Importing From China? Avoid these 5 Common Mistakes
In my work at wedoimport.com, I regularly work with a lot of new importers, especially new e-commerce sellers selling through the Amazon or eBay platforms. Most importers, when first starting out are very excited & charged up about the new venture & want to get things moving as quickly as possible. When first importing from China or from any other country for that matter, there is a steep learning curve & it normally takes 2-3 shipments for an importer to understand the process flow & all the terminology & acronyms involved in International trade. With limited understanding of the import processes & that of the working style of Chinese factories, comes increased risk, especially quality risk as well as the increased likelihood of incurring losses on the first import from China due to getting the numbers wrong. Here I look at 5 common mistakes, I often see with new importers first starting out of China. This is by far the number one issue, I notice with enquiries from new importers and I like to call it the “Urgent Order Syndrome”. Normally the first email we receive from a potential new importer would go somewhere along these lines:
“I am looking to import 2,000 units of digital food scale from China. These are required urgently as we have huge demand for these. Can you help us out and get us the best possible prices on these?”While the exuberance is totally understandable as all new entrepreneurs are excited about their venture & want things to move fast, this can often be a recipe for disaster. This urgency often results in requirements for product & packaging not being “specific” enough, quality control procedures being lax, factories skipping procedures to cut down on “production time” and last but not the least, losing out on good suppliers, who may have a quality product but are not flexible on their delivery times, or have longer delivery times simply because they have more business. All these issues can lead to quality problems & the loss from these quality issues can be far greater than the time savings achieved by trying to speed up the process. Another thing I see commonly in such cases is people negotiating aggressively on “Delivery Period” and choosing a supplier because they promise a slightly shorter delivery time relative to the “Industry Standard”. In many of these cases, suppliers tend to quote a shorter delivery time to close the sale and may still take the same time, in other cases, they may skip processes to speed up production which can lead to quality problems. For most new importers importing from China, the sourcing process starts on a B2B website like Alibaba. It involves contacting multiple suppliers, getting quotes, comparing them & shortlisting the best suppliers, in many cases based on price. However, from my experience, often people do not compare like for like specifications albeit unintentionally. For a majority of the products, there are so many subtle differences in a product that influence the pricing of a product. This can be materials, components, type of paint, dimensions (thickness is a common culprit) or other specifications. This problem is less severe, when someone knows the product well, however even in those cases differences among suppliers start to get highlighted, when you are deeper in the sourcing process. In many other cases, especially when people are sourcing new products that they haven’t worked with before, very obvious differences are sometimes missed, leading to good suppliers being shot down because their first quote looked expensive. One of the ways to deal with this is to spend some up-front researching & understanding the specifics and finer details of the product as well as expected quality problems with that product. Asking a lot of good questions about the make-up of the product, to the first few suppliers you speak to also helps. This is a very common problem when first starting out importing and normally happens due to the nature of international trade. Even in a simple international trade transaction there are several parties involved which can make it difficult to calculate the landed cost of a product and hence the expected profit. On top of that, what I often see in the consulting work I do with a lot of e-commerce clients is that when you factor in other costs for e-commerce platforms, say Amazon seller fees, domestic courier costs, marketing costs, professional product photography costs, etc. the profit margins don’t always look viable & there might be better opportunities in a different product. New importers often base their costing on the obvious costs such as product cost, logistics, and inspection. However, there are often other not so obvious costs that influence profit margins for a product. These can be for unexpected contingencies such as cost of random customs inspections at port of loading or port of destination or planned contingencies such as cost of expected returns. This is a difficult one for any importer & takes a while to get used to when importing from China. This is also critical when it comes to working out the landed cost of your product. When requesting quotes from Chinese factories, the first question you can expect is about your quantities. The answer to this question influences:
- Whether the supplier will respond to your email
- The quote you get from the supplier (High-Low)
- The “service level” you will get
- Your customization options (White Labelling, Packaging, etc.)
- Your logistics cost per unit.