even volunteer to pay for shipping just to test out the money transfer system and delivery process but the bigger players will just send it and take care of the costs involved themselves. It's all a part of doing good business.
TIP: When they send you a sample, always have the suppliers fill out the customs paperwork labeled as a Gift. Then you won't have to pay any import duties or taxes on the product when it enters the country.
Another thing to watch out for is to try to avoid dealing with foreign trade companies, if possible. It also means that you might have to go through them to deal with warranty issues which may mean long delays and obviously they add on their commission to every unit which again cuts into your profits and operating budget. Not what I would want
Remember that the reason you want to import was to get rid of the middlemen and trade companies are another middleman cutting into your bottom line. Find the source/manufacturer or their direct company representatives. Keep searching/digging until you do. It will save/make you a fortune over the long term.
If the sample looks good and you are ready to place an order, the supplier will want to get paid in full, upfront. Usually 30%/50% in advance and remaining 50%/70% balance due in full before it leaves the docks or warehouses in China, which might take a few more weeks for them to put it all together depending on the products.
Believe me, they'll let you know when it's ready to ship by sending you the final invoice. They want the balance of the money owing for the entire order as soon as possible to keep their business flowing.
There is logistics paperwork involved at this point in time but I will explain all that in greater detail later so to begin, yours or your suppliers freight forwarding company or courier company will usually handle that part for samples
Most suppliers in China deal with PayPal for payment so if you don't have a PayPal account, set up yet, then I suggest to set one up. It also helps provide a little credibility to the company you are dealing with. Then you can just transfer the total amount owing, as stated on their invoice, directly into their PayPal account from yours, which is great if you are sitting on a hot beach with an inch of sun tan lotion on, cold drink in hand and your laptop with Internet access.
For you non-American readers, keep in mind that almost every country in the world deals in US Dollars although the Euro is gaining strength and popularity so keep an eye on the daily currency rates for your country vs. USD before you place that order. I found that our Canadian Dollar spikes around noon everyday which is when I might transfer funds for more value on my dollar.
Depending on the size of the order, that strategy can save you thousands of dollars per order and money saved is money made.
In other words, once you get organized, you can run that part of your business from anywhere in the world as long as you have Internet access and online banking services with your financial institution.
It's also a great way to iron out any wrinkles in the ordering/return process before things get really busy and most importantly, you can figure out your C.P.U. (Cost Per Unit)
Once you know exactly what that order cost you to have it shipped right to your door, directly from your suppliers warehouse, then you will know what to charge your retail customers and understand one of the sweetest words in the business world, PROFIT!, after reaching your break even point.
Understanding your C.P.U. is vital for your success as a business owner so you have to figure that equation out and have it burned into your head when you need it for retail sales, freebies, multiple order discounts, performance bonuses for sales reps, etc. etc. etc.
Also, with PayPal, if you don't receive your order, you can put a complaint in with PayPal and get your money back within 30 days.
If, for whatever reason, you can/t/won't use PayPal, then request your suppliers banking information so you can get your bank to wire the funds directly into their company account and keep their transaction details with your bank for future order payments so you can place future orders remotely.
TIP: For any new business owners out there reading this, always keep a detailed paper trail, not only for your accounting & book keeping purposes but for countless other reasons.
A simple and easy filing system is a must so you instantly know how to retrieve important information, if ever needed, is extremely important.
There's nothing more frustrating than trying to find some important paperwork when you need it and you don't know where it is, especially when you are dealing in Global Logistics and your orders are taking a few months to get here. It's a major headache that's an easy fix now
Right about now you are asking.
Will foreign companies actually give me all their banking information?
YES They Will!
It is a standard banking practice for all global transactions.They just want to get their hands on your money. It's just business and every company needs cash flow to operate. It's no different then anywhere else in the world.
If business is going well and you are starting to do a lot of business overseas, then have your bank set you up with a Global Wire Payment System so you can transfer funds directly from your company account to any company bank account in the world electronically for a small monthly fee and a per transaction fee.
It's the best way to go as I write this article. If you are ordering products from a company in your own country, than an Email Money Transfer is best if your banks daily transfer limit amount will allow it.
Currently, in Canada, the limit is around $5,000.00 per day so you may have to talk to your bank's business manager to get your limit raised if you need it or make a few transactions over several days but it only costs around $.50 per transaction. It's so simple and efficient that it boggles my mind why everyone is not utilizing it.
I have no idea why companies don't offer this payment option for customers instead of costly credit/ debit cards, checks etc. etc. It's as easy as sending an email.
TIP: Keep the International Money Transfers under $50,000.00 at a time and no red flags will open up.
Banks are very paranoid with funds being transferred around the world for many reasons, as I'm sure you can understand with what's been going on lately. Money Laundering, Funding Criminal Activities, etc. etc. so if you keep your Electronic Money Transfers at $49,999.99 or less, you will not set off any alarms.
For carrying money on your person across borders, the limit is $9,999.99. If you get caught transporting more money than that amount on you Ex: $10,000.00, across borders, then the IRS gets involved and no one wants those guys on their case no matter how legitimate you are.
OK, you got your sample and it's perfect. Exactly what you are looking for and you are excited about the sales potential and are ready to put in your first order. Now it's time to get organized.
If the product is not up to your standards, maybe you are dealing with, what I call, a Knock Off Company so keep searching for the right supplier. There may be 100 different companies offering the same product but keep searching for the right one and keep an eye on their credit ratings on those websites I mentioned.
As you become more experienced in your global sourcing for products, you will notice patterns in company profiles indicating they are someone you want or do not want to deal with
If the products you order are small enough so that you can put 100 or more units in a box, Cell Phones for example, then a courier company will most likely be the easiest and fastest way to go although they might be more expensive per unit in shipping expense, which means less profit in your pocket but if time is a factor, you'll have to crunch the numbers on that decision.
DHL, Fed EX. UPS etc. are all set up in China so contact their local office and set up an account.
Remember, do not go out a buy 100,000 units after you get your sample. Keep the first few shipments low so you can test out the entire system. Slow and steady. Get to know your suppliers, your products, logistics companies, your markets and your business before you take any major risks. Money is hard to come by these days so protect it. Don't let greed or excitement cloud your judgment. Stay cool but keep pushing forward.
TIP: When dealing with courier company's, never let them know what your products are because things have a habit of disappearing if someone considers the product to be valuable to them. Theft is a major problem with shipping so be careful and always insure your order for the value you paid for it, plus shipping.
If your order does get "lost", you will only be able to file a claim for the amount you paid for it, not the amount you are selling it for, so don't overestimate the value of your cargo because then you will have to pay higher insurance premiums which is cutting into your profits on resale. Just make sure you can replace the order and always check the couriers billing system.
Courier companies are also notorious for double and triple billing you so keep a sharp eye on their invoices.They will also handle all customs paperwork for you.
Always make sure that you can track your order on-line as soon as it is picked up at the warehouse in China, until it's delivered to your door. Demand tracking numbers, if not available on their website, then directly from your courier so you can follow your order at every depot on it's journey from the other side of the world, to you.
Now it's becoming very real and very exciting
It may sound a little intimidating at first but it is actually very easy once you do it a few times. It's a buyers beware business and if you follow my advice, it can save you some very expensive learning curves which I also learned the hard way.
Well. Business is Booming and your orders are getting larger so now you want to start ordering container loads of products. A problem every business owner wants. Exciting and scary at the same time.
Ocean freight is definitely the most feasible way to go but time is a major factor to consider here because your shipment might take a month or two to get to you depending on your location.
For example, you could probably get a 20 foot container that can hold 20,000 units and shipped by ocean freight from China to LA or Vancouver for around $1000.00 (rates fluctuate) which means if your container can hold 20,000 units, your CPU (Cost Per Unit) is even lower because of the lower shipping expenses which equates to more profit in your pocket, not to mention you can negotiate greater discounts per unit from your supplier for larger orders.
Those lower prices per unit also means a greater advantage over your competition by offering your customers lower prices which you can make up in profit by selling more units.
Was it John Paul Getty who said he would rather earn a $1.00 off of 100 people than $100.00 off of one person. No wonder he was America's first billionaire.
If the products you order are too large for the couriers to make it feasible, you will have to look at ocean freight or air transport which I cover in greater detail in my next article.
Buying From China. Part II
I could go on and on about business and logistics but I feel I've bored you enough so If you are interested in knowing more, please feel free to send me an email with any questions you might have and I will gladly tell you everything I know and that is based on real world experience but I think that's enough information to get you started.