How to import from China: You're new & have limited money
Importing products from China to sell online is a great way to supplement your income. And for some lucky or business savvy entrepreneurs, it can become a primary source of income. But for most people starting at square one, the challenge is how to launch their business with limited startup capital. In this post, we'll explore how to import from China and keep your costs down.
Don't try to reinvent the wheel
It's common for new importers to think the key to success is inventing a brand new, never-before-seen product. But the costs associated with this strategy are prohibitive for most startups: research and development, tooling costs, intellectual property protection, marketing, etc. Instead, consider manufacturing an already-existing product, but with some small change. This could be something as simple as slapping a new brand name on it. Other lower-cost customizations include packaging, bundling or marketing methods.
When researching "how to import from China", many prospective entrepreneurs will land on sites offering bad informaiton. Sadly, the interwebs are filled with so called "experts" trying to peddle information to new ecommerce sellers. The fact is that many of these experts have only had a few, if any of their own private label products manufactured in China. This certainly doesn't stop them from acting like they know it all. This centuries old get-rich-quick play started during the California Gold Rush in the mid 1800's. A few clever entrepreneurs figured out they could make a killing by selling every gold-fever infected, wanna-be miners maps & pickaxes. They weren't miners themselves, but they saw a way to make money in the industry without actually putting the work in to gain experience. The same thing happens in every industry, every day. That's why the market for informational products is over 110 billion dollars a year and growing!
In short, be wary of sites selling Amazon "secrets" or Shopify dropshipping courses, or courses on how to import from China. Guided Imports has been in China since 2008. We are one of a handful of U.S. owned sourcing, manufacturing, and importing companies who have the experience and expertise to offer sound advice. We help ecommerce sellers every single day successfully get their products manufactured here in China. So look around the site, read the blog, visit some of the reputable sites out there that have great information on them: The Amazing Seller, Jordan Malik, Jim Cockrum, and CPC Strategy. 99% of the information you need is readily available for free if you put in the time to do the research.
Keep it simple
For buyers with limited funding, products that require many complex components can be more of a money pit than a money maker. It's not that complex products aren't profitable. But the high upfront costs of design and tooling requires higher sales volume to turn a profit. Conversely, simple, low-cost products can bring profit at smaller quantities. The same general advice is given on most reputable sites regarding what types of products to sell when you import from China:
- Lightweight products no bigger than a shoebox - This will save on shipping, which often times can be your #1 expense.
- Nothing electronic - Too many opportunities to break and customers will revolt, or at least flood you with complaints.
- The fewer moving parts the better - Less chance for something to go wrong or break.
- Something that is consumable, but non perishable - if you can find a product people buy repeatedly, you've just boosted your revenue exponentially.
- Don't sell a product that has never been offered on Amazon before. You don't want to blaze a trail here.
- Pick a product. Read all the 1-4 star reviews of that product and take notes on what the reviewers are saying needs improvement. Then improve that product and make it your own.
There are also a whole host of sites offering information on which type of metrics you should look at on Amazon when deciding what to sell. Tools like JungleScout and Unicorn Smasher can sometimes help you find ideas for products. Just be warned that many times, these types of tools cause paralysis by analysis. If this is your first product, don't wait around to find the "perfect" product; it doesn't exist. Pick one and use it as a learning experience.
You can read more about how to get smaller quantities from factories, or test-sell a product before ordering. There's a lot of informaiton out there. So much so that it can quickly overwhelm you. One of the most effective ways to learn how to import from China, is to join a Mastermind group. You can find these on Facebook or Reddit. You can also join a few of the dozens of Amazon FBA Facebook groups and look for a mentor to help guide you. There are many fantastic people in the Amazon FBA community. Just don't expect anyone to divulge product information, as this is usually a closely guarded secret.
One product at a time
Diversifying your assets is a good strategy for your investment portfolio. But for a startup ecommerce business with limited cash flow and experience, the key is to do one thing and do it right. If you've only got so much capital, you'll be able to take it a lot further by investing in a higher quantity of a single product than in low quantities of several different products. With multiple products you'll be paying separate tooling and startup costs for each, which means you'll have less cash available to buy quantity. And at lower quantities, you'll be paying more per product unit.
You'll also want to make sure to read our articles on how to negotiate with suppliers. China is very different from the US; especially on the business side. Just keep in mind that while you can certainly negotiate price, if you push too hard the supplier will say yes, but they will recoup their lost profits. This usually means they will start using lower quality raw materials or components.
Consider buying from a trading company instead of a factory
Yes, you will pay a markup -- although this is usually very small, even as low as half a percent. But in exchange you'll get the benefits of the trading company's relationships to factories. This can result in lower MOQs, access to traders' backstock, and exposure to smaller factories that you might not otherwise find online. Plus, trading companies are much more customer service oriented than factories, which makes for easier communication between supplier and buyer. Buying from a trading company will also save time, as they are very familiar with the products they offer. This includes the quality expectations of the destination market, since they often specialize in exporting to a handful of countries. Whereas factories don't have the time, inclination, or personnel to devote to quality concerns. The only quality metrics factories care about is their internal quality control, and/or the quality requirements specified in client's purchase agreements.
Another advantage of buying from a trading company is that they are typically smaller and more accessible. You'll have much more success in your communicating details since it's common for trading companies to have only 2-5 employees. As stated previously, these employees are usually better versed in the English language which makes the entire process easier and more efficient.
Price: Not are dire of consequences for negotiating lower prices
When you import from China, you do so to get a better price than if you sourced American suppliers. We covered the potential dangers of "over negotiating" a supplier's pricing. This topic is far less applicable when dealing with trading companies, as they expect some price haggling. Whereas a factory will recoup their lost profits if you get them to lower their price past what is standard, a trading company is less likely to do this. Why? Because they don't directly control the raw material selection of your product. A factory may substitute cheaper materials in your product to regain the profits you cost them by badgering them into submission on price. A trading company doesn't actually manufacture the product, so this won't apply. However, you will want to be cognizant of the price range of your product so you don't ask for a price that is clearly not viable. Just because the trader can't usually substitute lower quality materials doesn't mean they won't find other ways to reimburse themselves!
When negotiating with trading companies, you'll want to source as many as you can, since prices can vary quite a bit. Once you have a range of product costs, you can then negotiate more effectively.
When you import from China, keep in mind that there are literally thousands of factories, trading companies, and component suppliers. In other words, you have options. Make sure to explore these options in your initial supplier research.
Hire an experienced expert to help you in China
When you import from China, it helps immensely to hire either a sourcing agent, supply chain management (SCM) company, or an import specialist to help you in your quest. China is the "wild, wild west" of the manufacturing industry; rules are ambiguous, back-room deals are common, and if you get burned it's highly unlikely you'll get your money back. Hence the desire to have a professional on your side that has a presence in China. Just be very diligent when vetting a potential sourcing agent, as many of them fall under one of three categories that should raise concern:
- Chinese agents. As mentioned previously, back-room deals are part of the business culture in China, If you hire a Chinese agent, there's a good chance they have a side deal with a few suppliers. They've likely agreed to funnel business to these suppliers in exchange for either a flat fee or a percentage of the order. In America we call these kickbacks. But again, in China, they're almost expected.
- Western or U.S. agents that aren't physically in China. This is the majority of sourcing agencies. While they tout their expertise and experience, they sit in their American offices, half a world away from where your product is being made. Often times they either outsource your business to a Chinese agent (see above point #1), or they just work the phones and email from the US--the same thing you would essentially be doing. If they are not actually IN China, then it may be wise to keep looking.
- Agents that sell products on Amazon FBA. Surprisingly, this is very common. Many sourcing agents have been successful in their Amazon, Shopify, or other e-commerce business and think this automatically qualifies them as expert in sourcing and importing from China. Even many agents in China sell products online since Amazon allowed them to do so in 2016. You may need to do some research on this one since it's often difficult to find this information. It's mind-boggling that customers would entrust their product to someone that could potentially be their competitor! You know how much hard work and how many hours you put into finding a viable product to sell, and now you're going to give your precious product idea to someone that could sell it themselves? All sellers are very private and protective of their goods, and for valid reasons. Don't hand over your great product idea to a potential competitor.
The only sourcing, importing, or SCM company that would make any sense is one that is Western/U.S. owned & operated and actually has offices in China where Western/U.S. employees work. This way you're getting the communication skills, work ethic, dedication, honesty, and quality standards of the U.S., with the added benefit of Chinese prices.
When you import from China, it is a significant advantage to have an experienced U.S. sourcing agent watching out for your interests. As long as they don't charge a commission and are transparent with their fees, there is virtually no motivation for them to try and squeeze you for more money or larger orders. Whereas commission-based agents have every motivation to steer you toward larger orders and more expenditures.
Validate your product before investing
By eliminating some of the unknown factors of investing in a product, a buyer can utilize limited resources much more efficiently. When you import from China running a product validation at the start of the sourcing process is the way to do this. Product validation involves collecting cost estimates for every stage of production and shipping. The results are then analyzed to find the optimal investment amount, quantity, production and shipping methods.
At Guided Imports, we have been doing this for our client's for years as part of our full-service A-Z package. But after countless requests, we now offer our Product Validation & Cost Analysis as a stand-alone service. This has been incredibly popular, as we do all the work for you and provide you with an extraordinarily comprehensive report so you can decide whether your potential product will be successful. It's far more sensible to spend the $129 to get a comprehensive report and cost analysis of your product idea before you commit to it and start the sourcing process.
Make sure to sign up below to receive periodic discounts on this service as well as a chance to get the service for FREE when we do our quarterly random drawings.
Use the Overrun Technique
When you import from China, you will be dealing with a business culture that is dramatically different than that of any Western country. However, this doesn't mean that they don't have many of the same core principles. For example, suppliers in all countries will gladly help you with a request if it means more profit for them--especially if they don't have to do much work. This is the idea behind the Overrun technique.
When a buyer wants to save money on manufacturing costs, it's a safe bet they're looking for a supplier who can produce a low Minimum Order Quantity (MOQ). The problem is that many of the better factories won't agree to a low MOQ. And I've seen all of the "experts" on the internet who are giving bad advice about how to go about getting a supplier to agree to fill a low MOQ order. Usually they suggest to tell the supplier something like this: "...I'd like to place a small test order and of it does well I can promise you a large order on a regular basis.." Sound familiar? There are many variations of this approach, but the idea is the same: promise something you probably won't do.
The reason why Guided Imports is the most recommended sourcing and SCM service in the ecommerce industry is because we have fantastic relationships with our supplier network. And fantastic is an understatement. Over the past 7+ years we've worked tirelessly cultivating and growing relationships with the goal of attaining guanxi with each supplier. This unique cultural concept is absolutely critical if you want long-term success in China. We've written guides, posts, and books on this concept. In short, this is our biggest advantage over every other competitor. Without getting into too much detail (you can find endless information on this via Google) this concept is based on trust Rather than start a new relationship with a potential long-term factory partner with a white lie, why not try something more effective? This is where the overrun technique comes in.
Basically it's just asking a supplier if they have an upcoming production run of your product that another customer has ordered. If they do, you can try to get them to do an overrun of a few hundred extra units. Here's a real-world example:
[thrive_text_block color="blue" headline="Example of Overrun Technique"]Let's say you're looking for a supplier to agree to produce 200 units of a garden hose sprayer. You've been turned down by a number of factories because your order quantity is far too small. So, getting creative, you ask each supplier if they have an upcoming production run of any garden hose sprayers from other customer's orders. Eventually you'll likely find a supplier that says yes. Then you can ask them if they could just tack on an extra 200 units to that production and sell them to you. This way, they are not only saving money by not having to retool, re-setup their production process, but they're also making money by selling you the overrun. Really the only thing you need to worry about is the logo. If the production run is combined with the logo application process, you'll have to see if they can leave off the logo for your additional units (or apply your logo)[/thrive_text_block]
This has been successful for many buyers, as it's a win-win situation. You'll likely need to put in some time finding a supplier in this situation, but it's worth the effort.
Source freight forwarders & shipping rates
For many new e-commerce sellers who want to import from China, shipping costs are a shock to the system. Depending on your product size and weight, the cost can actually be higher than the product itself!
To ensure you're getting an accurate shipping quote, you'll want to contact as many freight forwarders as you can to compare prices. Since prices can vary depending on demand, time of year, and other factors, be aware that the quotes you receive will typically have an expiration date. Thus it makes sense to get shipping quotes before you decide on a product AND again just before your production is completed.
How to save money shipping low quantities When you Import from China
Typically, shipping small quantities of goods from China is expensive because you're usually relegated to express (door-to-door) shipping (FedEx, DHL, UPS, TNT). The only way around this is to try to either find an Air Freight carrier that is competitive on smaller shipments, or to search for a Less than Container Load (LCL) carrier that allows shared containers. This way you're splitting the cost with other smaller shipments. There are not many companies that offer this type of shipping, and the ones that do are usually concentrated at certain Chinese port cities. You'll need to do some internet searching and calling to find this hidden gem.
There's a definite tipping point for air freight vs. express. Usually shipments under 300kg are better off with express. Anything over 300kg will likely be cheaper via air freight. However, air freight is subject to the same import, export, and customs processes and fees as sea freight, so keep that in mind. Whereas express is door-to-door and the price is all-inclusive.
The best way to save money on shipping is to find a lightweight and small product. Shipping a pallet of iPhone screen protectors will be a fraction of the cost of shipping a pallet of garden hoses. So while you shouldn't pick a product solely on the basis of the shipping cost, it's definitely an added bonus to find one that is small and lightweight! When you import from China, you need to devote as much time into sourcing freight options as you do finding suppliers.
Another way to keep shipping costs down when you import from China, is to plan ahead by avoiding holidays and last minute shipping. While shipping quotes have a limited "shelf life", you should try to get an initial quote before you decide on the product. This will allow you to get an idea of how much shipping will cost. Also, try to avoid the major holidays in all countries involved in your product's production.
China has some big national holidays that cause the country to essentially shut down for a few days to a few weeks. Shipping right before, or right after these holidays will likely be more expensive. So plan ahead as much as your schedule will allow.