We regularly work with importers we need urgent support and are very keen 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.
1. The “Urgent Order” Syndrome
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?”
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.
2. Not comparing “Like for Like”
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 our 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.
3. Overestimating the Profit Margin on a Product
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.
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.
4. Not Realising how “Economies of Scale” work
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.
All these things will have a significant influence on your “Landed cost” & quality of the product. While this should be a whole post in itself, I would like to mention out of the factors above, “logistics cost per unit” is the most important one, especially for sea shipping & I often see people losing margins because of getting this wrong when it comes to LCL shipments.
5. Expecting Perfection on Small Orders
We are huge proponents of being very clear & specific on your requirements when importing from China, as it’s one of the best levers against quality problems. This is one of the reasons we ask a lot of upfront questions to our client when starting a new sourcing project.
However, this is a bit different from expecting a “Perfect Product”. While the objective of every quality control process should be to aim for perfection, in reality this may not always be achievable for “smaller orders”, especially on your first order with a given factory.
There are several reasons for this, relating to how factories in China work, economies of scale, the thought-process of the factory workers & the perception of the factories towards what is considered perfect or acceptable.
I have often seen importers lose valuable time, in trying of get minor things perfected such as the taping of the box in a certain way. The law of diminishing return comes into play here, i.e. the time spent & the QC cost of getting this level of perfection, often outweighs the cost of doing so “for smaller orders”.
The right sourcing agent can help you navigate the complex Chinese market to ensure success for your end-end sourcing needs.
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