How to Import from China?

How to Import from China?

Thinking of starting a small business, renovating, building or operating a large company, Importing from China allows you to leverage your money better, and for some being able to enter into the market place when they wouldn't normally be able to. There are many opportunities to be had with products made in china, Chinese manufacturers can make from buttons to bulldozers, but how do you Import from China and take advantage of this great opportunity?

The Importing from China Process

The China Import Process was developed by Lindy Chen Author of "Importing From China" and Award winning Business Woman, learn from her experience to achieve the best results for importing from china and dealing with Chinese suppliers.

Almost anyone can make huge profits being an importer, if you follow the right steps in the right order. Firstly, you should research into the process of importing and answer the following questions:

**What product should I import from China?

**How much should I order from China?

**How do I know if it's feasible for me to import from China?

**What specs do I give potential Chinese suppliers?

**What does it cost to import from China?

**How long does it take to import from China?

**Do I need to give my Chinese supplier a sample or prototype?

**How do I negotiate with my Chinese supplier?

**Should I get a sample from the Chinese supplier?

**How do I choose a broker for importing?

**Inspect Before Shipment, or Not?

 

 

What product should I import from China?

Where To Start, you may currently be in one of two boats:

1. You know what you want to import, or

2. You're not sure what to import

If you know what to import - Great! Your next step is to determine the quantity of products you want.

If you don't know what to import, then look for a gap in the market, or extra value you could deliver to differentiate your product or service from the current offerings.

Hint: Identify areas that people are feeling pain.

Different people have success with different products. You need to be able to sell the product out when it arrives, so do some market research first. That is, ask your potential customers what they want and how much they'd be prepared to pay for it.

Then develop a marketing, sales and distribution strategy. E.g. be a wholesaler, have a bricks and mortar retail store, an online store, sell through eBay etc.

China is considered "the world's factory" so there's plenty of products to choose from, for some ideas consider: Example types of Chinese Products

Steel Products

Housing Products

Furnishings

Equipment

Textiles

Plastic Products

Chemicals

Other non related products

For an expanded list click here.

You can get some ideas from the product categories section of our website.

But don't restrict yourself to what you can buy 'off-the-shelf'.

The Chinese are excellent manufacturers, and they'll custom make just about anything to your specifications.

To keep it simple and low risk, stick to only one product category that you can get from a single supplier in China.

Buying different products from more than one supplier and getting them in the same container starts getting a little more complex.

Not impossible, but for newbies, it just increases the risks.

Some ideas for what product to import:

1. Ask your potential customers what they want and what they're prepared to pay for it.

2. See if the manufacturing capability exists in China for your product. Contact us if you get stuck.

3. Develop a marketing, sales and distribution strategy.

The important thing is to get into action, identify your product and have a business plan.

Products To Avoid When Importing from China

These items are:

1. High value, requiring a great deal of capital to buy a small amount of stock

2. Constantly go down in price, therefore your stock may be worth less than you bought it for

3. Are quickly superseded

4. Competitive to re-sell

5. Low margin

Also, keep in mind the product must comply with your country's electrical standards.

And if you're after brand name products e.g. Sony, Apple etc, there is a good chance they have existing exclusive distribution agreements in place.

 

People more suited to importing consumer electrical goods are generally experienced importers who know how to deal with the Chinese, and have good distribution channels for these products in place already.

 

How much should I order from China?

 

Many people at this stage say, "I don't know how many I want, because I don't know how many I'll sell", or, "I just want a few to test the market".

Knowing the quantity is important because you have to tell the supplier in order for them to give you a quote!

The quantity will determine how many chinese factories will want to do business with you:

Specify too many units, and some factories won't quote because it's beyond their capacity.

Specify too few units, and factories won't quote because it's not feasible for them to produce your item.

You want to attract at least six quotes for your product to help determine a fair market price to pay, as prices vary greatly in China.

You'll need to forecast:

1. First order quantity

2. Monthly, quarterly and annual volume

 

Most suppliers are only interested in how many items you want on your first order - because they only get paid one order at a time.

Suppliers know from experience that forecasts beyond the first order can lack accuracy, particularly for start-up businesses.

But for your own purposes, you need to forecast your monthly, quarterly and annual volume because you need to select a supplier that has the capacity to produce your volume, particularly if you have big plans!

Generally it is best keeping your first order to the minimum the supplier will allow, to minimise your risk if the supplier and/or product doesn't meet expectations.

Shipping Containers

A small order in International Trade may mean at least half a container, but keep in mind a full container is better value as there may not be much price difference in the freight between a half and full container.

 

Containers are either 20 foot or 40 foot, and once again, a 40 foot container can be better value. However, on the first order, a 20 foot container would be less risk.

To calculate how many units will fit in a container, you'll need to know the dimensions of your product, including packaging.

If you're importing small, high value items, then air freight may be appropriate.

Minimum Order Quantities

Check supplier websites to see if they advise Minimum Order Quantities (MOQ).

Some factories advise their MOQ, and for others it will depend on factors like product value, product type, tooling requirements, product dimensions (how many fit in a container), frequency of purchase etc.

On your first order, you need to balance getting a reasonable size order to cover the fixed costs involved in importing, with being conservative to reduce the risks.

 

Initial Order Quotes

Some people are tempted to exaggerate the quantity required, to get a better price and/or deal from the supplier, as well as attracting the supplier's attention.

This strategy is not recommend. It is better to provide a realistic estimation of what you actually want to order in your first contact with the supplier.

If, when you place your order, the quantity that you want has dropped from the original quantity, the Chinese supplier is more than likely going to lose interest in completing your order, and may become irritated.

The supplier may increase his price for your new, lower volume requirement.

Certain suppliers only want to run large quantities, and if you reduce the size of the order, they may find all sorts of excuses to delay your order, or even worse, not to produce your order.

This can certainly be a pitfall, and in this situation, it is recommend selecting another chinese supplier.

 

 

Feasible To Import From China?

Even though China is a cheap option with great savings to be had, you still need to consider the feasiblility of the project you wish to undertake.

Things to consider:

    Project Schedule

    Do you know what you want?

    Will you save money Importing from China?

    How many do you want?

 

Project Schedule

Not all manufactories will have excess stock; if they do, it may not be what you are after, so they will need to produce it. Either way, make sure you allocate 4 months to start Importing from China. Have a new or complex product? then you will want to up that to 4 months or more.

 

Do you know what you want?

Ensure you know the product you want, this includes but not limited to dimensions, material, colour, functionality and you will need photos, drawings or a means to show the manufacturer what they will need to produce, at what quality and sure that no interpretations into how it should be is needed by the manufacturer.

 

Will you save money Importing from China?

Importing Goods Are the cost savings of sourcing direct from the factory in China exceed the fixed costs like freight, customs, duties and your investment in professional assistance for importing.

 

For example, if you only wanted $5,000 worth of goods, it may be cheaper and less time consuming for you to buy this product locally, as the on-costs of international trade can add up to this amount alone.

 

Importing is only feasible after you require a certain volume, or value level. As a rule of thumb, if your order is a minimum of US$20,000 to purchase from a factory/importer/wholesaler/retailer in a Western country, it should be feasible for you to purchase directly from the manufacturer in China.

 

Firstly, find out what it costs to buy your product locally. Getting a local quote may also help you understand what materials, labour and production charges are involved.

 

This can help you when getting quotes from China, as you may now have the ability to specify materials in more detail, and have a better understanding of the manufacturing process.

 

And don't forget to get quotes on packaging, if applicable.

 

When buying direct from the manufacturer, it helps to have a good understanding of your product manufacturing process, and be able to use manufacturing terminology.

 

For example, people are sometimes unaware that tooling or die charges may apply.

 

How many do you want?

Chinese Manufacturers have minimal order qualities (MOQ), this is the minimal number that can be ordered and is due to factors such as production setup, costs and wastage. The minimal order quality will also be specific to a manufacturer and product, so do not expect the same minimal order quality across the board.

 

Feasibility Check

You can do a feasibility check by getting container quotes, Duties, and possible wharf charges for your product, or simply do our complimentary Feasibility Check here, and find out if it's feasible or not.

 

 

 

What specs do I give potential Chinese suppliers?

 

Before importing from China, it is crucial that you do your homework and prepare detailed specifications for your supplier.

Quality products start with your specifications.

The more specifications you provide a potential supplier, the greater the chance you'll receive an accurate:

1. Quote

2. Product produced to your standard

 

Do not assume the supplier knows anything about your product, even if he is the number one supplier in the world!

Remember to include the specifications for packaging too, if applicable.

 

If there's one thing you take out from this, make it 'specify the bleeding obvious'.

The Chinese are master copiers, and they will make whatever you tell them, however, you have to tell them what you want, in detail.

Sometimes it helps to explain to the supplier why it is that you need the product to be produced this way. If you neglect to do this, the Chinese supplier may just assume that you are a "Crazy Westerner", and also conclude that they have a better way of doing it.

Including photos and artwork (if applicable) will significantly increase the chances of getting what you want, and are very powerful tools to utilise when importing.

Non-Disclosure Agreement

Intellectual Property protection is important, and it's recommended you use a Non-Disclosure Agreement that's in English and Chinese.

Sample

The next level of specification is to give the supplier a sample of your product, but bear in mind that this is only required once you've selected your supplier.

Think in great detail, and communicate all expectations clearly with your chosen Chinese supplier.

For a starting point and guide for your specifications, download our Specifications Form.

 

 

What does it cost to import from China?

Importing From China - How To Start Your Own Import Business Without Losing Your Shirt

There are many variables involved, so use the following as a guide:

    Cost of goods - variable. After you have at least six quotes from suppliers, you'll have an idea of a fair market price to pay.

    Import assistance company - $ variable depending on level of service.

    Freight - $ variable, depending on volume, port it's coming from/going to, time of year, freight company used etc. Allow $2,000 - $5,000.

    Duty - Between 0% and 17.5% in Australia of the value Customs put on your goods

    Goods & Services Tax - 10% of (The Customs value of cost of goods + freight + insurance + Customs duty)

    Other e.g. Customs clearance, document fees, wharf charges etc - Allow another 3% on top of everything else.

 

To fund your importing, check your usual financing sources, including the banks.

Financial products go under different names including Trade Finance, Inventory Finance and Import Finance.

For small to mid size companies, the Bank of Queensland has good products and helpful service.

For established importers, a new and innovative finance company worth checking out is Octet Finance, who specialise in financing importing from China.

 

 

Do I need to give my Chinese supplier a sample or prototype?

 

If you can give your supplier a sample or prototype of your desired item, it will greatly increase the chances of receiving what you want.

Just give a sample to your shortlisted top 1 to 3 suppliers, not to everyone you request a quote from.

Samples Getting a prototype made can require a lot of 'back and forth' before you get what you want.

It's therefore generally quicker and easier to have a prototype made locally, not in China.

Then you can send the prototype to China, and they can do what they're best at... copy it!

Some people think their Chinese supplier will come back to them with suggested improvements, but this rarely happens.

The Chinese are not known for their creativity and free thought - they will just produce what you tell them to produce.

 

So, whilst it's not critical you give your supplier a sample or prototype (and sometimes it's just not practical to), it will increase the chances of your final product bein

 

 

How do I negotiate with my Chinese supplier?

Many of us have enjoyed bartering for goods at markets in Asian countries. Here the vendor starts high, you negotiate them down, and it can be a lot of fun.

Did you know that in business to business dealings in China, the opposite usually occurs?

Suppliers will generally quote low initially to attract your interest, then impose price increases over time.

Many western business people weaken relationships, receive poor treatment, or get sub-standard goods because they went in guns blazing on a price negotiation at the beginning of a relationship, often before they've even seen a sample to determine if it's actually a suitable product!

The bottom line... In business to business negotiations, get at least six quotes to determine fair market price, and if your preferred supplier is around the mark, rather than negotiate for reduced price, negotiate for things like better quality materials, shorter production times or added features.

 

Once you have selected a supplier, are satisfied they are reputable, are happy with the price of the product, and the sample you received was up to standard, the next step is to draw up and negotiate the Purchase Order (PO) with the selected supplier.

 

Most suppliers prefer loose arrangements to supply the product because it minimizes their risk and liability.

It is recommended that you minimize your risk as the importer by utilising a properly drafted Purchase Order.

The Purchase Order will need to include clauses covering the following areas:

    Quality control procedures

    Terms of payment

    Moulds ownership

    Packaging requirements

    Penalties for quality issues and delivery delays

    Any other additional clauses defined by individual project

 

Having an established Purchase Order document creates efficient and effective production and importing processes.

 

 

Should I get a sample from the Chinese supplier?

 

When you've found a supplier you want to work with, you're satisfied that they're reputable, and you're happy with the price of producing your order, the next step is to get a sample from that supplier, prior to placing an order for the full quantity.

Keep in mind that the first samples you receive from China may not always exactly match your specification and/or sample.

The Sampling Stage can be a back and forth process between you and the Chinese supplier, even when you've provided as many specifications as you can in the first instance.

If the supplier asks you for your international courier account, (e.g. 'DHL account'), ensure they only send necessary samples to you, to avoid high courier costs.

Sample Making

 

To show that you're serious about dealing with your supplier, proper and thorough documentation is required to create a foundation of understanding, and minimize the inherent risks.

 

We use a Sample Making Agreement which includes:

    The agreed commitment from the supplier of a date by which they will have made the sample for you

    The consequences for the supplier of not producing the sample on time, and

    The specifications of the sample, as the sample may vary from the final mass production.

This Agreement helps to ensure we get the samples we paid for, and that if the samples are correct, that the final product will match the sample.

Further details of the Sample Making Agreement can be found here.

When you receive your samples, check their workmanship and material, compare the samples and then shortlist a potential supplier.

 

Inspect Before Shipment, or Not?

Once your goods have been manufactured in China, should you outlay more money to have your product inspected prior to loading on the container?

The answer depends on a few variables, such as:

    Order value

    How safety critical your item is

    Your confidence/history/relationship with the supplier

    Your risk tolerance

For example, it mightn't be cost effective to inspect a $10,000 order of erasers.

However, a $50,000 order of erasers may be worthwhile inspecting.

At ChinaDirect Sourcing, if we're not doing an on-site inspection ourselves, we put the responsibility of checking the goods onto the supplier.

We've devised a fantastic form that shows the supplier we're serious about quality.

We introduce it to the supplier, when we're negotiating the Purchase Order, so the supplier knows clearly our expectations, and how he will be assessed.

The form is called the supplier Self Assessment, and the supplier simply fills it out and sends it to you prior to shipping your goods.

If everything looks ok on the form, you can approve delivery. If there's any red flags, you have a conversation with the supplier to resolve it, BEFORE SHIPMENT.

See here for further details on the Supplier Self Assessment.