Six Essential Steps to Profitably Import from China
The road to import success from China is paved with broken dreams, misplaced trust and the occasional dodgy supplier. More
common however are two genuine, well intentioned parties that cannot seem to bridge the cultural and communication gap to
successfully work together. Successfully being profitably – for both importer and supplier.
Make no mistake however, China is still the default supplier to the world, and for the most part can produce some fantastic products
to import, at margins which deliver the importer a very healthy profit they can build a very successful business around. The key is HOW to navigate the process, profitably.
We are going to break down our approach to importing from China, what to do how and why. The steps we take to import product for ourselves, noting some of the lessons and mistakes we have made along the way.
How We Import from China
1. Validate your Product Idea – Is it Profitable to Import
There are three things you need to think about here. So let’s break these down. There are over 20 different cost areas to control just to import, then you need to take that product to market. There are a few critical areas that will break your profit margin very quickly here they are:
- Risks and compliance – regulations, standards, permits and approvals.
- Product development costs – diving into custom manufacturing with a supplier that does not have the right skills or equipment is a bit like asking a labourer to build a skyscraper. If it does happen it won’t be very pretty. Plus if you don’t understand how the product is developed and manufactured, you may be asking for things that are just not feasible, At this stage the supplier often stops answering your emails.
- Minimum Order Quantities (MOQ) – Chinese suppliers are used to 10,000 quantity orders for their domestic market. So they often frown at anything under 500 quantities, which doesn’t always fit well with a small business or start-up
Once you have worked through these three critical areas for your product, you can start checking off the remainder of risk areas.
2. Prove your Supplier is up to Task
It is too easy to find suppliers these days, that’s the problem you are mostly overwhelmed with a whole range of traders, agents, wholesalers, with everyone claiming to be the manufacturer. Here are the recommended ways to find, then shortlist a great supplier:
- Trade shows in China – the Canton Fair is still the best place to find, shortlist and start negotiating with suppliers in as little as five days. You should put aside a week, fly into Hong Kong and spend 1-2 days at the trade shows there that run parallel. Then spend 3-4 days at the Canton Fair. Just be warned, you must be very well prepared to reach the negotiation stage after five days. We have a 90 minute learning module with e-book and checklist on Canton Fair preparation with a lot more detail on what to do.There are plenty of other trade shows in China, check out Yiwu and industry specific trade shows.
- Online supplier directories – Alibaba.com is a global phenomenon, and does bridge the gap making the role of the agent somewhat unnecessary these days. HOWEVER, Alibaba still does not qualify its listings very well, and there are far too many low quality suppliers. There are tonnes of tips we provide in our import export learning program, first rule of thumb is to stick with manufacturers with gold supplier status. You must exercise a high degree of caution, this is still the wild west and you have no legal recourse if thing go wrong. While Alibaba offers some buyer payment protection the transaction is between you and the suppliers so don’t expect Alibaba to rush in and solve your problems if a supplier starts pulling a fast one.
3. Develop a Minimum Viable Product (MVP) – A Market Ready Prototype
This is a REALLY critical stage. We have actively encouraged many of our clients to develop their prototype in Australia (or their home market). Because the amount of emails, Skype calls and re-sampling required to develop a product can be brutal, and drain your enthusiasm faster than a toddler in a tantrum.
Of course the manufacturer has to develop a prototype also, but if you can present them with a ready product that they re-model it is much easier than asking them to create from scratch.
Now the MVP is important too. We see so many businesses that try and create the perfect product, with all the bells and whistles, before they go into production, and then take an extra 12 months to bring to market. In that time their budget and the market has moved on.
GET A MARKET READY PRODUCT TO MARKET QUICKLY, THEN WORK ON THE PERFECT PRODUCT AS YOU ARE MAKING SALES OF THE MVP.
I cannot emphasise how important this is. You are competing against other importers, major retailers, and even suppliers that list on EBay these days so creating your market footprint as effectively and quickly as possible is everything. We provide more detail about how to do this in our learning program. This is just a snapshot.
4. Now Protect Your Import Business, Ideas and Customers
There are usually three kinds of businesses that approach this topic, the first know what they are doing and learned from experience how to systematically mitigate every major risk area. I will pump up our own tyres here for a second and say, we fall into this category.
The second kind of business will DIY based on what they know already, “this is how we do it in Australia, I have been to China/one of my staff speaks Chinese so I reckon this is how we should do it”.
The third kind of business will not overcome a challenge and just stop, with the challenges deemed insurmountable. They may or may not go and get professional help to proceed with their product.
Let’s clarify three important risk areas:
1. You have almost no legal recourse in China – you will have no luck of enforcing an IP breach or supplier indiscretion in China. Ask an appropriately qualified lawyer (we are not), and they will tell you so
2. Depending on shipping terms, the product is your responsibility from the factory/port to your front doorstep. If it goes missing is damaged, held up, seized or whatever you will most likely bear the brunt of this2. As an importer in Australia (check for your country) – you are responsible for ensuring your product is compliant with laws, standards and regulations
3. A patent or trademark is up to you to enforce, even in Australia (forget China). It is up to you to make sure your IP is not being used without your consent. Now I have scared you with the facts, just take a deep breath and relax. All of these risks we have faced, and overcome in some cases quite painfully. Let’s just say I would rather squeeze lemon juice in my eye than try to fix these issues again AFTER they happen. Prevention and risk mitigation is about planning, to properly plan you need to understand what risks there are and what to do about them.
5. Now Commit to an Import Order
Now let me point out two critical points here:
1. Your negotiation with the supplier started at “hi, I my name is….”
Every email and communication since then has been posturing towards the final negotiated agreement, and there is much to get right in your agreement.
2. Using buyer leverage is very different in China, than it is in Australia for instance.
Here you might demand, detail and withhold until a supplier agrees to your terms – referring to our culture rather here than generalising about different industries. In China you might do the same, but:
YOU MUST EXERCISE YOUR BUYING LEVERAGE IN A MORE SUBTLE AND CLEVER WAY.
Here is why:
- Relationships and guanxi – relationships are very important in Australia, in
China relationships are everything. A CLOSE WORKING RELATIONSHIP IS YOUR BEST RISK MANAGEMENT STRATEGY.
- Saving face – your contact should not be bullied into submission, sent demanding emails and copied in their boss to everything. Understand the hierarchical structure at your supplier factory and how much genuine leverage your contact has there. Do they have their bosses’ ear and can they enforce the changes you ask for?
- “Yes” can mean “No” – I hate this cliché but you must experience it to understand it. Yes can be “I understand”, or “I don’t want lose the order, so I will just agree and then reveal the truth after you commit”, or it can mean “maybe”
This is Chinese business culture that fills textbooks, and relayed to you in a nutshell, so there is obviously a lot more to it you need to be across.
Let me also point out a really important point on the agreement – the invoice is everything. You might negotiate over hundreds of emails, and think you have an agreement. If the invoice is different, then that is what matters.
6. Ship and Launch Your Products to Market
In relation to shipping and launching your products imported from China, let’s look at a few important details and issues to overcome.
- Product quality and recalls – YOU MUST GET QUALITY INSPECTIONS DONE IN CHINA
However it is just one step among a dozen to take to ensure great product quality. All of the product quality steps we take precede the order, even product recalls must be negotiated prior to committing to a production run.
- Shipping from China – obviously air is fastest but most costly, perfect for small regular orders. However for the majority of us that have bulk orders or even just bulky products, you must ship and decide if you will do a LCL (Less than Container Load) or FCL (Full Container Load). An LCL can be costly but for many small businesses it is the only option they have, if a 20 foot container is not needed.We provide a lot more detail about how, why, when, and importantly how to crunch your LCL costs, in our import learning program.
- Launching products imported from China – I tear my hair out when a client asks us when they should start marketing, as their container of product arrives at the port. We advise our clients to:
START BUILDING CUSTOMERS AS SOON AS THEY COMMIT TO THE PROJECT – LAUNCH ONLINE ASAP
So by the time their product arrives they have a thriving e-commerce website, engaged social media network and even wholesale customers lined up. I cannot fit everything in here, so we have a 90 minute workshop on our import learning program that details the how and why of launching your imported products.
Now you have learned the very bare bones of how we import from China, you can now implement some practical steps right away. If you want to cut to the chase, get started with our import learning program. It is only $499 and hands down is way better value and learning than the jokers charging up to $5k for unqualified ‘import secrets’.
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Why Learn How to Import Products from China?
Sure you can DIY and learn as you go. Tonnes of businesses do and many do well. However when you learned how to swim, you (probably) had a coach, or instructor. To learn the correct techniques, like mechanics and breathing so when you were in the deep end of the pool, you knew what to do. Not splash about, while your arms and legs didn’t work in tandem.
Importing is much the same, when you are thrown in the deep end (“how on earth do I get this product manufactured and back to my market, without losing my house?”), you should already have the knowledge, skills and acquired experience to power to where you want to be – successful product. Not learn from near ‘drowning experiences’.
We focus not just on importing, but bringing a product to market successfully. Because that is what our clients ask for. We stand apart from other courses, because we want you to:
1. Test your product idea first – prove that your product, supplier and customers work out before committing
2. Save time and money – start small, get product to market quickly and don’t over commit to costly/unnecessary extras
3. Qualified and experienced – let’s be honest. The industry is plagued by dream sellers without credentials, look for external proof that a provider is qualified to give advice
10 years of import and export experience, with hundreds of products and businesses, is combined into a cloud based online import learning platform. More than 70 learning modules in HD video, tools and templates which are updated monthly in line with industry trends. It is your tool to start importing, swimmingly.
China Wholesale Online – 5 Tips for Success
There is a low level of trust with Alibaba and other supplier directories used to buy from China online. I have mentioned the onus you have, and the unwillingness of Alibaba to resolve disputes (they prefer to provide tools to better manage the process). So your challenge is to overcome yours and the supplier’s lack of trust. Not easily done from your desktop, it requires some clever maneuvering.
Here are the 5 tips for success when importing online from China:
1. Treat information posted online at face value – consider trusting it after it is proven
2. Don’t be lazy – evaluate supplier legitimacy by taking a few extra steps to verify claims and facts posted. Look independently of the supplier site
3. Learn the tricks for filtering out traders, wholesalers, agents – focus on genuine suppliers, ideally manufacturers
4. Trial your supplier – earn the trust you need to place with them to order a commercial quantity of product
5. Plan to go to China and make the personal connection – once you are ready to commit to a commercial order
With 3PL (someone to hold stock and pick and pack for you), it is very attractive option to operate an import business from a laptop. Just don’t fall into the trap of believing its all beer and skittles. You need to work hard sure, but you also need to work smart and overcome the different challenges of online business – lack of direct personal connections and business relationships which are accentuated when operating across cultural boundaries.
Business in China – Importing B2B
If you are paying too much for your product supplies from local wholesalers and looking to cut costs in your business, you should definitely be looking to order product supplies direct from the manufacturer in China. We have worked at a business to business level between Australian and Chinese companies for some time, to sort out production and quality issues, negotiate release of goods after a disagreement and just communicate effectively when email and phone calls become exhaustive.
Here are the critical success factors for business to business trading with China:
- Prevent losing value in your order – there are dozens of ways your production order can be reduced in quality and value and blow out in time, after the contract is signed
- Manage product faults and ongoing quality issues – product quality starts with the first contact, and there are dozens of ways to prevent poor product quality prior to production
- Shorten new product development time and innovations – understand what issues will delay the time to bring product to market for ODM (Original Design Manufacture) and OEM (Original Equipment Manufacture) projects
Savings on most products often range from 30% to 200%, depending on the product and a whole range of other variables. It is certainly much cheaper, and a smarter long term option, to learn to import from China and work direct with the manufacturer.
Make a strategic choice about HOW you will do that, a sourcing agent will likely impede a direct personal relationship with the factory, and take commission. DIY is very attractive, just up to speed quickly on how to import and;
DON’T ASSUME IT IS THE SAME AS DOING BUSINESS IN AUSTRALIA. IT IS VASTLY DIFFERENT
Why Would I Import from China Wholesale?
We advise all clients and members to work directly with the manufacturer wherever possible. However in some cases, there are wholesalers in China that are better suited suppliers.
Here is why:
- Wide variety of products, from different manufacturers – wholesalers in China often represent factories that do not directly export, and genuinely add value by marketing, communicating in English and getting export clearances for many low volume manufacturers
- Lower MOQ (Minimum Order Quantities) order – wholesalers can often negotiate lower volume orders and sell these on to you at lower volumes than the factory is prepared to offer you directly
- Wholesalers can produce new designs and products – Chinese wholesalers, including many with offices in Hong Kong have product development and design in house, and develop new products regularly which you can import with moderate changes and lesser risk
The Canton Fair, and trade fairs in Hong Kong before and after it are a great starting point for connecting with Chinese wholesalers.
What to Avoid – Trade with China Suppliers
The issues with dealing with intermediaries in China, including wholesalers, traders and sales agents are significant. You should carefully weight up the benefits we outlined, and these challenges:
- Difficult to negotiate changes – if you want to negotiate changes to the product, before and after production you are not speaking with the factory decision maker
- Cost does not equal quality – you cannot be sure if the price you pay translates to quality, with the wholesaler taking an undisclosed margin
- No direct relationship with the factory – your BEST RISK MANAGEMENT STRATEGY is personal relationship with the factory, which intermediaries including wholesalers in China prevent
Why Work with My Import Label to Import from China
- You learn the processes and insights that we have used to set-up product brands and import businesses
- Objective and honest advice – we don’t take commissions or play favourites with manufacturers, the advice we provide is based on your needs only
- Confidentiality – we do not disclose your product or suppliers to anyone, and happily sign non-disclosure agreements with members
With tonnes of experience, successful members and qualifications, you know the training and support you receive is relevant and credible
The range of products we have successfully sourced for clients include:
- Clothing, textiles and footwear
- Giftware, home wares, bedding and party supplies
- Industrial products – building supplies, stainless steel, nuts/bolts, shop fittings, paper, laminate film, power tools, agricultural and industrial machinery
- Electronics – consumer and industrial
- Sports equipment, hobbies and toys
- Children’s clothing, products and accessories
Half your Budget, Double your Profit
We help you to:
- Import any product, from any market
- Innovate your products
- Scale up and import in volume
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