china importing, myth or fact?

[oliver3487]

Hi,

Right, we all see these articles and so called success stories about importing goods from china/india and making large sums of money. And i cant seem to find anywhere that has much negitive to say about it. But i get the feeling everyone sort of does it but no one makes large amounts of money from it. (please dont say you get out what you put in, this is not helpfull).

I'm trying to find someone who imports and sells goods from china or india and does well from it.

Maybe lots of people are making good money from it, people always say some is, but it never seems to be them.

(just trying to clearify weather money from china is more of a myth these days)

 

[Paul Kelly ICHYB]

If done right, you can make money, however, you really do need to know what you are doing, to reduce opportunites for loss!

You need to know the real price i.e. the price when it hits your warehouse - the buying price is only the start and can be half of the real cost. You need to know the legalities of the items (compliance, licenses etc), the support you need to give etc.

Too many people see an item that is half the price of the UK retail (they are not aware of the distribution margin requirements), buy something, import it and then find out it costs the same as they can buy in the shops.

Unfortunately, greed sets in, pound notes flash across the eyes and thats where reality is lost and money burnt!

 

[FreelanceSoftwareDeveloper]

There are a few points to consider but ultimately the answer is yes, importing from China can be very profitable. Firstly though you need to know a couple of the general rules:

1. You cannot source branded goods such as electronics or designer clothing from China, yes the iPhone may be manufactured in China but you cannot get one directly out of the country. That's the biggest mistake people make, I even see people after being told that fact numerous times can't resist a $100 iPhone and buy a few 'just in case' but no they lose their money to a scammer. It's a rule, you won't 'get lucky'.

2. As in the above post, ensure you know the shipping costs, the import duty, VAT. As a guideline assume approx 30% of the item + shipping cost in duty/vat.

Like anything, it comes down to the product. If someone else is importing by the container load then it will be difficult to compete ordering in a lower volume as you will pay more per unit, more per unit in shipping cost, then more per unit in duty/vat. In this situation it would be better to find a UK distributor/importer as often their markup will work out less than the increased cost of buying direct.

For example;

You want to buy 50 units at £12 each, total shipping cost £100. Total cost £700 + 30% duty/vat = £910 or £18.20 each into the UK

Someone else is buying 1000 units at £9 each, total shipping cost £1000. Total cost £10,000 + 30% duty/tax = £13,000 or £13 each into the UK

If you want 50 approach the importer paying £13 each I expect you will get a better price than £18.20 and you will have significantly reduced your risk. If you want 1000 you should be looking to import.

 

[LicensedToTrade]

(please dont say you get out what you put in, this is not helpfull)/quote]

It may not be helpful to you, but unfortunately it is the reality of the situation.

Due to the inherent cost of moving stock or materials over great distances, in order to make importing profitable (particularly on low ticket value goods) you need to be buying in considerable volume.

What is often overlooked when importing is ensuring that you have a viable market (and access to it) before you start buying stock from China. It doesn't matter how cheap you can buy mp3 players in China if you haven't got a route to market in the UK. The longer you hold onto that stock, the smaller your return will be.

 

[Independent Trader]

Importing from China at the moment is the toughest I have seen it, big delays in lead time then huge increases in Sea Freight costs add to that the weak pound and increase in costs of product from source it really is the toughest it ever has been.

I only cam across this thread looking for a forum to see if other importers are having similar problems.

Back on topic it is still possible to get a good ROI but you need CASH and good cash flow to make it work and build slowly if your intial cash is low.

 

[Brian_210]

Good thread! I will be importing my first goods from China within a month or so. They are low value goods, set between £2-£7 on ebay per item. As I have used up all my other income I only plan to order 1000. Originally the price was $1370, but I have managed to lower it to $820 by informing them of 'competitors' prices.

I started by checking what the Duty would be, which for this product is around 4%, then I have to add VAT on top of the whole price. at 17.5%. This makes it $1002, then shipping fees will be up to $100 - which I can get cheaper as I know someone who works for an air freight company.

That's just over £760 to get the 1000 items to me. To compete well I'd want to sell them total cost of £2.50 including post. The margin isn't great, but I'm looking more for the experience just now.

If anyone has experience and see's a fault in my assumptions - or costs I haven't taken into account please let me know, I'd be really greatful

 

[Independent Trader]

UK Clearance costs? Last time I flew anything in that was quite expensive or is the price you quote landed at a UK address. How are you paying for the goods? Any potential quality problems? Although exchange rates are say $1.44 --> GBP you wont buy at that rate, probably closer to $1.42 than $1.44

 

[Eastern]

That's all fine and good. But I hope no one is making money from goods being made in sweat shops.

 

[Independent Trader]

That's all fine and good. But I hope no one is making money from goods being made in sweat shops.

Well Mine are checked out, but even the big boys get caught out.

 

[deniser]

We import from China but not ready made goods but goods made to order to our specification. The profits are good that way.

 

[Brian_210]

What are clearance costs? I understand what it means, but...how is it calculated and is it for all products?

How do you check out if they're being made in sweat shops? - I found my supplier through made-in-china, but I assume that doesn't promise anything!

 

[Independent Trader]

What are clearance costs? I understand what it means, but...how is it calculated and is it for all products?

How do you check out if they're being made in sweat shops? - I found my supplier through made-in-china, but I assume that doesn't promise anything!

Who is arranging the Air Freight? If its someone like UPS then there shouldn't be any extras. Mine was quite a few CBM from India and I used my freight forwarder to make the entries and get it landside. Then arranged a UK Haulage to my warehouse.

Using Sea Freight I allow depending on the item anything from 20% up to 30% on top of the FOB price this is the cost of Sea Frieght plus UK landing and delivery costs.

 

[LicensedToTrade]

So my understanding of your figures is this.

£760 total price you paid for 1000 units
This gives them a cost of £0.76 ea

IF you sell all 1000 at your price of £2.50 you will make net profit of £1.74 ea (equal to a margin of 69.6%)

In total you would generate a net profit of £1740.

My questions now are: what other costs are you incurring in order to sell these products, how long do you expect it to take to sell all 1000 units. What is the agreed defect rate with your supplier? What warranty are you offering your customers, and once you have sold all 1000 where will you source replacements to fulfil your warranty?

 

[Paul Kelly ICHYB]

Brian,

VAT is calculated on cost/shipping/duty, so please revise your calculations accordingly!

 

[Mister B]

Who is arranging the Air Freight? If its someone like UPS then there shouldn't be any extras. Mine was quite a few CBM from India and I used my freight forwarder to make the entries and get it landside. Then arranged a UK Haulage to my warehouse.

Using Sea Freight I allow depending on the item anything from 20% up to 30% on top of the FOB price this is the cost of Sea Frieght plus UK landing and delivery costs.

That must be a seriously low invoice value, so low that it's not worth coming in by sea. Or am I missing something? FWIW, my sea freight costs at the moment are running at about 6% This is based on FOB Shanghai and includes delivery to my door. Does not include duty.

Apart from the other costs mentioned, what about the development costs? We always factor DHL sample courier charges in as a cost of sale so that the landed cost is a true reflection of how much the deal is costing us. Likewise, TT or LC charges are apportioned that way.

Mister B

 

[Independent Trader]

That must be a seriously low invoice value, so low that it's not worth coming in by sea. Or am I missing something? FWIW, my sea freight costs at the moment are running at about 6% This is based on FOB Shanghai and includes delivery to my door. Does not include duty.

Apart from the other costs mentioned, what about the development costs? We always factor DHL sample courier charges in as a cost of sale so that the landed cost is a true reflection of how much the deal is costing us. Likewise, TT or LC charges are apportioned that way.

Mister B

Agreed on not worth Sea Freight for that sort of value. My cost are high because my items are fairly high CBM so one item I might only get 1300 on to a 40ft High Cube container the sea freight for shipping next week $3650 + UK port cost and freight forwarders and £380 UK delivery it soon add up.

Regarding the margin someone is quoting further up they are including VAT.

 

[LicensedToTrade]

So my understanding of your figures is this.

£760 total price you paid for 1000 units
This gives them a cost of £0.76 ea

IF you sell all 1000 at your price of £2.50 you will make net profit of £1.74 ea (equal to a margin of 69.6%)

In total you would generate a net profit of £1740.

My questions now are: what other costs are you incurring in order to sell these products, how long do you expect it to take to sell all 1000 units. What is the agreed defect rate with your supplier? What warranty are you offering your customers, and once you have sold all 1000 where will you source replacements to fulfil your warranty?

EDIT: Apologies this should read gross profit

 

[Brian_210]

So my understanding of your figures is this.

£760 total price you paid for 1000 units
This gives them a cost of £0.76 ea

IF you sell all 1000 at your price of £2.50 you will make net profit of £1.74 ea (equal to a margin of 69.6%)

In total you would generate a net profit of £1740.

My questions now are: what other costs are you incurring in order to sell these products, how long do you expect it to take to sell all 1000 units. What is the agreed defect rate with your supplier? What warranty are you offering your customers, and once you have sold all 1000 where will you source replacements to fulfil your warranty?

That's ok I knew what you meant

and my dad works for a Chinese company that does air freight, so will be accepting them in the UK at a lower cost, then getting them to my door for nothing

I knew what you meant

and I am having them shipped by a company my dad works for, and he will be accepting them in the UK and delivering them to me


Most selling would be done online, through forums such as this, and ebay, then I have packaging and posting costs at around 87p, so my margin is much smaller than this. I only plan on selling around 10% singularly, the rest would be in packs of 3 or 4, or at trade to shops/stalls at around £1.20 per item, the costs at trade I have found are higher than this.

I would offer the guaranteed 28 day money back, I didn't think I'd need to give a warrenty past this...I'd be ordering more before I ran out to ensure I had a constant supply. I am completely new to importing, so any advice would be appreciated as no doubt things can, and quite possibly will, not go as I want.

What are the main questions I should be asking the supplier? - If agreeing a defect rate, what are the steps if there are problems with the products? As it's a company in China it will not be as simple as within the UK!! I don't mean to sound naive, and like I haven't thought and researched about it, I'll understand it a lot better once I've done it a few times.

 

[Independent Trader]

Selling costs via eBay will be around 15% of gross sales price. Elsewhere you will have payment processing costs, selling to the trade you will have the costs of letting them know its available.

In 8 years I have had very few quality issues, and where I have and they have been from a regular supplier then no problem. The only time I had a problem that I had to underwrite it was from a one off order, needless to say they didn't get anymore order from me. I would assume that you will handle problems from your profit. P&P costs are you not going to charge these? £2.50 unit cost and Free P&P seems too cheap.

If its going to be ongoing, you will need stock on order well before you sell out of your original order.

 

[Brian_210]

My thoughts for selling them were at £10 for 4, Say they cost up to £1 to my door, £10 +P+P at around £2.50. Costs would be £4 for stock and £1.50 for sale (if taking your 15% from ebay example). Giving a net of £3.50 per 4 sold. Giving a total return of around £875. My intentions are to do this on a trial basis, check if there is a market - and to get a first time experience of importing. I hope it doesn't seem naive to the people who have done this time and time again, but I believe doing it is the best way to learn.

 

[Independent Trader]

Not naive at all, I think it looks okay, to be frank I would just take the plunge.

The supplier and product is always my main concern. Just as long as the 1k is okay to "lose" I would gamble it and see how it goes once it is in your hands and ready to sell. You really won't know until its here and your first advert is running. I understand you want to cover the bases which is fine, but the step of placing the order is the most difficult ;-)

 

[Brian_210]

Thanks for the advice, and to the OP, my apologies for hijacking your thread. £1000 is a lot of money to me just now, but without doing it I guess I'll never know. If I lose out I lose out - live and learn. I have spent too long backing out of 'risks', or not thinking them through properly. This time I have spent a few months gathering everything together for what seems such a small return, but it isn't all about the money this time!

 

[J-Wholesale]

Good thread! I will be importing my first goods from China within a month or so. They are low value goods, set between £2-£7 on ebay per item. As I have used up all my other income I only plan to order 1000. Originally the price was $1370, but I have managed to lower it to $820 by informing them of 'competitors' prices.

I started by checking what the Duty would be, which for this product is around 4%, then I have to add VAT on top of the whole price. at 17.5%. This makes it $1002, then shipping fees will be up to $100 - which I can get cheaper as I know someone who works for an air freight company.

That's just over £760 to get the 1000 items to me. To compete well I'd want to sell them total cost of £2.50 including post. The margin isn't great, but I'm looking more for the experience just now.

If anyone has experience and see's a fault in my assumptions - or costs I haven't taken into account please let me know, I'd be really greatful

You've done your homework and worked out the cost in terms of fees and such for getting these items to your door, but you've left out what can be the single biggest cost of all when sourcing goods direct from China, and that's breakages or spoiled goods.

You haven't spent that much, so even if the worst case scenario occurs, you're only out of pocket by £760. And the worst case scenario is the goods are in such a condition that they are unsellable - all of them. This is entirely possible, and without a man on the ground over there who you trust, and who has the product specific knowledge to know when something is not fit for sale, it's a very real possibility.

I don't mean to get you in a state over what might happen, but your markup is not high enough to allow for spoiled goods. Chinese suppliers can mess up anything, even what appears to you to be a simple item. Even a one piece item coming out of a single mold can reach your door in an unsellable condition. We've had entire lines spoiled on many occasions, sometimes even entire runs from particular manufacturers, costing us thousands of pounds.

And there's nothing you can really do except learn from it. Trying to recover money or attempting to have your supplier remake the items is a waste of time. But, you do learn from it. The mistakes we made in the beginning don't happen to us now. The only thing is, because you learn through mistakes, each learning experience costs you money. Which means you have to be prepared to lose this money, and you have to factor potential loses into your pricing. Hence my comment about your markup not being sufficient.

 

[oliver3487]

Hi,

Thanks for all the replies, like i said people are saying you can make money and peope do. But is there anyone on here that can state, I make good money from doing it for a living?

 

[paulears]

I've had 5 fairly expensive items arrive - ironically, the delicate product is supplied in aluminium flightcases - but they simply had one skin of cardboard as an outer, and 2 of the 5 are damaged. Not much I can do, apart from stand the loss! The factory replied with "very sorry, will pack your next order better!" What next order?

 

[oliver3487]

Thats the way from china, allow for 30% of the products to be damaged or faulty.

So anyone out there have a success story to tell?

 

[wholesalecity]

If i am the one who earn lots of money from China or India, i will never share my story. It should be a secret.
As i know, recently lots of people choose to import goods from China, because it is really cheap. That's why my company can boom so quickly.

 

[Independent Trader]

Brian you have to regard it as risk, and that you could lose. But I would not put the risk as high as others, BUT it does depend on what the product is.

 

[Paul Kelly ICHYB]

'allow for 30% of the products'

Where did you get that from? I have never had more than a couple of % faulty/damaged units. If buying from reputable suppliers, you will not get major problems, but is does depend on the item.

I seasonally import lychees and had to write off almost 2 containers (over 30 tonnes) once, but, being a perishable, it was a risk I had to accept. non perishable should be no where like that!

 

[Brian_210]

Yes I understand that I could lose it all, the items are fake plants. Made from silk and plastic. - not exactly a simple 'mould'. But on the other hand - not one that could easily be damaged, or returned after 6 months saying it broke. I guess my biggest risk is the quality issue, they have emailed photo's of the one's they will be producing, but I guess that's no guarantee.

 

[Mister B]

30% is way out of the line. We endure less than 0.5%, anymore and we'd want answers. To be fair though, we undertake our own factory inspections and also use a third party QC team who act as our eyes and ears on the ground. If you're anticipating a high fail rate, then it would be cost effective to use a Chinese QC team. Mister B

 

[oliver3487]

Hi,

Of course if you have factory inspections etc then it will be nearly 0. I was saying you should assum the worst and be able to cover a 30% ratio. If you are buying without going out there and doing inspections then the damaged or faulty amount will work out to be about 20% in my experiance if you include trying new suppliers who never even send anything etc. (this was more in electronic's). But maybe i way off then.

Anyway alot of you seem to buy from china, still waiting for someone to state that they make good money from it in the end.
Anyone????

 

[LicensedToTrade]

Anyway alot of you seem to buy from china, still waiting for someone to state that they make good money from it in the end.
Anyone????

Like I said before, it depends on volume. I bought in excess of £6million in 2008 and around £4million in 2009. This year will be about the same again.

But I am talking about the purchasing parity of a national and international organisation. As you will be buying in less volume, you will have less of a return.

 

[oliver3487]

Like I said before, it depends on volume. I bought in excess of £6million in 2008 and around £4million in 2009. This year will be about the same again.

But I am talking about the purchasing parity of a national and international organisation. As you will be buying in less volume, you will have less of a return.

thank you, but as you say that is a national and international organisation, do you think people are able to make enough of a return trading in smaller amounts. Or even better do you know anyone who does manage to do this?

 

[Drn55]

... do you think people are able to make enough of a return trading in smaller amounts. Or even better do you know anyone who does manage to do this?

Yes and yes. You keep asking this question, and in this very thread you've had answers from people who are probably doing just that. If not, where does their knowledge and experience come from?

Nobody has directly answered your question because by doing so they would be telling everyone where their own profits come from and how successful they are. The answer to your questions are yes, and yes. If you want examples, you're not going to get them here.

 

[oliver3487]

alright, fair enough. Just trying to get the clearest answer possible. Someone saying that they buy from oversea's and manage to make a profit from it wouldn't have really given away too much. I do realise peoples answers do show that people must be successfull at it and of course that they don't wish to share details, just trying to learn as much as possible as always, which is the reason anyone starts a thread.
thanks for all the answers i think the thread as helped provide a good insight.

 

[paulears]

I'm confused? everyone appears to be saying exactly that - we import from China and make a profit. If we didn't, we wouldn't do it!

If you have a very high investment then you will get better terms, better consistency between batches and probably quicker delivery. The factories I buy from continually want me to buy higher quantities, but I resist and repeat smaller orders. This impacts slightly on the end margin, but I'm more comfortable with holding less stock, and also in paid for stock that will arrive ... sometime!

I've not had a single customer return a product (these are specialist microphones) - I've not sold vast quantities - running at just over 800 in about 15 months - the average margin works out to just over £20 on each item - this average includes the cheaper ones I move via ebay, rather than the more expensive ones direct on my website.

The income stream from this just fills in blanks where our usual work is a bit thin. If I wanted to expand this then I would increase stock holding, and perhaps increase the range a little and invest in some serious advertising - all of which would generate more money. The level of business at the moment is difficult for me to manage when our core activities suddenly go mad - which is nice.

There are problems with having a supplier in a far away country who doesn't really understand what we do with their product, has very different ethics and ethos and have internal manufacturing difficulties. That said, I can live with it - and they genuinely do seem to try hard. In many ways, it's like dealing with a child - you must explain VERY clearly what you want and expect, and never assume, always check.

I bought some really nice microphones with unusual features. It needed computer drivers. I ordered some and when they arrived they were great, on a PC - easily worth the £200 I planned on retailing them for - however the CDs had only PC drivers, no MAC drivers. 80% of the professional users have MACs - but the factory didn't actually have any MAC drivers at all. I didn't ask, I assumed. I've still got 3 sitting on the shelf.

One Chinese supplier I want to buy from has a MOQ of 1000 - too many for me, I buy these via a German distributor, who is totally different in business style. Delivery in two days, free - and a guaranteed return for replacement or repair for 3 years at no cost. The 20% extra cost still leaves sufficient margin to make this worthwhile and my most popular Chinese microphone comes via this route.

 

[Independent Trader]

I am not sure what Oliver wants to hear. Take a look at nearly every product in retail, excluding food and I would guess 80%+ is imported from outside the UK with a high % from Asia.

 

[oliver3487]

sorry if i went on a bit, only just trying to learn as much as possible. thanks again for all the replies, my questions has been answered thoroughly.
oliver

 

[jackleo]

I am a Chinese. I work for a foreign trade company. ask me. hehe