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Product Industry & Demographics (& PL vs your own design)

This is the 7th post in our Brand Building Series and today it’s my turn to talk about this next blog post. 

In this post I’ll talk about private label versus your own design and why being unique (in the long run) is better.

I will also talk about Industry Research & Demographics (Who will be your customer?) because I feel this goes hand in hand with the decision on choosing a product. 

Before we discuss private label versus your own design I will dig into Research & Demographics first – who will be your customer? Is there enough demand? Your customers or target market can also determine whether you go for private label or your own design.  

Industry Research & Demographics

I’ve talked in previous blog posts on how to choose a product and do your industry research. So I won’t go too much into detail in this post, check out the post I did on this a while ago: http://importdojo.com/the-ultimate-guide-on-how-to-find-a-product/

Let’s imagine that you aren’t sure yet which product you want to sell in but you have a certain industry in mind. I always say follow your passion or something that you can relate to. 

After all it doesn’t make sense to start selling Bluetooth speakers when you know nothing about them let alone explain features or answer technical questions of your customers. 

So ideally you start with something that you can at least relate to or feel that you can improve on. 

Let’s pick an industry. As some of you know this from me already – I love hiking and trail running here in Hong Kong, so lets look at that niche :)

Me last week hiking/trail running in HK’s mountains 

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1) I go onto Google and start my search. 

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2) I check the first few links and I find a site that has a compilation of the top 10 products – makes it very easy for me. 

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Here’s the Top 10:

  1. Jacket
  2. Shirt
  3. Pack
  4. Handheld bottle 
  5. Shoes
  6. Socks
  7. Poles
  8. Neck Gaiter
  9. Medical Kit
  10. Food 

3) Next thing I do is go onto Google.trends.com and enter “trail running”. 

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It is a very trendy topic as you can see

4) Now lets look at particular states in the US:

Colorado, Utah, Washington, Arizona, North Carolina are the top 5. 

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If I look into cities as you can see there is a very high demand in Denver, Portland, Seattle, Austin & San Francisco (& a few more). 

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I know from living here in HK there is very high demand as well. Now if Amazon would have a store here that would be probably my first item to put up on as a listing. 

As an alternative I could also set up an eCommerce shop here in Hong Kong (there’s my next business idea). 

However I am going to focus on selling a product in the US now either on Amazon or my own eCommerce shop. 

Next thing to do would be to research the particular top 10 products and then focus on either the highest demand or the product I can affiliate myself with the most. 

After I pick a product I go onto Google keywords planner. I pick “trail running jacket” and as you can see there’s a very high demand (100,000 – 1Million monthly searches on Google).

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If I were to go after shoes it would even be 1M-10M per month. Thats a lot of potential customers :)

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What do I do now with all those numbers? Nothing for now since I still am far away from launching a product, but the point of this exercise is that I become aware of the trends, the search and interest volume of my potential clients and how I can take that to my advantage. 

E.g. I can set up my own shop or sell on Amazon and drive traffic via targeted Facebook ads (or Google) to my listing. And I can specify that by country, state, city and interest. I am not going into detail now (thats for later) but just a quick look at a Facebook campaign with these keywords and targets generates a audience of 790,000 people. Something for later when my product is live (or during the launch). 

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Now obviously this is just a brief and short trip into researching demographics and interests. But as you can see from above, there’s literally a million potential clients for me. 

Obviously I would now have to do my product research, find suppliers etc but this will be a post for next week. 

What you can do from here on is to look up the competition on Amazon and how you can improve a product or even get unique ideas. See also our blow post from 2 weeks ago here. 

Lets assume that you have your product and industry well researched. What do you pick now? Private Label or having your own design? 

Lets look at the options:

Private label

2-3 years ago Amazon FBA private labelling became the No.1 way to start your new business with a small capital. Simple – find a lightweight product, fits in a shoe box and costs less than 2$. 

So many people jumped onto that train that today we have immense competition on Amazon. While there are still categories and products out there that have small competition, its getting more and more difficult for everyone. 

I am sorry to tell you but those days where you start off with 1000$ or less are over. I still see success stories with private labelling however starting capital should be at least 3-5,000USD. You are going to want to order a quantity (say 500-1000 pieces) that last you 1-3 months when you launch, especially if your product goes well. You will need capital for marketing (PPC, Facebook ads etc., influencer campaigns), logistic costs from China, inspection costs, photography and business set up costs. If you are looking at higher priced items from China – because they have less competition, 5000US$ are easily spent on product costs only. 

How does private label work? By now I think most of you how it works but basically you are buying a product off the shelve from a manufacturer, maybe improve it (see last blog post), put your own logo on the product or packaging and send it to Amazon. Obviously there are many steps in between but thats pretty much it in a nutshell. 

Does private labelling still work? Yes it does, but the competition is just immense right now that you’ll want to pick your product carefully with extensive research. Perhaps instead of making it difficult for yourself with limited capital you may want to look into other private labelling like wholesale private labelling. What’s that? Check out my good friend Will Tjernlund’s speech at the Global Sources Summit last year October in HK: https://www.facebook.com/globalsources/videos/10154597697889785/

So while private labelling in its different forms is still a viable option and will make you money you will have to have a good product that stands out plus extra capital for marketing and advertising since the TOS change from October 2016 in regards to giving away products and review services has more or less collapsed as a sure way to gain traction in your first few weeks.  

The most obvious downside on a private label item is that anyone can come in and hijack or have the same product up after a few weeks. Even if you are brand registered, a competitor can come in and modify the product with his factory, maybe even improve it and sell under his own listing. Within a matter of weeks you can have 4-5 competitors and the price gets driven to the ground. Think of the melon slicer that everyone tried to sell and within 2 months there were 30+ sellers of this product. Imagine you would have been the person designing this item, how long you’d been the only one making huge profits. All the other guys that came in after you had to fight for the price and customers. Basically a race to the bottom. 

What are the advantages on private labelling?

  1. Small investment costs (3-10,000USD+)
  2. Quick turnaround time from placing orders to selling the product
  3. Good starting point to make money on the side and learning the process

Don’t get me wrong, to start out and if you are concerned about capital and big investments private labelling is a great way to get started. You’ll learn the ropes, get your first experience in China and on Amazon and you’ll be set up with your business. 

Even I started with a private label but quickly moved on to create unique products. 

Your own design and why unique is being better

What’s your own design and what are the risks involved? What sort of capital do you need to invest? 

OK, so first off you might say – even my unique products can be copied at some point. Yes, thats true but you’ll have a head-start of at least 6-8 months and by the time the competition comes in you’ll have a lot of reviews (that he doesn’t have) and you’ve already made good money and ideally even work on your next product. Thats the business cycle anyway, you create a product, someone comes and copies you. Deal with it and move on.

Next question may even be how to avoid that anyone copies you – patents and trademarks. First you’ll definitely want to register your brand on Amazon so that anyone trying to hijack your listing has to ask you for approval – guess you won’t approve :) Second you may even want to patent your design in the US (or wherever you are selling) So anyone trying to copy you has a very low chance of succeeding. You can easily report them to Amazon infringing your patents or design.  

Whats the downside with your on design? There are three things that come to mind.

  1. Long period of development & perhaps the feeling of missing out on action
  2. Medium to Large investment costs (10,000USD+)
  3. Risk of product not selling well (but you’ll have that risk with private label items as well) as it is new to the market and “no one knows it exists yet”. 

Whats the upsides of your own design? 

  1. You dictate the selling price and market. Out of experience your margins can be 100% upwards. Private Label usually has anywhere from 15-45% (which is actually not bad when you are starting out) 
  2. You can interest retailers and other businesses with a unique design. It’s very unlikely that Walmart is interested in buying a private label garlic press. 
  3. You have a USP (Unique Selling Point) that your competitors (private labellers) don’t have. If you keep coming out with unique products your customers will return. Just think of Nike or Adidas how they constantly re-invent themselves with new designs, material etc. If you are a one hit wonder there’s not really a momentum that you can build (e.g. improving the garlic press for the 50th time). 

CONCLUSION

I think it is pretty clear that a lot depends on your capital and assessing your risk tolerance. Investment more and get paid off (hopefully) or start small and grow slow. It is really a personal decision that I can’t take off your hands :)

Researching your demographics and possible target audience helps making a decision.

I hope this post has helped in some way and I look forward to your comments :)

All the best and happy sourcing,

Manuel

http://importdojo.com/importdojo-masterclass/

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Zero to Hero: Build a Brand Series – Product Analysis & Innovation Part 1

Zero To Hero: Building A Brand Series Product Analysis & Innovation

In the previous weeks, we went over Business Banking & Incorporation – where we explored different strategies on how to legally and financially enhance your business. As a way to start 2017, today’s blog post will be focusing on Product Innovation.

The ultimate goal for any business is to be sustainable in the long term. To achieve this, you need to have a Unique Selling Point(USP) that differentiates your business from the competition. This mini guide and case study is meant to get you to think outside the box in terms of product selection and launch cool & innovative products.

In terms of Private Label products, sellers normally follow one of these options:

  1. General items with unique logo and packaging.
  2. Completely unique product.
  3. Improvement over existing products.

Importing general items used to be profitable, but it’s not sustainable in the long term! When choosing products, you need to think from the Amazon customers’ point of view. How would you feel(as a customer), if you’re searching for a particular product, and find something like this:

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This is a very bad approach as the only way to differentiate between each product is:

  • Listing
  • Photos
  • Price

Price is the most obvious one, so more often than not, it becomes a race to the bottom. This is not what we want as a brand. By creating something that the market wants & improving upon it, you will have control over your brand. This is also an asset if you plan on selling to retailers in the future – Retailers love unique, branded and in demand products!

Today’s case study involves picking an existing product and completely breaking down each aspect of it and try to improve it.

Note: This is only an example and the strategy should be applied for your product of choice.

The Product

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For this case study I picked an Interactive Dog Toy Ball. Let’s have a quick overview of the product.

  • Number 1 Best Seller in Dog Toy Balls
  • 4,432 reviews
  • 2 Variations
  • Multiple Colors

Based on the initial data, these numbers may seem prohibitive, however:

  • Multiple reviews indicate the product is popular
  • Variations show demand for different sizes and colours

All that needs to be done is analysing the product carefully and see if we can improve it. So let’s go ahead with our product analysis.

Product Listing

 

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Surprisingly, the listing for this product is very lacking. As seen in the above image I have pointed out the 3 main features I find lacking:

  • Poor Images & Very Bland – A product with this popularity/demand should have higher quality pictures.
  • Bullet Points – The bullet points are too short and don’t describe the product features in detail.
  • Listing Title – This, in my opinion, is the most lacking part. The title is not Keyword Optimized and they have the words “Colors May Vary”. As a customer viewing the listing, the question I ask is:  What colors are available for this product? Which color will I receive??

Product Description

 

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The seller has Enhanced Brand Content/A+ Content, however, they are not taking full advantage of it. The description is short and the pictures show only the packaging instead of highlighting the product’s features. Furthermore, they included a picture of another of their products!

The description should be a keyword rich, informative section where you provide features and details to the customer.

Reviews

Moving on with the product analysis, it’s time to check the reviews – The item is a best seller after all! Reviews of customers are extremely important, more so after the Amazon Review change where all the giveaway reviews have been removed. Let’s see what the reviews tell us about the product:

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The most notable aspect is that 24% of 4,430 reviews(1063 reviews) are 3 stars or lower. This already shows me that the product can be improved upon, but let’s look at the positive reviews first.

Positive Reviews

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Looking at some of the positive reviews, I picked up these features customer like:

  • Fun Toy and most dogs love it.
  • Adjustable difficulty of the item makes it accessible to any dog.
  • A lot of the reviews suggest customers bought 1 or more. This is a very good sign.
  • The product makes their dog exercise more.

Positive reviews are an important aspect, as they tell you what customers LOVE about the product. If you are innovating or improving an existing product, you have to know what customers like about your competitors.

Negative Reviews

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Looking at the negative reviews throughout the listing, I have noticed a common theme:

  • Cheap material – most dogs break it easily.
  • Dangerous – Some dogs have risked choking because it comes apart easily.
  • Boring – some dogs found the toy to be boring, this suggests that the toy is only ideal for particular breeds.
  • Functionality – Some customers found that the treats don’t come out properly.

When looking at negative reviews, focus on a common theme – if many customers complain about a particular feature, this can be improved!

External Research

 

After focusing on the listing, it’s time to search if there’s demand outside of Amazon USA. Remember, the goal is to build a lasting and global brand, so you need to expand your research further. I will look at this particular product and see how it performs:

Google Trends

When launching a product, it’s easy to only focus on that particular product. However, the goal is to see if there’s demand in the category. I made a Google Trends search for the keywords “Dog Treat Toys” and “Dog Toy Balls” to see if there’s any demand throughout the year for this product.

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As seen above, the demand for the product is fairly steady all year round with some months experiencing high demand. This is good news as it shows that this product is not seasonal and their is interest in this niche.

Non-US Amazon

The idea is always to first launch a new product in the US market(higher demand) and expand into other countries. As you can see below, I have made a search for this product in the Spanish, UK, France, Germany, Italian & Japanese Amazon marketplaces. Although this product is listed in all marketplaces – not a single review can be found. This can mean:

  • No demand for the product outside the US – Highly unlikely considering the category(Pet Supplies).
  • The seller main focus is only the US, so releasing a better product in the other marketplaces would give you an advantage.

Amazon DE

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Amazon UK

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Amazon Japan

 

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Re-Cap

Based on the initial analysis, my conclusions are:

Positive

  • Quality is an issue – We can make a better product.
  • Material is low-quality hard plastic and therefore we can improve the material quality or use a different material.
  • Certifications – No certifications are mentioned in the listing, by obtaining certifications we can make the product better.
  • Photos – Higher quality photos.
  • Listing – Better product descriptions & bullet points.
  • Variations – Include colors in the listing & offer 2-3 colors.
  • Packaging – With some effort we can make a better packaging.

Negatives

  • The product is extremely popular and therefore hard to get the #1 spot.
  • Large amount of reviews – However, 24% are 3 star or lower, so a better product can outperform it.

Warning: If going this route, it is extremely important to check if any products you take inspiration from don’t have a patent associated with them. The idea is to have a brand with unique products – So be unique!

What’s Next?

Once you have made significant research about a particular product. You need to make any improvements come to life. The way to do this is by either:

  • Hiring a product designer to design a completely new product based on the feedback you give them.
  • Sourcing a factory that produces similar products and see if they can make the requested changes.

I recommend hiring a product designer as they can completely experiment with different designs and you would get a unique product for your brand. When you’re happy with the result, you pass on the design to the chosen factory and a mold + sample is made.

A Note About Product Research

We are all familiar with product research tools such as Jungle Scout or Unicorn Smasher. While these tools are great, they shouldn’t be used to exactly tell you which products you pick, BUT to discover hidden gems within the marketplace & monitor sales volume. The best way to truly build a lasting brand is to:

  • Build a brand around a category/niche you’re passionate about. If you have a strong passion/interest towards a particular niche, you know what the market wants.
  • If you already have a product in a category, focus on building a list & interact with potential customers via social media. Once you build trust with your customer base, they will often tell you what products they love/want.
  • Release products which are both unique and better than the competition.

Moving Forward

Once you release a new product on the market it’s best to release other products related to the brand. This is done to:

  1. Cover many sub-niches in one category.
  2. Show expertise in your niche
  3. Build trust with your target market(if you consistently release great and innovative products)

Good places to look for new products related to your item are:

“Frequently Bought Together” section

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As you can see with our product from the case study, Amazon is already showing you an item that is frequently bought by customers. 

“Customers Who Bought This Item Also Bought” section

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Same as above, Amazon gives you all the data you need to make your research easier for your next products.

“Sponsored Products Related To This Item” section

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This is very important as it shows PPC activity surrounding a category. If other sellers are spending money promoting their products, then, there is interest in the market. As you can see below, Amazon is showing a lot of products.

Category Magazines

Magazines(both online and offline) are a good source of inspiration. These publications only cater to an audience actively interested in the category so they can greatly help you. Understanding the market and your potential customers will help you gain authority within your niche.

Forums

Forums are a great source because audiences discuss topics related to a particular niche. Which is very helpful because:

  1. You can get inspiration for blog posts
  2. You can segment your audience( Gender – Age – Household Income etc)
  3. Advertising – Forums have advertising sections, see what type of brands and products are advertised and do your research on that.

Tradeshows & Exhibitions

This is by far the best way to source new products. Trade shows are a great way to see trending & upcoming products and find potential suppliers. Manuel will talk about this in more detail as he has a lot of experience in this field.

Reminder: Always do your research before investing time and money into a product – Your customers and business will thank you later!

Conclusion

I hope this mini case study was helpful and hopefully it can serve as an inspiration for new products in 2017. Moving forward, the next blog posts will be written both by Manuel & myself and will focus on Sourcing, Manufacturing & Certifications. These topics have been widely covered by Manuel, however, we have some great information on how to apply them to build a brand.

We hope you had a great holiday season and both myself & Manuel wish you a Happy New Year! If you have any questions regarding this blog post, kindly leave a comment below.

All the best & happy selling,

Duncan

http://importdojo.com/importdojo-masterclass/

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Zero to Hero: Build a Brand Series – Business Incorporation 101 – Part 3 – Banking

Zero to Hero: Building a Brand

Business Incorporation 101: Part 3

Business Banking

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Having a good business structure is only one part of running the business – A good company needs to have the best tools to be financially viable. In this blog posts we will talk about business banking, transfers and international exchange rates. As your business grows, you can’t afford to lose money in fees, for this reason, it’s important to choose the best banking tools you can find.

 

Regardless of the country you choose to incorporate in, we suggest you have:

 

  1. 1 Business bank account In the country of incorporation
  2. 1 Bank account in you home country or country of residence
  3. 1 International Bank Card(HSBC, Chase, Deutsche Bank etc)
  4. 1 Currency Exchange Account

 

We recommend having accounts in all 3 major world currencies – US Dollar($), Euro(€) and Pound Sterling(£). You may ask why would you need so many accounts if you’re only operating in one country or currency?

 

There are 3 reasons:

 

1. Market Crashes & Recession

 

As we have experienced in the past, countries have market crashes or recessions which greatly devalue the local currency. This can sometimes be so severe to eliminate your profits or worse put you out of business. Having an second account in another currency will enable you to switch/move  your assets and reduce the risks.

 

2. Global Expansion

 

At some point in your business, you will want to expand into other markets besides the US. Having an account in the local currency combined with a low exchange rate account; will save you fees on money transfers.

 

3. Material Prices & Sourcing

 

A lot of E-commerce sellers overlook this very important aspect, materials rise and fall according to the local(and global) stock market affecting labour costs – and increasing you Cost of Goods Sold. A good way to go around this issue is:

 

  • Source different types of materials so your risk is spread out (Wood, Aluminium, Titanium, Textiles etc.)
  • Source from different markets. Example: Electronics from China, Textiles from India and Merchandise from the USA

 

In every business there is risks involved, however, what separates successful businesses from unsuccessful ones is that they prepare their business for every situation.

Here are some of the best business accounts in the world you can use – there are no affiliate links and all the companies/banks mentioned are listed because they truly provide the best value and they are tools we use.

 

Best Global Banks 

 

HSBC

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As we will mention in this blog post, nowadays, there are a lot of banking options. However, I would also recommend having a bank account with a major, global brand. While their fees may be higher, the fact that they have a global presence is perfect for E-commerce. HSBC is probably the best choice if available in your country since they offer:

 

  • Free ATM withdrawals from HSBC ATMs worldwide.
  • Insurance packages – Travel Insurance, product liability insurance, house insurance etc.
  • Free Transfers to any HSBC account worldwide – If your supplier has an HSBC account, this will save you a lot of fees!
  • Account opening assistance worldwide if you’re an HSBC customer
  • Very good online banking & secure

 

Citibank

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Citibank is a great alternative to HSBC(if it isn’t available in your country). Their service is top-notch and their accounts come with a lot of benefits. The Citibank Plus Account in particular is a really good option, it’s features are:

 

  • No monthly/yearly costs
  • No ATM fees worldwide – However, they don’t refund ATM charges that local banks charge abroad.
  • No foreign transaction fees
  • No currency exchange mark-up – You get charged Visa’s official rate.
  • No fees on international transfers

USA Bank Accounts

Charles Schwab Bank

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This is probably the best bank account in the US to have if you travel overseas a lot. Almost every service the bank offers is FREE – One amazing feature that is very rare in banks: they refund you worldwide ATM fees you get charged by the overseas banks. Their only downside is their online banking system, which is a bit lacking. However, having this account as part of your banking is definitely an asset.

 

You need to be a US resident or have a US address(if you’re not a US resident you can use a mail forwarding service). You can open an account online and they have a few branches across the country. If you’re not a US resident, we suggest to visit a branch to open the account.

 

Features

  • No monthly fees
  • No set-up fees
  • No ATM fees – Worldwide
  • No foreign transaction fees
  • No currency exchange mark-ups – You only get charged Visa’s official rate

Alternative: Capital One 360 USD Account

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The Capital One 360 offers the same benefits as the Charles Schwab Account, however, they don’t refund worldwide ATM fees. If you travel frequently outside the US, then this might be a deal breaker.

 

European Banks

United Kingdom

Metro Bank

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  • Fee-Free in Europe(SEPA Countries)
  • Low ATM fees Worldwide
  • Very low transfer fees(if transferring within SEPA)

 

Norwich & Peterborough Building Society

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  • No debit card fees worldwide – including ATM withdrawals
  • £5 monthly fee – Free if a balance of £5000 is kept in the account or deposits of £500 monthly

Germany

DKB

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  • Free – no set up costs & no monthly/yearly subscriptions(for the basic plan)
  • No ATM fees worldwide – However, they don’t refund ATM fees the local banks charge(if using an ATM outside the EU).
  • No foreign transaction fees
  • No currency exchange markup
  • Downside – Their English customer support is very limited. However, it’s a pretty good option for German residents.

 

Sweden

ICA Banken

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  • No ATM fees worldwide
  • Free SEPA transfers
  • No currency exchange fees
  • Monthly fee 25 SEK(~2.50€) – Waived for students and persons younger than 21 years old.
  • Free Travel Insurance for trips up to 45 days

 

 Online Only Banks

 

N26

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N26(Formerly Number 26) is by far the best online bank in Europe! Based in Germany it is now available in all EU & SEPA countries except Malta & Cyprus. The bank offers three plans – N26, N26 Black & N26 Business. N26 is now a certified bank and they offer deposit protection up to €100,000 according to EU regulations.

 

Features

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  • Free – no set up costs & no monthly/yearly subscriptions(for the basic plan)
  • No ATM fees worldwide – However, they don’t refund ATM fees the local banks charge(if using an ATM outside the EU).
  • No foreign transaction fees
  • No currency exchange markup – You only get charged Mastercard’s official rate.
  • The entire account opening process is online — you never have to physically show up anywhere
  • Card usage notifications directly from the app
  • Free Mastercard
  • Customer Service Support in German & English

To be eligible for a N26 Account you need:

  • EU resident/citizen – You need to submit proof to be eligible
  • A mailing address in Germany – You can use a German virtual address for this.

This is by far the best online-only bank if you’re from the EU & travel a lot!

Monese

Monese is an online bank that offers a UK bank account to anyone residing in the EU. They are a really good bank, however, there is a monthly fee of £4.95. If you plan on doing extensive business in the UK or need a bank presence there(especially when Brexit takes effect in a couple of years) – Having this account is a must. You can see all the features Monese offers below: 

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Simple – US Only

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Simple is an online-only bank and it’s shaping to become one of the best very quickly. They offer some really cool features & everything is done through their app. Some of the features include:

 

  • No monthly/yearly fees
  • Free Debit Card
  • iPhone & Android App
  • In-app budget tracker & visualized spending reports
  • High level Security
  • Goal Setting via their app

 

Simple is also a full member of the FDIC, so deposits are secure. Furthermore, the bank has been getting a lot of investor funding, so expect more features in the future.

 

Currency Accounts

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Currencies Direct

If your exchange fees are eating up your profits, you will need a service that offers the following:

  • Low Exchange Rates
  • Ability to transfer large sums of money
  • Experience in dealing with online sellers
  • A platform that supports multiple currencies

 

Currencies Direct ticks all the above! The set up process is quite is easy – just fill out the form on their website and a representative will contact you to see what type of business you run. Currencies Direct offers:

 

  • Extensive experience in dealing with online sellers – particularly Amazon
  • Low Exchange Rates
  • Risk Management – if you transfer huge sums of money, you want the best rate in real-time. This service will contact you when the exchange rate is ideal so you don’t loose money on extra fees.
  • Supplier & Manufacturer Payment – This is what separates Currencies Direct from the rest. They cater to a specific need us importers want(ie paying suppliers)!
  • Amazing customer service

 

I can’t stress enough how important having a good currency exchange account is. While Paypal is great to start with, their fees will eat your profits as you grow larger and payments become bigger.

This will also be true when you start to outsource different tasks of your business. It is likely that your employees/contractors/freelancers will be from different countries, having a currency account will allow you to streamline payments more effectively.

 

Conclusion

 

This three-part series was meant to give an overview for the legal and financial aspect of this business. Although it can be quite overwhelming, having a proper legal business will greatly benefit you in the long term. Our goal with the series is to create Sell-able Brands, and a business that has a good legal structure and management, is more attractive to potential investors.

In the next part of the series, we will move over to Product Selection, but with a twist, many sellers are realizing that to succeed in Amazon & in other E-commerce platforms – products need to be unique and innovative. In the next few weeks, we will explore how you can improve existing top seller products and releasing products that customers’ in your category want. Myself and Manuel will give you a complete guide on Product Design, Certifications, Patents & Manufacturing.

 

This topic is very requested, so if you have any questions or if you want us to talk into more detail, kindly leave a comment below.

 

All the best & Happy Selling,

Duncan

http://importdojo.com/importdojo-masterclass/

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What is going on in China right now?

This is a guest post by my partner in crime over at our sourcing operation of ImportDojo :) 

What is going on in China?

I am happy to provide you a bit of insight into the struggles of the worlds factories so for you to understand the background when you get emails like “shortage of packaging, long delivery times, factories shut down, massive price increases” etc.. 

Probably most of you have encountered rising prices and stubborn suppliers in the past few weeks. While some of this is the daily business of all of us, the degree of disturbance has taken dimensions unheard of in the past years and it is important and interesting to go deeper to find out what is happening and what causes the problem.

The US Dollar and its Chinese brother CNY

When Donald Trump won the election the USD fell into a short depression, recovering within hours to a strengths it had not had for almost 20 years. The USD compared to the EUR surged two days after the election to a surprising 1,078 conversion rate and continued to drop to a stunning 1,044 conversion rate in last week. As a reference point, the EUR was recovering and compared to the USD before the election results it had strengthened up to 1,150. This meant, that items purchased for the EURO zone in USD from China suddenly increased by about 9% in their landed price. 

Since we all compare profitability of products with the current possible sales price on the market, that meant margins were melting by 9% and a lot of projects, which looked fabulous before, were doomed. We heard it many times from our customers, that they were expecting a different price calculating back from the sales price on the market to the buying price. The point is, that it takes between 3-5 months for this exchange rate fluctuation to take effect in the market.

Of course the financial professionals will argue about the validity of the above numbers and I have to say they are correct. The strengthening USD forced the CNY to depreciate, which meant that compared to the USD the CNY became a bit weaker and everything coming from scratch from the chinese market in terms of raw materials could become a bit cheaper eventually. However the depreciation of the CNY towards the USD is limited to around 2-3%, while the currency strengthened by 9%, so for the European market it is a loss of around 6% just because of the USD. For the US market on the other side it definitely is a chance, since the depreciation of the Renminbi takes effect and in theory all items should become 2-3% cheaper. Now this is where the second problem kicks in.

The environment

At 4:20 PM on Friday, 16th of December 2016, Chinas environmental control agencies issued a five day “red alert” about a hazardous, choking smog spreading across the northern part of China and Beijing. Skies went black, the public was advised to stay indoors and switch on the television and the whole thing had a little bit the feeling of a catastrophe approaching. The AQI (air quality index) surged from average 150 (which is already unhealthy) to 500-700 in certain areas. Schools and nurseries were shut down, cars older than a certain age were banned from the streets and life almost stopped.

Beijing is just one of 21 cities in China declaring red alert throughout the last 20 days. A couple of days after Beijing, Shanghai followed and around 200 million people were effected by the exhaust fumes of the factories producing for the whole world. The government did the only thing that was right and targeted high polluters like steel mills, coal plants, painting and packaging factories, oil processing plants and all factories not fulfilling the environmental criteria set out by the government at the beginning of the year. As a result, by the end of last week more than 2.500 factories all over China have been shut down. Some of these manufacturers will get the chance to reopen after the red alert passes, many of them will have to either improve and get up to the standard required or file bankruptcy.

We may say “Lucky our factories are not affected”, but it would be a lie. The truth is that only very few of the 1.500 factories we work with have had to completely shut down. However this does not change the fact that their raw material suppliers for steel, aluminum, copper, plastic (oil related) as well as packaging are not there anymore. Yes, China is out of stock on raw material and packaging material. The result of this government policy is, that in the past 3 weeks cold rolled steel prices have gone up by 40%, hot rolled steel prices by 30%, plastic by 25% and packaging – if you are lucky and you can get it – by 35%. Aluminum and Copper follow the main steel indexes.

We have hit rock bottom on this and probably this is as bad as it gets. Suppliers are postponing orders without any guaranteed new shipment date where they purchased the raw material but did not purchase the packaging yet. In some cases if the material is not yet purchased, suppliers even cancel orders with their customers because the price increase they have to ask for would be in a range of 20-30%, which will make them lose their reputation. 

Chinese New Year

The cataclysm is the 28th of January 2017, when all factories put down the work 12% of the worlds population starts their 2 week holiday with a journey to their hometown. This is also the point in time where the environmental “red alert” will probably be lifted again and everything can go back to normal. However nobody can foresee the effect of China standing still 1 month earlier than anticipated because of these environmental issues and we are working hard to find a solution for each and every customer who encounters this problem along their way.

The potential chances in this situation

Concluding this newsletter the situation does not look good at the moment but it is an amazing chance to get some sourcing and product development work done. Offices remain open and concepts can be drafted, samples can be inspected and quotations can be handed out. Even though production is not at its peak, the factories can focus on selling their assortments and capacities for the coming year, for orders after Chinese New Year.

We are prepared to take on your new ideas and requests before Chinese new year and offer a discount to existing customers of 10% with the coupon code #christmas, sent to any of our employees at ImportDojo. Here in Hong Kong our merchandisers work over the christmas holidays and will be happy to grant this lower price to any service from our services overview except for photography and virtual address services here: http://importdojo.com/sourcing/

Finally, there is nothing left to say except for thank you once again for the trust you put in us in 2016. We are looking forward to an exciting 2017 together with you and we wish you a merry christmas, happy holidays and all the best for 2017.

All the best and happy sourcing,

Manuel

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Zero to Hero: Build a Brand Series – Business Incorporation 101 – Part 2

Zero To Hero: Building a Brand Series

Business Incorporation 101: Part 2

Taxation & Overseas Incorporation

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In last week’s blog post, we had a brief introduction on the best legal practices and an overview on US incorporation. Today, we will go into more detail on how to manage your business effectively and also explore some of the best countries where to incorporate.

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P.S. This guide is only meant as a resource. While a lot of research has gone into proving helpful and accurate information – We are not lawyers. Before incorporating your business, especially in countries outside of yours, always consult with a qualified professional specialized in international laws & taxation.

The Ultimate Double Taxation Guide

Most E-commerce sellers come from a wide range of countries and sell in a wide range of markets. The most common ones are:

  • US residents selling in the US, EU & Asia
  • Europeans selling in the EU & USA
  • Individuals who either come from other parts of the world and sell in the US/EU
  • US/European residents who sell in other markets & countries outside Amazon

Most sellers normally pick one market, for example, the US, and start selling there. This is easy because when it comes to tax, you have to deal with:

  • US Taxation(sales tax, customs, import duties etc.)
  • Personal Income Tax based on your country of residence

Naturally, as you your business grows, you need to expand into other markets. This is where things get complicated as each country has it’s own tax laws & systems. In particular, when it comes to international tax, double taxation comes into effect.

What is Double Taxation?

Double Taxation is commonly referred to when income taxes are paid TWICE on the same source of income. It normally occurs when income is taxed at both at personal and corporate levels. There are two types of Double Taxation:

1. Juridical

This is when one source of income is taxed by two or more countries. For example, you’re a German resident who sells goods on Amazon US and you get taxed by both US and German authorities on the same income.

2. Economic

This happens when more than one person is taxed on the same income. This often happens when a company has multiple members/shareholders and the same income is taxed on that income(instead of redistributed amongst each member and personal tax is paid).

Important

Double Taxation is often a unintended consequence of international tax legislations. Countries and tax authorities try to avoid double taxation as much as possible and systems are in place to avoid you or your company paying twice on the same income.

International Double Taxation

International businesses are often faced with issues of double taxation. Income may be taxed in the country where it is earned, and then taxed again when it is repatriated in the business’ home country. In some cases, the total tax rate is so high, it makes international business too expensive to pursue.

To avoid these issues, countries around the world have signed hundreds of treaties for the avoidance of double taxation, often based on models provided by the Organization for Economic Cooperation and Development (OECD). In these treaties, signatory nations agree to limit their taxation of international business in an effort to augment trade between the two countries and avoid double taxation.

What is a Double Tax Treaty? Does my country have one?

Many countries around the world have signed agreements or treaties between them as a means to avoid double taxation. These are based on models provided by the Organisation for Economic Cooperation and Development(OECD). This is a life-saver for business owners as they often have issues of the income being taxed in the country where it is earned and then taxed once again once it’s moved to the owner/s home country(or residence).

To find out if your country of tax residency has a double taxation treaty with the country you do business in, check on both countries tax authority website. You can also search on Google by typing: “Country” + “ Double Tax Treaty” – replace the country field with the country you do business in(example: USA).

How can I avoid Double Taxation?

To avoid double taxation, there are two ways:

  1. 1. Speak with your accountant/CPA so they file for taxes correctly on your behalf.
  2. 2. Have a limited liability company(or the equivalent) – Limited companies have the ability to pass on their profits to their owners and pay personal income tax on the earnings.

The Advantage of Having a US LLC

As we saw last week, having a limited liability company in the US has a lot of benefits. However, perhaps the biggest benefit of all is the ability to make the LLC a disregarded entity. This means that any profits the LLC makes, get passed onto the member/s – so basically the LLC in itself never gets taxed, only it’s owners. This is perfect for those who are non-US residents and are part of a double taxation treaty with the US, as you can get taxed on your personal income in your tax residency.

Keep in mind that you still have to file a tax return with the IRS at the end of each financial tax year(normally April). This is a great benefit and when you form your LLC, is something you should definitely discuss with your CPA.

Tax regulations can be very confusing, unless you have experience in handling taxes on your own, always consult your CPA, accountant or tax authorities first. Double taxation can be avoided if there is a structure in place.

In the event you’re taxed twice on the same income, this can always be refunded back. However, it’s a long and bureaucratic process which can greatly reduce your cash flow and delays to your business.

Other Limited companies in other countries have the same structures as a US LLC, so make sure you’re aware of the tax laws before incorporating in a jurisdiction where there is no Double Taxation Treaty!

Offshore Incorporations

There is a common misconception surrounding foreign incorporations being labelled as tax havens. This is all depends on where you incorporate and how you declare tax – I would always recommend declaring your offshore company with the tax authorities back home. A good idea is to incorporate either:

  1. Where the majority of your business operations will be
  2. The country of residency
  3. Countries which have a very good legal, banking, and taxation systems – such as Singapore and Hong Kong.

Let’s look at some of the best offshore incorporation structures and what they offer.

British Virgin Islands(BVI)

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Warning: BVI has been recently in the news due to tax evasion. Currently, these jurisdictions are at a greater scrutiny from tax authorities in the US and Europe. Should you still want to incorporate here, consult with the tax authorities back home and make sure you declare your registered offshore companies to comply with the law.

Other jurisdictions under the public eye are Bahamas, Panama & Barbados.

The BVI are an idyllic paradise islands located in the Caribbean Islands known for it’s super-rich expat community & low tax rates. Here is a complete overview of BVI incorporation:

Main Features

  • Company documents are widely accepted by major international banks.
  • Fairly low yearly renewal fees.
  • Information about the owners, directors and shareholders is not public.
  • No property purchase restrictions in the BVI & freedom of doing business in any country.
  • Anyone can register a company in the BVI
  • Companies incorporated in other jurisdictions can be moved in the BVI

Requirements

  1. Must have a registered address inside the BVI, main address can be in any country. For this, you can easily use an agent or law firm to act as a registered agent.
  2. Minimum member requirements are 1 shareholder and 1 director.

Capital

BVI companies have to issue a minimum amount of shares on their behalf. The maximum authorized capital for 50,000 shares($1 value for each share) is subject to a government fee of $350.

Tax Rates

BVI companies pay zero tax for all it’s members, directors, officers & shareholders. This is what makes the BVI an attractive option.

Annual Fees

Each BVI company must pay the annual renewal fee of around $800 – 1000$. The fee mostly depends if you’re filing for renewal on your own or using a service.

Public Records

 Names of the directors, officers and shareholders are not filed with the BVI Register of Companies, not included in the Memorandum and Articles of Incorporation and not available for the public.

There are no accounting and audit requirements for BVI companies.

Time-frames of Incorporation

 5 to 8 business day from making the Apostille & documents. Most third-party incorporation services can register you in 1-2 business days upon receiving all documentation.

Overall Costs

$1200 Incorporation Fees & $800-$1000 yearly renewal. This doesn’t include any share capital for the company.

 Estonia E-Residency

The Estonian E-residency program is not quite an incorporation – However, it’s specifically designed to act as a digital identity. This is perfect for location independent entrepreneur who need a “base” in a European country. The E-residency is not a residency program, however, you can register an Estonian company which is also very attractive.

Features

  • Digitally sign documents and contracts.
  • Document verification and encryption
  • Form an Estonian company online. You need an Estonian address & bank account(which you have to fly in Estonia to open).
  • Merchant Accounts available
  • Tax Filing can be done online. However, tax residency must be established first.
  • In addition to this, people who enroll in the e-residency scheme will receive a smart ID which provides:
  • Document encryption & authentication
  • Digital signing of documents
  • Digital Identification

This scheme is truly unique as it provides a way to shift taxes & documentation entirely online. As more people are working from home or becoming digital nomads, having an online ID which provide top security features is a must. The E-residency only costs around €100 and the process is done entirely online.

Singapore

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Singapore is perhaps one of the best places to incorporate since it’s very entrepreneur-friendly and a strong financial centre of Asia and worldwide. The main attractive thing about Singapore is that it’s own government pushes for new entrepreneur to register their companies there. This makes the process more streamlined and you get a lot of help. The government website also provides a lot of information.

A limited company in Singapore is called a Private Limited Company and each registered company must bear the suffix Pte Ltd in all official documentation.

Features and Benefits

  • The Pte Ltd is a separate legal entity in Singapore. This means that the company liabilities are completely separate from it’s members and shareholders(ie You)
  • Singapore’s Pte Ltd. outlives the lives of its shareholders. Meaning the company stays active even if the owners pass away.
  • Registering a company in Singapore will give you a credible image and makes it attractive for business and investors.
  • When registering the company you have the option to pass the company to a new ownership if the need arises. This is a great feature as you can easily pass company ownership to investors and buyers in the event of an exit.
  • The first 300,000 SGD earned are eligible to a government tax credit of 50-100%, for incomes over 300k SGD, the corporate tax rate is 17%.
  • If the profit is already taxed on an income level, the Singapore PTE Ltd. Frees you from any capital gains.
  • If you’re not a resident of Singapore(ie a foreigner), you MUST appoint at least 1 local director – which can be either a Singaporean/a citizen or PR. However, if you want to shift operations to Singapore, you can obtain an EntrePass visa – Singapore’s employment pass.

Registration Process and Requirements

  • The entrepreneur must choose a unique business name for the business, preferably with an available domain name. A name check can be done and reserved also.
  • A Singapore Limited Company can have a minimum share value of 1 SGD, there is no maximum capital share value. The company can have a maximum of 50 shareholders.
  • Company must have a real address in Singapore and the local person appointed as director must be 18 years or older.
  • You must appoint a local secretary no later than 6 months from the date of formation.
  • Some private limited companies will require enlisting auditory services. This can be checked before applying for registration.
  • Some sectors of the economy require government approval before incorporating. Some of these sectors are finance, banking and insurance.
  • If you’re planning to set up the Singapore Limited Company as an offshore company, you must use a third-party service to file the application process. Foreigners are not allowed to file for registration for there own. Singapore has a visa-free policy of up to 90 days for most nationalities and you don’t need any special permits to form the company.

 

Hong Kong Company

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Hong Kong has long been considered a financial Mecca of Asia and it’s actually the place I would recommend to register an offshore company. Their banking system is excellent and it’s a very entrepreneurial country. The process is getting a bit more difficult, however, with the proper guidance, the incorporation process is fairly straightforward.

The most common type of business entity registered in Hong Kong is a private limited liability company. Limited liability companies are a separate legal entity for its owners compared to structures such as sole proprietorship. Anyone above the age of 18 can set up a company in Hong Kong.

I will list all the process and requirements for registering a HK Limited Company. Due to the complexity of the process and tighter regulations, it is recommended you engage a professional firm to handle the process.

Requirements for HK Companies

Company name – The name must be unique and needs to be approved before proceeding with incorporation.

Directors – Unlike Singapore, directors can be from anywhere in the world. You must appoint at least 1 company director and there is no requirement for the director to be a nominee shareholder in the company. Directors must be of at least 18 years of age and board meetings can be held anywhere in the world.

Shareholders – HK Limited companies allow a minimum of 1 and a maximum of 50 shareholders. There is no residency requirement of the shareholders and a single individual can own 100% of the business. Nominee shareholders can also be appointed and shares can easily be redistributed and sold.

Company Secretary  – The appointment of a company secretary is mandatory. The company secretary must be a resident in Hong Kong or have it’s official office/place of business in HK. The company secretary must be a different person in the case of a sole director or shareholder. The role of a company secretary is to maintain the company books and ensure compliance with the laws of Hong Kong.

Share Capital – The general norm is to have 1 share per owner, the currency of shares can be in any major currency and if transferring shares they are subject to a stamp duty.

Registered Address – To be able to register the company, you need to have a registered Hong Kong address. This must be an actual address and not a P.O. Box..

Public Information – Information about the company and it’s members is available to the public in compliance with Government laws. If you wish to keep details and names hidden, you can consult with a professional firm.

Taxation – Profits tax is set at 16.5% for profits made in Hong Kong. Only profits and income earned in Hong Kong are subject to the tax as HK has a territorial taxation policy – Meaning profits made outside Hong Kong aren’t subject to tax. There is no capital gains tax & withholding dividend taxation.

Compliance – It is mandatory for companies to maintain accounts. Accounts must be audited annually by a Certified Public Accountant in Hong Kong. Companies must also file an annual renewal fee and must hold an Annual General Meeting, 18 months from the date of formation. The subsequent years, the AGM must be held every 15 months.

Time-frame – It usually takes between 5 to 7 days to incorporate in Hong Kong.

NB: Although there is no official requirement to be physically present in Hong Kong, you must be present in order to get a Business Bank Account. It’s difficult(if not impossible) to get a bank account remotely. 

Documents Required

To set up a company in Hong Kong, the following documents are required:

  1. Articles of Association of the company. A copy is normally provided by the firm assisting the incorporation process.
  2. Incorporation Form that includes all of the following:
  • Company name
  • Registered address
  • Description of your business & sectors you will be operating in
  • Personal Details of shareholders, directors and company secretary
  • Member Liability
  • Share capital – Amount & No. of shares

If directors or shareholders are non-residents of Hong Kong, these additional documents are needed:

  • Copy of passport
  • Overseas proof of address
  • Bank Reference Letter

For resident shareholders and directors:

  • Copy of Hong Kong identity card
  • Proof of address

For corporate shareholders and directors who are registering a subsidiary in Hong Kong:

  • Copy of parent company registration documents such as Certificate of Incorporation and Articles of Association

NB: If your documents are not in the English language, they must be professionally translated.

Further Assistance

If you need further guidance on the best policies of registering a Hong Kong Company, Manuel & Michael Michelini from Global from Asia have just released a brilliant Udemy course. They explain all the steps in detail and Michael has extensive experience helping online sellers register companies in Hong Kong.

You can check out the course here:

https://www.udemy.com/how-to-start-your-international-business-via-hong-kong/

*Please note that the link is an affiliate link

Conclusion

I hope this very long blog post provides some clearance and options on incorporation. This can be a really confusing topic, especially when starting out. This is one area(the others being taxes, accounting & IP) where you should seek out professional advice due to the complicated nature & international laws.

However, the aim of this series is to guide you in the right direction and be protected from the legal aspect. The correct incorporation structure can have a lot of benefits for you and your business – whether it’s tax credits or legal protection of your personal assets. In the next blog post we will move over to business banking where we will explore some of the best accounts & practices to save you money.

I would love to hear your feedback on this series! Both myself & Manuel are trying our best to provide you the tools and information to expand your business, so any suggestions are welcome :)

All the best & happy selling,

Duncan

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Zero to Hero: Build a Brand Series – Business Incorporation 101 – Part 1

Zero To Hero: Building a Brand

Business Incorporation 101 – Part 1

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Over the past few weeks we went over the basics of building a brand. One thing all major(and minor) brands have in common, is that they are protected from a legal perspective. Having a good business structure will give a lot of benefits moving forward. Although the initial set up process can seem overwhelming and expensive, it doesn’t have to be. Nowadays, there are many countries where you can incorporate remotely that provide a lot features, benefits and most importantly in a financially secure jurisdiction. 

In the next part of the series we will guide you through everything regarding business incorporation and banking – including some helpful tips on where to incorporate your business.

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P.S. This guide is only meant as a resource. While a lot of research has gone into proving helpful and accurate information – We are not lawyers. Before incorporating your business, especially in countries outside of yours, always consult with a qualified professional specialized in international laws & taxation.

Why Incorporate? 

Many new business owners and online sellers alike often ask if they should incorporate their business before selling online or do it once they are established and have capital. This all depends on what type of business you run, in our case, what products you’re importing. If you’re importing products of high-risk liability such as:

  • Electronics or Electrical Appliances
  • Toys & Baby products – and any products used by children ages 3-10
  • Supplements
  • Cosmetics & Beauty Products
  • Food & Drinks

These are all products that need certifications and in some cases lab testing done. If you’re importing as a Private Label(and not an established brand), a corporate structure will offer you an extra layer of protection. 

Furthermore, having your business incorporated has numerous advantages which are helpful especially later on when your business grows larger. Some of the benefits include:

Personal Asset Protection

It is very important early on to separate personal assets and business assets. Aside from the initial stage where you have to fund your business, you should immediately get a business account for your transaction. This is crucial not only because some banks won’t allow you to use your personal account for business, but more importantly, having your personal assets separate, will protect you in the unfortunate event your business is liable for damages.

A business corporate structure, such as a Limited Company, will protect your personal assets. This is the main reason what makes incorporation attractive.

Transferable Ownership

In the event of an exit, company shares or members can be transferred. Making it very easy and attractive if you want to sell your company in the future. This is true if you have a Corporation structure, where you own 51% or more of the company, shares can be easily sold or transferred to the new owner.

Tax Benefits

Depending on the structure and country of incorporation, you might find out that you owe less taxes than self-employed/sole proprietorship. This is due to numerous tax cuts and deductibles offered to business owners. If you qualify, your tax bill can be reduced greatly, as always, consult with a law firm specialized in business incorporation or your CPA on what tax cuts are available in your country or state.

Important: This shouldn’t be confused with tax evasion and it’s by no means condoned. Tax avoidance is allowed only in accordance with the tax laws of the country of incorporation. For this reason, if incorporating in a country different than the one you’re resident in, consult with the tax authorities before proceeding with incorporation. 

Separate Credit Rating

Your company will have it’s own credit rating and it won’t be affected if your personal credit score is not good. Keeping a good credit score for you business will give you a lot of benefits, these include:

  • Increased overdraft facilities
  • Higher Credit Card Limits
  • Bank Account Upgrades
  • Dedicated Financial Advisor(depends on the bank and account history)
  • Reduced or No Account Fees

Having a good history will make your company investor-friendly as investors or potential buyers want a company with few debts or liabilities. 

Retirement Plans and Payroll

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Having your own company will allow you to create private retirement plans for you and your employees. Depending on the bank, business accounts have payroll management in their system. This will be very helpful if you plan on having employees or contractors.

Disadvantages of Incorporation

Unfortunately, while there are a lot of benefits to business incorporation, this comes with it cons. This is true to small business owners and people with limited capital. Some of the disadvantages are:

A Lot of Paperwork

Registering and maintaining a business comes with a ton of paperwork and filing. This can be very confusing if you’re new or if this is your first company. Each country has it’s own laws and if you’re selling globally, you have to comply with each country.

This can be quite overwhelming, but unfortunately it must be done. To make things easier, have your CPA or lawyer take care of your company filing – that way you have no risk of incurring fines.

Fees! Fees! Fees!

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With tons of paperwork, comes tons of fees. Between registration fees, yearly licences, taxes and CPA fees; your outgoing expenses might increase. Maintaining a corporation can become expensive and shouldn’t be done without capital.

Limited companies are popular because the fees are lower and have less filing requirements than corporations. This is the structure that works best for new sellers and those in e-commerce in particular.

Liability Is Not Guaranteed

While incorporating your business may protect your personal assets, you may still be liable in some cases. Only a Corporation fully protects the personal assets of the shareholders. If you import products with high-liability, it’s best to consult with a lawyer on which structure is suitable.

USA Incorporation

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There is a common misconception amongst people outside the USA that incorporating your business in the US is expensive and complicated. Furthermore, in some cases, if you’re importing in the US, you need to have a US company or subsidiary. Some dropshippers in the US will also refuse to work with you unless you have:

  • Reseller Licence
  • Employer Identification Number 

US LLC State Registration

It is recommended to start off with an LLC if you choose to incorporate. For US non-residents the 3 best states to incorporate are:

Delaware

Delaware State is the most popular place for foreigners who wish to incorporate in the US. However, Delaware is better suited for those wishing to form either an S-Corp or C-Corp.

  • State Filing Fee: $200
  • Certificate of Formation: $90
  • Annual Fees: $300 Alternative Entity Tax by June 1 + State Filing Fees $200 = $500

Nevada

Home to the popular Las Vegas, Nevada is one of the best states to file an LLC, with it’s very attractive tax rates and ease of filing. Besides the yearly fees, there are no other requirements to follow.

 

  • State Filing Fee: $75
  • Annual Fees: Business Licence $200 + Annual List $150 = $350

Wyoming

Wyoming is the cheapest state of the 3 for LLC costs. It offers all the benefits of states like Nevada and formation shouldn’t take longer than a few business days. Foreigners wishing to incorporate in Wyoming, must have a registered agent notifying the state in writing.

  • State Filing Fee: $100
  • Annual Fees: $100

In all three states you require a Registered Agent. A registered agent is a person or service that acts on your behalf in the state of incorporation. They would receive any letters/paperwork and notify you when paperwork and annual fees are due. Services normally start at around 49$/year and it’s required by law to have a representative in the state of incorporation.

Employer Identification Number

The EIN, is the tax identification for your business. This will be the number used to conduct business inside the US and for importing/exporting goods.

 If you’re a US resident or you’re a non-resident, wishing to get an EIN, the process is quite simple, and you can either get the EIN by applying online, phone or by mail. If you’re a US non-resident with a US LLC/Corporation, you will need a responsible party to get the EIN.

To get the EIN you need to fill out Form SS4 and send it to the IRS. Getting an EIN is very simple and fast – the whole process shouldn’t take more than 15-30 minutes and is free of charge.

Getting a Bank Account

If you’re not a US resident, this is the biggest issue you will face. It is extremely difficult and rare to get a US bank account(business or personal) without being physically present. In some cases, there are companies that offer the service of opening a bank account remotely, however, they are expensive. You can also consult with your CPA or lawyer and see if they can open an account for you.

To open a business account in the US, you need:

  • Passport
  • EIN & Company Registration Documents
  • Business Licence
  • Articles of Organization – This is a list of all the members in the company, you should get the documents when you register the company.
  • Operation Agreement

Keep in mind that every bank is different and requires different documentation. If you’re a non-resident, inquire beforehand on what documents are needed.

Virtual Address

You need an official business address, this is needed to receive company mail and to register for services & marketplaces. A virtual address will notify, forward and even scan your mail – There are numerous companies offering these services for as little as $90/year.

Phone Number

If you’re registering a US LLC as a United States Non-Resident, you need a US phone number. This is will be required by all businesses(including banks) and marketplaces you will deal with.

The easiest and best option is to simply get a Skype number, it is fairly cheap with low call rates. If you’re based in the US, it is recommended to get a business phone number. 

Conclusion

This has been a brief introduction on business incorporation. In the upcoming weeks we will explore Offshore Company Registration – including the best countries where you can incorporate, and business banking. Hopefully, after reading this guide, the incorporation process has become easier to understand.

If you want us to include a particular topic regarding business incorporation or if you have any questions on the subject, please leave a comment below.

All the best & Happy Selling,

Duncan

http://importdojo.com/importdojo-masterclass/

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From Zero To Hero Post 1 – Branding done right

Branding Done Right

Last week we introduced you to our overview of the Zero to Hero blog series. In today’s blog post, we will cover the areas you need to focus in building your brand from the start. The phrase “Build a Brand” gets thrown around often and most people know that having a brand is essential, by implementing these features, you are guaranteed to have a good foundation to build a global brand.

Before I get into this first blog post I wanted to give you an overview of whats coming and what the main milestones are in this series. Some of those topics are super exciting so make sure to share this blog post and stay with us until the end of the project

PROJECT OVERVIEW

Building a Brand    

❏ The importance of building an Ecommerce brand

❏ Choosing a brand name & why it’s crucial for long term success

❏ Creating a Logo

❏ Choosing a slogan that fits the brand

❏ Creating a story behind your brand

❏ Brand Design 101: Brand colours, fonts & mood/voice. Consistency is key.

Business Incorporation   

❏ Why incorporating is essential for your business )

❏ Where to incorporate. Pros and cons of each + which one is better for e-commerce.

❏ Currency accounts / Comparison of each & why it’s essential to not lose money in exchange rates.

Choosing a Product  

❏ Product Research Guide

❏ Industry Research & Demographics 

❏ Competition Analysis

❏ Identifying flaws in competitor’s products & making your product better.

❏ Private Label vs Own Design and why being unique is better.

Manufacturing  

❏ Complete Guide on Manufacturing Overseas

❏ Certification

❏ Materials & components to avoid when starting

❏ Contracts – Protecting your brand 

❏ Choosing a supplier

❏ Ordering samples & how to test each sample effectively

❏ Product Design Guide

❏ Mould Process Guide

E-Commerce    

❏ Why having your own website from day 1 is essential for your brand

❏ A look at Ecommerce platforms & what do they offer. Which one we recommend for beginners.

❏ Building you store

❏ Email Marketing & Building a List      

❏ E-commerce SEO and how to drive traffic 

❏ PPC Overview

❏ E-commerce blogging

❏ Why good product descriptions is key to success

Social Media Marketing   

❏ Setting up Social Media

❏ Gaining Exposure

❏ Social Media Marketing

❏ Connecting with Authority in your niche

Inventory Storage   

❏ Fulfillment Centres – What they are and why they are essential for your growth

❏ List of fulfillment centres

❏ Fulfillment centres vs FBA 

Branding your Product      

❏ Product Photography

❏ Custom Packaging – standing out from your competition

❏ Shipping Boxes

❏ Insert Cards & Marketing Materials

❏ Customer Service & Experience

AMAZON 

▪ A guide on using sellers central platform effectively.

▪ Amazon Sponsored Products – A guide to PPC and how to optimize your listing based on Amazon ppc Results

▪ Customer Service – How to handle different customer issues and respond effectively.

▪ Amazon Deal Guide – Lightning Deals – Prime Day – Black Friday Deals. How to apply and maximising profits during deals. We will also explore how to run deals outside of Amazon to your listing.

▪ Amazon Vine and Giveaway Program – An explanation and overview if it’s effective for your business.

Retail & Wholesaling  

❏ Finding retailers & distributors in your niche

❏ Create a catalogue

❏ Contacting retailers

Going Forward 

❏ Expanding to other countries

❏ Maximising other sales channels

❏ Creating a product line

❏ Exhibitions & Tradeshows 

❏ Outsourcing

Now let’s go into today’s post.

 

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The Key Areas To Building a Brand

Choosing a Brand Name

This will be the main feature besides the logo of your brand, so it must be chosen carefully. Brand Names can be mainly classified into 3 main categories:

1. Niche Specific – Example: Joe’s Tea Company 

This choice is fine if you’re planning to exclusively sell within one specific niche or main category. However, as your company grows, it is essential to expand into different areas of one category. 

2. Category Specific – Example: Joe’s Beverage

This option is ideal if your main focus right from the start is to grow your brand to dominate your niche. By not limiting the choice of products in the brand name you can diversify according to the market at that time. Targeting multiple sub-categories within a niche is essential(as we will learn later on in the series) because you can target multiple keywords within that niche.

3. Unique Brand Name – Example: Empower Drinks

This gives you the most freedom for your brand, as you can expand and release products without being limited by the brand itself. However, a lot of effort must be made to get the name out there and customers won’t start associating your brand with a specific category in the short term. The best benefit of a unique brand name is that you have complete control, this is especially true if trademarks, domain names and other intellectual property is available for you to register.

Ultimately, a brand name goes down to preference. All three choices require effort, a line of successful products and excellent customer service to succeed.

Logo Design 

The logo, in most cases, IS what makes the brand. It is the key feature with which your customers will identify your brand. Before hiring a designer for your logo, here are some key aspects your logo should include:

Simple but Detailed

A logo shouldn’t be too complicated as it can be distracting, especially when it comes to products. Think of the products you will release, or plan to release on the market, it is likely your products will be made of different materials(wood, stainless steel, fabric, etc.) and a variety of methods of application(embroidery, engraving, stamping, etc.). A great logo will make your products stand out more and its a great way to start building a brand.

Colour Scheme

Ideally your brand shouldn’t have more than 2 or 3 colours in all of it’s branding. This applies to all aspects of the brand. In the pictures below, you can see how all the major brands pick one main colour and focus all their branding on it.

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Image Source: The Logo Company

Here is how certain colours effect Men and Woman. Depending on your niche, this may prove helpful in the design process

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Image Source: Entrepreneur.com

Demographics

 

Make your brand appealing to the audience you’re targeting. Audience segmentation will be helpful in targeting the right demographics that may be interested in your brand through advertising and social media. The main demographics you should be interested in are:

1. Gender: Male or Female

2. Age Range

3. Location – Country and State/Province

How ImportDojo Applies Branding

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As you can see from the image above, Import Dojo implements all key elements when it comes to branding. The brand name in itself has great relevance to its audience. The logo is fairly simple and recognizable, with few, but bright colours. 

However, what makes the brand in this case, is the story of how Import Dojo was started and why Manuel had the idea to start the blog. You can read more about it here.

Products, even if essential, are only one aspect of the brand. When you combine the same concepts throughout your website, social media and packaging; that’s when a brand truly starts to distinguish itself from the competition.

The Hard Truth: Branding Takes a Long Time To Be Effective

Unfortunately, the not so sexy part about branding is that it takes an unbelievable amount of work, consistency and time to see the rewards. Nonetheless, people are more likely to buy from a company that offers a unique experience to its customers. The whole point of the series is expand your brand to multiple sales channels and expand globally.

While Amazon will still be the main sales channel, having control over your brand, customers and products is going to be the only way to succeed in the future.

 

Conclusion

This was only a brief overview and guideline on the process of kick starting your brand. We hope this blog post was helpful in guiding you in the right direction. the upcoming weeks blog posts, we will dive deeper into:

– Choosing a great slogan and how to make a slogan that fits your brand.

– Brand Story – How stories can help your sales and connect with customers.

– Finding a Designer – The questions to ask before hiring a designer and what to look for.

 If you have any questions or you would like to know in more detail, please leave a comment below.

All the best,

Duncan

http://importdojo.com/importdojo-masterclass/

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From Zero to Hero – Building a Brand – Introduction

My name is Duncan and I have been an Import Dojo Master Class member for the past 8 months. As mentioned in the previous blog post, I will be making a blog series on how to build a better brand and provide an in-depth guide on tools & strategies to help sellers expand beyond Amazon.

The Idea Behind The Series and Course

Over the last month, many established and new Amazon sellers have experienced several changes on the platform – both positive and negative. The biggest change was the update in Amazon’s review policy which made launching a new product much harder.

That’s when the idea of the Zero To Hero blog series came up. Both I and Manuel realized that to succeed on Amazon, you need to have: 

●      A good product

●      A strong brand

●      Multiple sales channels

Over the past few months, we have explored different strategies which will help you not only become a successful Amazon seller, but also gain exposure globally.

Aim For Long Term Success: Building a Strong Brand with Multiple & Global Sales Channels

The main aim of the blog series is to go from idea to a strong, recognizable brand in your niche. Unfortunately, a lot of entrepreneurs are focusing solely on the Amazon platform. While it may be the easiest and the lowest barrier to entry; there are many disadvantages:

●      No control over your brand since the customer belongs to Amazon       

●      Amazon has made several changes which affected sellers badly   

●      Building a business on one income stream is never good   

●      Higher competition & lower pricing   

●      Some markets are saturated

In Zero to Hero, we will go over other E-commerce platforms, both in the US and in other countries. The series will provide an in-depth guide on which channels work best, including marketing strategies for each, including:

1.     Which E-Commerce platform to use to build your own online store

2.     Expanding in the US beyond Amazon, this will include stores such as Walmart and also small retailers(How to find them & approach them)

3.     Selling in Japan & EU

4.     Product branding – How to custom packaging, handling customer service & inserts

5.     Social Media Marketing – A deep look into Adwords & Facebook advertising for e-commerce

6.     Outsourcing & Building a Team – Where to find Virtual Assistants and which tasks make sense to outsource.

This is only a fraction of what will be included in the full blog series. Below is a representation of what Zero to Hero will offer. In the next blog series, we will have an introduction on what makes a successful brand and how to apply it to your brand or product.

An Overview of Our Blog Series

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Please feel free to share and comment if you have any questions or if you want something included in the series.

All the best and happy selling :)

Duncan

http://importdojo.com/importdojo-masterclass/

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News and trends from the October 2016 exhibitions in China

I have made it a habit to give you an update on trends after every exhibition season in April & October within Hong Kong and China so I won’t break that habit this time :)

It has been a hectic 8 weeks for me. When I returned from Europe in September I flew straight to Hong Kong and had an extensive amount of work waiting for me. 

While the first few weeks were all about catching up with work after my holiday I was excited to go to the exhibitions in Hong Kong and China. Here are some of the exhibitions that I went to in October/November over the course of 4 weeks: 

Global Sources Electronics (phase 1)

HKTDC Electronics Fair

Global Sources Smart China Sourcing Summit – for Amazon and online sellers

Global Sources Electronics (phase 2, Mobile Electronics)

Global Sources Gifts & Home

Mega Show (Part 1)

Canton Fair Phase 2

HKTDC International Building and Hardware Fair

Mega Show (Part 2)

Canton Fair Phase 3

Without further ado here are some impressions from the last 8 weeks. 

Hong Kong is constantly at the Top 3 most expensive places to live in the world. Wonder how my apartment looks like in Hong Kong? 

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Yep, thats 8 square meter of pure space :) 

 

 

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At least there’s a rooftop with a view :) 


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And not so bad to work with this view  :) 

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There’s also a co-working space downstairs. 

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Back at the office with one of my newest products.  Check it out if you are in need of a portable photo studio. 

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End of September I head to an Amazon seller and eCommerce meet up in Shenzhen, China, organized by my friends over at EnterChina

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Rico Ngoma serial Entrepreneur and partner of EnterChina drops knowledge

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working on new projects for ImportDojo on the rooftop

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back at the office with the team :) 

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another hike at the end of September. Remember to work out whenever you can :) 

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The exhibitions start! I head to the Global Sources Electronics show Phase 1. Make sure to get your free train ticket ticket with your buyers badge. 

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Global Sources hosts two electronic phases with different categories from 11-14th and 18th-21st. 

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Walking the aisles at the shows. Predominantly Smart Phone accessories on nearly every booth. 

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Sport & Action camera’s are evolving and it’s amazing what you get these days. 

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Video & WiFi glasses/camera’s seem to be the newest thing. Maybe not the newest but a lot of suppliers exhibit those. 

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Smartphone cases. 

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I found this product to be quite interesting :) 

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An actual AI (Artificial Intelligence) 

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This automatic car cover peeked my interest. 


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Gaming & video backpacks seem to be popular as well. 

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Virtual Reality getting bigger and more interesting in terms of developments. 

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Drone’s are definitely still popular but less than half the amount of booth’s than in April this year. 

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Global Sources held the first Drone Racing Championship this year at the event. I wasn’t there to witness but it looked pretty cool.


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I head to the HKTDC Electronics show. Make sure to pre-register (its free)

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Quite a lot of buyers on the first day. 

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You’ve got big brands from overseas

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and big local brands from China. 

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The HKTDC doesn’t focus on Smart Phone Accessories only but has regular household electronics as well. 

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Smart Home Automation has made big leaps and improvements in terms of apps and technology

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Not sure what these guys do. 

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It’s a beautiful day in Hong Kong and I am stuck at the expo :(


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It’s my birthday and I hike to the beach with a couple of people

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I am invited to speak at the Global Sources Amazon sellers summit again. I got to present my case study there as well in April. This time I talk about how to select the right supplier.

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I meet a few fellow ImportDojo members and familiar faces from online :) This is Taye from Hong Kong.


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Chris McCabe delivers amazing value in regards to Amazon account suspension and prevention. 

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Chris Davey & Danny McMillan arrange a meet up that evening in central Hong Kong. Over 40 Amazon and eCommerce sellers come. 

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Discussing with Mike Michellini from Globalfromasia some strategies for our business. 

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I talk about supplier selection and how to verify suppliers in China when at exhibitions but also online.  img_6586

In case you are wondering what some of the testing companies charge. 

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I walk the halls of the Global Sources home and gifts. 

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Lots of packaging suppliers there as well. 



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The first suppliers with Lightning earphones for the iPhone 7. I test them and they are horrible in quality :) 

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Interesting design for a power bank. 



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Flexport talks about the recent Hanjin collapse and the forecast of the freight forwarding industry at the Sellers Summit

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In between all of this I become the Number 1 bestseller on Amazon with my French Press case study. Even if only for a few days I am happy because I sell between 100-200 pieces per day :)


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Danny McMillan and Currencies Direct organise a meet up in Central with Will Tjernlund at a “fireside” chat. Will talks about Wholesale strategies and amazes the crowd as usual :)

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The next day a Typhoon with a signal T8 (the second strongest) hits Hong Kong and everything closes. I plan on heading to the Megashow part 1 but have to delay that until the next day as public transport closes all together. 

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I eventually make it to the Megashow for a few hours before heading to Guangzhou for Canton Fair Phase 2

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Remember to book train tickets in advance as they are sold out days in advance. 
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I walk around Canton Fair for the day and take catalogues and snapshots of interesting items

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On the next day I head to Shenzhen to visit one of my suppliers. Some of them go the extra mile :) 


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I check the production and facilities. 

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Testing equipment within the factory. 

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My wife gets me a birthday gift :) 

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back in Hong Kong I check out the “OBEY” exhibition thats running for a month. Very cool art!


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My friend organises a “junk boat trip”. You basically rent a boat that caters food and drinks all day and you drive out to some island 

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Ignore the couple that is making out :)

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I head to Canton Fair Phase 3 and check in at the Aloft. The value you get for 60US$ is amazing. 

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I walk around Phase 3 for a couple of hours and meet existing suppliers and try to find interesting products for my outdoor brand. 

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Office and stationery is also very present. 


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Chris Davey from FBA4U organises his 4th Amazon Seller meet up in Guangzhou. The crowd is huge. Make sure to join his Facebook group if you are looking to meet up during your trip. 

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I meet familiar faces and friends from all over the world :)

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On 7th November I head to Bangkok for a couple of weeks. I hear a lot about UBER Hong Kong has Tesla drivers. I give it a try and I actually find a Tesla for my airport ride. I had to try it :) 

Pheew! Lots of photos and stories to share. All in all I’d say I’ve met a lot of great people, made new friends, found new products and definitely had a good time the last weeks :) If you are planning on coming to China I highly recommend you do.

In the coming weeks I’ve got a lot of news and amazing content coming for you. I am starting a new blog-series here on ImportDojo focusing on building a brand and how to drive traffic to your Amazon listing. Furthermore we are going to show you how you can build a business outside Amazon, so stay tuned :)

All the best and happy sourcing,

Manuel

http://importdojo.com/importdojo-masterclass/

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Exhibition season starts & Amazon policy changes

It has been a hectic week for me, exhibition season started and I went to the GlobalSources Electronics show this morning to check out some of the newest products.

I’ll give you a recap of the trends at the end of the month as usual but here are some first impressions.

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Arriving at the halls

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Are these camera’s still selling?

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An actual AI at the show

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Virtual Reality (VR) becoming more popular

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GlobalSources will hold a drone racing championship here. Curious to see.

For previous recaps have a look here:
http://importdojo.com/news-and-trends-from-the-exhibition-april-2016/
http://importdojo.com/the-cantonfair-all-you-need-to-know-about-the-biggest-expo-in-asia/

For what you can expect or what you can prepare have a look here:
http://importdojo.com/news-and-trends-from-the-exhibitions-in-asia/

Here is a list of the most important exhibitions coming up:

http://www.globalsources.com/NEWS/TRADE_SHOW_CALENDAR_OCTOBER2016_A.pdf

You probably heard about the two big changes on recent Amazon policy updates (today & last week) so I wanted to give you my two cents and what you can do:

Amazon review policy update

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https://www.amazon.com/p/feature/abpto3jt7fhb5oc

Last week (3rd of October) Amazon made an important announcement on its policy change in terms of reviews.

In short you are not allowed to ask for reviews in exchange for a discount or free product (anymore). This has been coming for a while.
First Amazon requested that reviewers spent a total of 5$ before they can leave a review, then in September this year this threshold was risen to 50$ and now only regular purchased products may be reviewed (or trough Amazon’s Vine Program).

I personally think this is super positive for sellers who try to build a brand and pay attention to quality and customer service. Will it be harder to get reviews and boost rankings? Yes for sure but it will also mean that those that are trying to make a quick buck will fail which means more room and profits for us hard working peeps :)

This will hopefully remove a lot of pushy Chinese factories and get rid of poor quality items. The many months you spent on perfecting a product sitting in front of your computer trying to come up with an additional value for your customer or how you can deliver better quality products are finally appreciated.

I’ve always said that building a brand together with social media and outside traffic is important right from the beginning.

My two cents:

  • PRO:
    less giveaways – more profits for me
    better quality products
    less Chinese sellers pushing the price down
    reviews that you get now are a reflection of your dedication to your products
    Having built an audience (social media) pays off
  • CONS:
    it will take longer to gain traction & sales launching a product
    And thats really the only con I see here….

Do it “right” from the beginning, build a brand and and audience on social media following and quality products
The point I am trying to make is not to worry too much about getting your product on the map if you have either:

  1. A superior product and listing
  2. A product that is highly in demand (just follow trendy websites and you will find those niches)
  3. Social media to drive traffic to your listings.

Reviews will eventually come. And those reviews will be a reflection of the hard work you’ve put into your product.

The best thing about this change is I don’t have to set away a ridiculous amount of units for reviews – saving me a lot of money.
The downside? Yes, it simply takes longer to gain traction but who said this is a get-rich-quick scheme?
Every business takes time and unlike a lot of people out there tell you, be patient, put in the work and you’ll get rewarded eventually.

Now, if you haven’t yet its time to set up services like Salesbacker (Salesbacker). The only way you can ask for reviews is with programs and autoresponders like SALESBACKER because this is integrated in your Amazon account and the people who are asked to leave reviews have bought at a full price (or discounted price that you list public). Salesbacker works very well for my products. Usually every 2nd-3rd buyer leaves a review.

So if you are worried about your intial launch I recommend that you launch your product at a discounted price for a few hours/maybe a day and see how sales come in and you MUST have Salesbacker installed before that and wait until reviews come in. Then you jack up the price again to normal. It’s perfectly within TOS and has worked well for me on a few products.

It has become very important now to build outside traffic trough social media or advertising. Even more important is to have the right supplier and add value to your product. Check out my case study on how I did it:
http://importdojo.com/importdojo-masterclass/

The second big change came in this morning:

https://www.bloomberg.com/news/articles/2016-10-11/amazon-said-to-limit-warehouse-access-to-new-merchants
Amazon now restricts new sellers that you cannot ship anything to their warehouses if you have not yet shipped any products to Amazon by 10th of October. You can still sign up for FBA but your first shipment will have to wait until 19th of December.

I believe that their warehouses are bursting and they are trying to avoid overcrowding and “clogging” of products that are new and have no sales record/history. Same thing happened last year during Q4 but only affected a few categories like toys. Now it affects all categories. This will certainly upset a few people who’s first shipment may be on the way or is being produced right now. Not only will those sellers miss out Q4 sales but also might be stuck with their inventory at some warehouse at additional costs. If you can wait it out good, if not I recommend to do the following:

Switch your incoming inventory to FBM (Fulfilled by Merchant) and ship your product to a fullfilment warehouse in the US. Here is a list of warehouses from reddit: https://www.reddit.com/r/FulfillmentByAmazon/comments/3eq4m0/updated_list_of_fba_prep_and_ship_companies/

It is perfectly OK to sell in Q4 BUT ship from your own (or third party) warehouse. There’s no offiicial statement from Amazon yet but I think below screenshot says it all

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I hope the recent changes didn’t put you off or de-motivate you. I’ve seen some of my products or friends product hit page 1/2 after a few days without doing much.I believe if you put in the work and add value to your product you can succeed.

All the best & happy sourcing,
Manuel

http://importdojo.com/importdojo-masterclass/