I need to order all that?

Minimum order quantities (MOQ)

Most suppliers give you an incredibly high amount for an MOQ (Minimum Order Quantity). Most of the time this is fairly negotiable. Say for example a supplier gives you a MOQ of 1,000 pieces, and that is his desired quantity to start production.

There are ways around this. If, for example, you are not in need of a color gift box but would rather have a white box the quantities tumble. Most suppliers will agree to produce 200 pieces for a white box.

So why the 1,000 pieces? For one, 1,000pcs is usually the minimum order quantity for colored or private label gift boxes. That’s a fact and some printing factories actually require more than 1,000pcs.

If you want, say, 300pcs of an item and a color box you may ask the factory if they can still print the color box if you are willing to pay a higher price for the printing of the gift box.

If you don’t need a gift box but you want some label or logo on the box you can ask them to put stickers on it. Stickers usually cost a few cents and can be printed easily.

Simply ask your supplier once you have settled on an item what his MOQ is and I am certain it can be discussed, depending on your requirements.

 

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Packing and labeling

When sending an order you should also include any labels or numbers that you wish to have printed on the gift-box, product, or export cartons. Your supplier should be asking you (once you place your order) about the labeling requirements. These are examples:

Specific marking and labeling is used to facilitate the following issues:

  • Meet legal shipping regulations
  • Ensure proper handling
  • Conceal the identity of the contents
  • Help receivers identify shipments and forwarding requirements
  • Insure compliance with environmental and safety standards

You as the buyer need to specify (with the help of the supplier) which export marks should appear on your cargo for easy identification. Products can require many markings for shipment. For example, exporters need to put the following markings on cartons to be shipped:

  • Shipper’s mark
  • Country of origin (CHINA)
  • Weight (in pounds and in kilograms)
  • Number of packages and size of cases (in inches and centimeters)
  • Handling marks (international pictorial symbols)
  • Safety markings such as “This Side Up” (in English and in the language of the country of destination)
  • Port of entry
  • Product description (a short description is sufficient and should be in the language of the destination country)

 

Export carton markings usually look like this:

The export carton marks should clearly be stated on your PO (order form) and from the supplier’s side on his packing list or invoice. It could look like this:

Markings should appear on three faces of the cargo, preferably on the top and on the two ends or the two sides.

Customs regulations regarding freight labeling are strictly enforced. For example, many countries require that the country of origin be clearly labeled

on each imported package. Most freight forwarders and export packing specialists can supply the necessary information regarding specific regulations.

Example of labels on gift boxes depending on where you sell:

Labels on products:

Some products require labels on the product itself with basic information. These are called rating labels. In textiles for example it’s the little tag that’s in the back. Again, your supplier should have examples or give you these labels:

Here is what a typical rating label looks like:

We provide simple labels and formats in this course.

http://importdojo.com/docs/supporting_docs.zip

If you are unsure about the required labeling speak with your supplier at the forwarding/logistics company. They usually know what goes where.

I discuss every little detail before the order

Things you should do before placing an order

So you have evaluated your suppliers, calculated your costs, reviewed the sample, researched the market, and you are ready to place an order?

Follow this simple guide to make sure you cover everything:

  • Payment terms with your supplier are clear and negotiated
  • Delivery time and method is clear and discussed with the supplier
  • Your forwarder is informed and standing by for shipment
  • Inspection company has been contacted/briefed and is standing by
  • Your warehouse is ready to receive the goods
  • Customs/tax and license issues have been clarified with your government
  • A form has been created for your reference to follow up on the order
  • Holidays in China have been considered

We also have a Check List to go trough all steps, provided on this blog.

What helps me the most is actually sit down with the supplier (above photo) and go trough every detail to make sure they understand my requirements. Obviously if you are not in China its going to be difficult but it can be done via phone or email just as well.

 

Supporting documents: http://importdojo.com/docs/supporting_docs.zip

 

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excel check list

Create an internal form to follow up your order

I recommend once your order is placed that you have administrative files for yourself to monitor the order. This could simply be a check-list in Word or Excel.

Here is what it could look like. You can copy sections or make your own checklist based on this. There is also a copy of this check list on http://importdojo.com/docs/supporting_docs.zip

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IMG_4581

Contact a third-party inspection company to inspect your goods

There are several third-party inspection companies in Asia.

Some of the big names are: Buereau Veritas, TUV-SUD, TUV-RHEINLAND & AsiaInspection to name a few. The first three are usually expensive but also very thorough. AsiaInspection is a simple and cost efficient service that should work in the beginning for you.

Lets take a look at AsiaInspection:

AsiaInspection has an easy to use Dashboard and Interface. As soon as you register someone will call you to ask if you are in need of any service. They are very helpful and efficient.

Here is what the Dashboard looks like:

 

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You can book several types of product inspection, send them a sample that you would like to have tested, or have them conduct research and an audit at your supplier.

Types of Product Inspection

  • Pre-Shipment Inspection / PSI (Inspect the products after they are fully produced)
  • During Production Inspection / DUPRO (Inspect your products during production making sure everything goes well)
  • Initial Production Check / IPC (Inspecting your products at a stage when ~20% of the products are finished)
  • Container Loading Check / CLC (Checking proper loading and quantity count during container loading)
  • Production Monitoring / PM (Simple monitoring of your products during the production)
  • Lab Testing:You can send AsiaInspection your sample, or even better, ask the supplier to send a sample for testing.
    What needs to be tested depends on your market and requirements. But they will give you an idea what they can do and what you should have tested.
  • Factory and Social Audit:While I recommend that you have the factory audited, many factories are already audited by either Alibaba or some other third-party for other customers.Simply ask your supplier to send you his latest factory audit report or look on

Alibaba. If your supplier is on Alibaba it is likely he has a factory audit that was performed previously. Therefore, you can skip this step if the factory has a valid and positive report.

If you are unsure and your order is large have the factory audited.

Their prices go from 309USD negotiable (full inspection) to 649USD for auditing and more.

If you are purchasing from China for the first time AND the amount is over say 2,000USD it makes sense to have at least a pre-shipment inspection.

This covers basics such as function test, checking the production, and making sure the products are made according to your order-requirements.

You can choose either one or all at the same time, it really depends on how much you trust your supplier and how sensible your product is.

Either way, you can simply do this entire process through the online-booking system. They can also give you a call to discuss details.

Once you have your test or inspection booked and performed they will send you a report on their findings. Depending on the findings you can now decide if you want to place an order to your factory or if the product needs improvements.

As for the other big names such as Bureau Veritas, TUV, SGS, and others I only recommend them if you have business in China in excess of 500,000USD. They are usually more thorough, with more detailed reports and so on. But they also come with a high price tag.

 

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logistics

Contact a logistics provider and get a quote

This part is essential if you have a larger order that needs sea-shipment.

First off, we will provide a list with over 500 logistics provider contacts within this e-book, so it will be easy to start contacting logistics providers and getting your quotes.

You can find it under:http://importdojo.com/docs/supporting_docs.zip
Here are some notes on how to contact your logistics company and what information YOU need to provide:

  • container volume (your goods in volume, calculated by the supplier)
  • estimated order quantity in cartons and units
  • number of SKUs (how many different products)
  • average dimensions and weights (if you have more than one product)
  • labeling requirement (this is covered in labeling and packaging)
  • visibility requirement (where do the labels and stickers go)
  • delivery points and address (pick up and destination address)
  • what material do you provide (labels, boxes, seals?)

If you are unsure of any of the above information ask your supplier to provide this for you. They usually have good experience dealing with logistics companies. Every factory should have a “shipping department.”After you have received the logistics provider’s quote you should also ask your factory’s logistics provider about a quote, just to compare and make sure you are not getting ripped off and your prices are competitive.Take the shipping costs into consideration with your customs and tax duties and you have your landing price.The most viable option of shipment is sea-shipment. What does that mean?

There are two different shipments by sea:

FCL – Full Container-LoadingThat means that you order a full container from a supplier only packed with your goods. Some items may have a large quantity per container, especially when they are very small.

LCL – Low Container-Loading

You ordered a quantity lower than a full-container-loading and it will be packed with goods from other customers and other suppliers in one container.

When you start off with importing you will probably have a LCL shipment because your quantities will be low. A FCL shipment can easily be a few thousand pieces of your product.

You don’t need to arrange anything for the loading and unloading. Your logistics provider will handle this part.

Logistic costs will decrease the more items you order and can fit into a container.

Here is a calculation example:

A 20’ container holds 28 cubic-meters. My product (Bluetooth speaker) fits 11,636 pieces into a 20’ container. A 20’ container to the US typically costs 2,000USD. If I would order different quantities the costs would be as follows:

FCL of my Bluetooth speaker 11,636 pieces. Container cost: 2,000USD Calculation: 2,000USD / 11,363 pieces = 0.17USD cents per piece of logistic costs (excluding insurance, customs, tax, etc.)

LCL of my Bluetooth speaker say 1,000 pieces. Total CBM of 1,000pcs Bluetooth speaker are roughly 3 CBM. LCL by CBM usually around 100USD Calculation: 300USD / 1,000 pieces = 0.3USD cents per piece of logistic costs (excluding insurance, customs, tax, etc.)

You see the price per piece halves if I go for FCL. But of course if I start small I will go for the LCL option.

 

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calculator

Calculate your costs

This part makes or breaks your import. It is essential that you calculate all your costs into the product to make sure you can actually turn a profit.

Import duty can be calculated in different ways. I have a rule of thumb myself. I take the buying price from my supplier and add 20-30% on top, regardless on where I export it from (or import in your case). This gives me a rough idea on what my landing price will be. This rule applies to first world locations like the US, Europe, Hong Kong, and Singapore, for example. Many second or third world countries are not so open to importing and put a high percentage of duties and tax on top of import products to protect the local industry.

Many first world places even have 0% duties and tax to encourage importing. This applies especially to “green products” that are very sustainable and help reduce energy or waste. A good example is an LED bulb with 0% tax and duties. Of course you can check in detail through Customs Tariff Numbers (see above) or resources like www.dutycalculator.com

Lets look at an example:

My product is a Bluetooth speaker and I would like to import it into the US. First I calculate my shipping costs. I have the measurements of the product and also of the export cartons through the supplier’s quotation. I plan to ship 1,000 pieces.

I go onto http://worldfreightrates.com/ and calculate my shipping costs. It will cost me roughly 1,200USD.

Now, I go onto www.dutycalculator.com (first five checks free)

I input details such as country of manufacture, country of import, product category (this website has a nice and easy to use auto-complete), total product value, my estimated shipping cost, and insurance cost. Shipping cost is the rough estimation of 1000 pieces. Insurance is usually 1% of total product value.

I press calculate

 

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Here we go, I have all costs listed. Wow, only 10% landing costs (excluding shipping costs).

 

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Here is a breakdown:

Notes on duty and tax rates and compliance:

Bluetooth speaker has an import duty rate of 4.9% . Restrictions may apply for shipping this product with courier or postal companies (some probability).

Packaging and labeling requirements apply to lithium batteries whether they are contained in the equipment or sent separately from the device. Please, contact your courier for more information.

Notes on import taxes due:

For imports with FOB value exceeding 2500USD, a merchandise processing fee of 0.3464% of the FOB value applies, with a minimum of 25USD and maximum of 485USD.
Please note that your shipping provider may add an additional handling fee.

 

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 So essentially I have the following import costs:

  • 1200USD Shipping
  • ~100USD Insurance
  • 10,000USD Product value
  • 1,774.64USD Customs & duties
  • TOTAL: 13,074.64 USD

That leaves me with almost exactly 30% costs on top of all my product costs. Pretty much within my “rule of thumb of 30%.”That’s 13USD per item (we have 1,000 pcs). That gives me a great span for margin. I know that the selected Bluetooth speaker is sold for around 49USD.Obviously I have to calculate my domestic shipping and storage or fulfillment costs on top but I should have a fair margin that I can sell this product with.I calculate another 8% for fulfillment by Amazon plus another 10% storage and packing costs. I end up with 15.34USD on the item. To be safe I round up to 16USD. That gives me a potential margin of 33USD per item (49USD minus 16USD). Total sales if I sell everything would amount to 49,000USD.In other words after I have deducted all my costs and investment I have the potential to make a gross profit of 33,000USD. I could take that 33,000USD and invest in my next project and build an even larger product portfolio. Not bad I would say.If you aren’t sure about logistic or duty costs you may also contact your logistics provider. We explain this in the next step.

 

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Floatingmarket052

Patents and copies

Copies

It’s very common to find the newest gadget in China at an exhibition but copied and for much less money than the brand sells it for. Stay away from these!

First of all you could get in trouble when you order a sample and customs picks it up. You could end up paying a fine or worse.

Second, if you do receive the sample and you try to sell it in your store or website, the actual owner of the design can sue you in a lawsuit if he finds out. This could end up being very costly and it’s simply not worth it.

There are ways around it such as a slight modification from the patent, but it’s still very risky and not worth it.

I remember when Dyson came out with their cool ventilator/fans and vacuum cleaners: http://www.dyson.com/fans-and-heaters/cooling-fans.aspx

A few months later they were everywhere in China. And a year later I recall there were at least three big retailers who bought these copies and had them in their stores. They should have known better. Dyson filed lawsuits, and the retailers had to pay a fine and remove all the items from their shops. Not only were their profits and investment gone, they also had to pay a fine and had their name slammed in the newspapers.

Patents

This goes in hand with the copies. Many designs have patents and again you shouldn’t touch these items or try to find a way around the patent. Some suppliers will tell you that they have modified the product so that they don’t conflict with the patent. Oh they are so wrong!

If you do buy a modified design and the supplier tells you that there won’t be any problems, stay away. He just wants you to place an order to earn a quick buck, but if there is a lawsuit against you I am sure your supplier won’t be found anywhere. Read more on patents on Wikipedia: http://en.wikipedia.org/wiki/Patent

 

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preparing my items for drop-shipment

Advantages and disadvantages of drop-shipping (e.g. Aliexpress)

AliExpress.com is one of the most used marketplaces in the world. This will be your new favorite channel for B2C and ordering small quantities from suppliers in China. AliExpress.com is part of Alibaba.com, which is also the biggest B2B (business to business) company. They have more than 20 product categories, which include electronics, cell phones, automotive accessories, clothing, jewelry, and other items.

I recommend this option ONLY if you have small order quantities and want to test the water.

Bear in mind that these items are usually stock from the supplier that they sell on Alibaba’s marketplace (Aliexpress). Be careful, as many of those items are returned goods from the manufacturer’s other customers, faulty items, or over- produced items from another customer’s order. In the last case it can easily be an order from some trading company in Thailand and the instruction manual as well as the packaging could be in Thai.

Be sure to check all these details before you place an order to a manufacturer.

In most cases the companies offering the products on Aliexpress are trading companies that buy stock from the manufacturer and sell online.

The prices can be 30-70% more than if you mass produce with the manufacturer. But again it’s a great option if you want to order 5-10 pieces of an item to test the waters.

Here is a rough overview of Aliexpress:

A) Quality of products

You have no way of knowing. Again, these are items that the supplier has in stock. You don’t know what’s inside and you can’t inspect the goods. On a bulk order with a factory you would always install an inspection measurement before shipment. With Aliexpress you have no way of knowing what you are actually getting. If you buy from Aliexpress make sure you use a seller with great reviews and lots of sales. Ask him to send pictures of the product taken out of the gift box, the gift box itself, and the instruction manual that comes with it.

B) Payment Options 

AliExpress.com offers a safe and secure payment option through escrow. Both the buyer and the seller are protected. AliPay (also an Alibaba company)

holds the escrow payment. The payment is released to the seller once the transaction is completed. Should there be any disputes or problems, the third party (AliPay in this case) will negotiate between the two parties.

AliPay acts completely neutral and does not favor either party, so you can be sure it is a fair negotiation.

One more benefit of using escrow as payment is you do not have to divulge your credit card number, and in the event that you are not satisfied with the delivered items, you can negotiation the price.

This escrow service is initiated via credit card, Western Union, bank transfer or through other online payment processors. Some suppliers differ from each other on that.

C) Shipment methods

AliExpress.com provides free shipping worldwide. They joined hands with the China Post Mail to provide free shipping worldwide to accommodate smaller orders, especially electronic items. AliExpress.com launched Fulfillment by AliExpress, which is designed to accommodate medium orders so that they can have free shipment like bulk orders. This will allow importers at least 30% savings on the shipping costs. However, shipment can be as long as 30-60 days in some cases and there will be no tracking number provided. Shipments could get lost.

AliExpress.com supports DHL, FedEx, TNT, and EMS with the UPS as the most preferred means of shipping goods. These methods deliver product from 2 days up to 7 days, which is good enough considering that we are talking about worldwide deliveries. I recommend using these carriers as there will be tracking, customs help, and obviously you receive goods much faster. Usually the prices for these carriers through AliExpress are quite competitive.

D) Are the prices competitive?

Prices are in general more competitive than if you would buy from your local importer/wholesaler or even online store. The general rule is that the prices are around 30% more than the actual manufacturer’s cost. Again, if you have small orders this should still be a good price to add your margin.

E) Example on drop-shipping

There are a lot of drop-shippers from the US on Ebay/Amazon that operate under the same principle as Aliexpress. They usually cooperate with a factory in China (e.g., Shenzhen) and buy their over-stock or have the manufacturer produce a certain quantity of a specific product. The factory does the fulfillment while the EbayEbay/Amazon seller does the marketing and sales part.

An Acquaintance of mine, who owns an affiliate marketing website (http://www.cheapcheapcheap.com/) pointed me to a good example and asked me how is it possible that this seller can sell so cheap: http://www.ebay.com/itm/201253495057

This seller buys from a factory in Shenzhen and the factory has the fulfillment done.

I know for a fact that this item can be bought in bulk quantity for 0.3USD. So they both make a nice profit. And, the Ebay selling price is still very cheap.

Now how can he sell this cheap and include free shipping?
Many fulfillment centers in China have an amazing deal on logistics with CHINA POST.

Some large fulfillment centers in China ship up to 20,000 pieces of goods a day. Now obviously you will get a great deal for shipping costs with CHINA POST as a fulfillment center. The downside? You as a customer might have to wait for 30-40 days to get your item. Also, there is no tracking or tracing with China Post, so if your parcel gets lost it’s gone for good. Many times there will also be customs issues and you may have to pay taxes and duties.

For an item costing only 3USD you can certainly invest 3USD, knowing that your item might get lost.

If you order larger quantities via drop shipping make sure you use a well- known carrier such as DHL/FedEx, etc. You can track and trace the parcel and they will handle customs issues for you too. Money well spent.

Aliexpress Conclusion

A great way to order goods online for small quantities. A few issues here and there that can be solved with the supplier. Quick and easy for starting and testing the waters with the product. The downsides are that you have no way of knowing the quality of the product and that the shipment could get lost (if you use free shipping). Use DHL/FedEx or other big couriers to make sure that your items actually arrive and customs won’t hold them up.

 

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on the way sourcing for our clients

Hiring a sourcing company

Back in the days when I worked for a Buying Office in Hong Kong I was travelling 10 days of the month scouting new products for Customers. As a Sourcing Company we provided everything the Customer needed for Import so he didn’t need to handle everything himself. We earned a small commission (non-profit wholly owned Buying Office) on our orders and made life for our Buyers a lot easier.

This option can be helpful if you do not wish to deal with all the procedures and processes involved. Bear in mind that this can be quite pricy and usually costs 30% on top of the manufacturer’s costs. There are hundreds of sourcing companies in China that can help you.

Again, this course is meant for you to skip this part but you can certainly start with small quantities from sourcing companies to test the water. Simply Google “sourcing company in China” and you will get many results.

Here are some of the more experienced companies. I do not have any relationship to them, I simply recommend them based on my knowledge about their service and years in business:

http://www.lifung.com/

Expensive but has the most experience in America

http://www.nafecsltd.com/

Small but efficient sourcing company

www.foundlimited.com

A Shanghai based Sourcing company with long experience that uses pre-paid packages.

Last but not least, we at Mandarin-Gear offer sourcing as well. You can simply contact me at manuel@mandarin-gear.com or check out my website: www.mandarin-gear.com

 

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