Existenzangst or fearing for one’s existence

Totally off topic today but I feel like sharing this famous German paranoia. In German we have a saying which is called “Existenzangst” and literally means being afraid of loosing your livelihood. 

Meaning you are constantly afraid of loosing your job, income, running out of money and ending up on the street. It’s ridiculous but ever since I’ve become an Entrepreneur I have this almost every day.

I admit, I too am scared (or anxious) and worry all the time so I wanted to get to the bottom of this. Am I the only one feeling like this? Let me try to get this off my chest. 

What’s the worst that could happen to me today? I am really just typing as I go and put out my thoughts. 

I really want to evaluate my very own situation and if you also have these "existence fears” feel free to do the same :) 

Lets take a look:

  • Amazon business tanks (30% of my income) 
  • Sourcing & Retail business tanks (30% of my income) 
  • Online courses, workshops, ebooks (20% of my income) 
  • Coaching, consulting (10% of my income) 
  • My eCommerce store tanks (10% of my income - just started)
  • All podcast & other interviews magically disappear and no one ever hears of me from tomorrow on (no income but leads and subscribers to my blog) 

Lets look at it in more detail: 

  • I am live on 3 Amazon market places and even if one tanks I still have 2. And I am not even live on many other sites that have third party selling (Lazada, Jet, Sears etc.) 
  • All my satisfied customers and potential leads that I built in over 3 years disappear tomorrow. I have many repeat sourcing clients who are very happy, how likely is it that they all disappear? 
  • I am currently live in 5 retailers, some re-order every month or so. I am even working on more retail customers. 
  • I have courses live on 5 platforms. Some with coaching, some without. How likely is it that they all get removed? Especially on my own site…
  • No one ever thinks my opinion or expertise counts and doesn’t book coaching with me anymore. I have built a reputation (I hope :) ) for being an expert in my field and I rather provide value than sell something just for the money.  Those that really know me well know thats true. So I guess that is very unlikely to happen. 
  • Just started with 1 eCommerce store (Outdoor & Garden category) and it’s going well so far. eCommerce is the future so even if I loose this I can build another store quickly. 
  • I gave about 30 podcast interviews, 4 or 5 actual print magazine interviews, 10-15 online blog guest posts, I spoke publicly at conferences and videos are available on that. Even so, I could start all over again and build my reputation from the scratch. 
Even though some of the above may be possible to happen but it is very unlikely that they all happen at the same time right? So what am I really worried about? Guess I am just another human :) 

Lets say one of these 30% income streams tanks. I still have 70% of my income and need to find a new way to make up for the missing 30%. 

Since I will still have 70% of my income & I’ll  actually be in a comfortable situation. And I would just have to increase workload for a few months. 

Lets just say all of this happens at once. It is not the end of the world. I still have some savings and my health. While I don’t really like the idea of going back to a job I have over 3 years where I ran multiple business and built income streams from the scratch. 

I’ll likely go apply for a job at a retailer's buying office (Amazon, Walmart) here in Hong Kong and on top of my 17 years of retail experience I now have 3 years of running my own business, a best seller book about importing from China and a round of online courses, interviews, public speaking that I can add to my CV. So I am pretty sure that I will find a job again. And that’s really worst case scenario.

Then again lets take another scenario. Let’s just say I lost all my income streams but I still have saved up lets say 50,000US$ from all these ventures. Would I immediately look for a new job? Probably not. Reason being that I have yet to travel the world and see things. Not that I haven’t traveled yet but I haven’t really TRAVELED yet. I mean hiking the Pacific Crest Trail in the US for 6 months, going to Machu Picchu in Peru, living on a beach hut in Brazil for a year and so much more to do. And the best thing is when you travel on a budget or do what’s called “Geo Arbitrage” you don’t need much. Don’t know what that is? Geo Arbitrage is when you live in Thailand (or anywhere else where you have low living costs) for 500$ a month on the beach eating seafood and drink coconut water all day. Obviously if I would have a child, a car, a mortgage etc. things would be different and I’d have to get a job pretty quickly. But again - it’’s not the end of the world.

Think of the time that you worked for yourself as a time out in where you enhanced your own skills, tested your leadership abilities and hopefully had a lot of fun doing it. And you’ve added things to your CV. You didn’t really take time off for 3 years doing nothing, you tried to build something. And that’s worth something when you sit at an interview. I am pretty sure that will get you the job. 

But lets not get ahead of myself, I work hard every day so that I can keep doing what I am doing. And I guess you are too :) 

My message today I guess is that we should all stop worrying so much. It isn’t as bad as it looks like. My second message today and I keep saying this to everyone - DIVERSIFY

Just by looking at what I wrote I again realized myself how important it is to have different income streams. AND it is another reminder to build even more income streams. 

An income stream that is bigger than 30% is actually worrying - unless you make millions anyway :) 

Back in the day when I worked for the lighting manufacturer one of our biggest clients (a very large DIY store) went belly up. Over 500 stores (thats big for Germany) closed over the next couple of months and suppliers (the company I worked for) weren’t going to see any money anytime soon. That customer made up over 70% of the companies turnover. Thankfully the management saw this coming and invested into hiring sales staff and building more clients. But it was still a big loss for the company. Anyway, just a small story but same principle. Build more income streams and you don’t have to worry all the time. 

If you have these fears once in a while sit down and look at what you’ve built already since you joined the entrepreneurial world. 

Copy my thought process above and see where you stand. Look at what you have already accomplished. Let me know in the comment section, I am really curios to know if I am the only one feeling this way :) 

Even if you are just at the beginning and scared of the path in front of you, if you never try you’ll never know and you’ll miss out - I promise :) 

All the best to us in 2017 and happy sourcing!

Manuel 

Zero To Hero: Building a Brand Series – Social Media & eCommerce


Zero To Hero: Building a Brand Series

Social Media & E-Commerce

In last week’s blog post we had a brief introduction on E-commerce and the key steps you should take to create your own sales channel. Another way to create a powerful sales channel is through Social Media.

Social Media is essential to get your target audience to find your brand and connect with influential figures in your niche. In the past few years, social media has become the number one medium for promotion and businesses who want to achieve long term success need to have a social media strategy in place.

Why Having a Social Media Presence is Important

We often hear how social media is powerful and important for brands around the world. The main reasons why social media is the platform of choice is:

  • Advertising conversions are higher than other forms of promotions such as traditional PPC, offline marketing and television.
  • People spend a lot of time on social media so it’s very easy to find your target audience.
  • Social Media provides a lot of data on demographics and behaviours which if used right it can scale up your business significantly.
  • Drive Huge Amounts of Traffic To Your Website & Amazon Listing.
  • Connect with your customers on a personal level and find out their concerns or needs in your category.

A Look at Social Media Platforms

Facebook

Facebook is without a doubt the most popular social network to use. Although having(and growing) your own Facebook page is essential for your brand, the advantage Facebook has over other platforms is an affordable and converting advertising platform.

Initially, the best strategy to use Facebook Advertising is to find your target audience. No other advertising platform in the world allows you to segment your audience by:

  • Gender
  • Income
  • Country
  • State/Province
  • Interests
  • Age

When launching a new brand, my strategy is to have a budget of $5 a day maximum to find my target audience, that way, when the time comes to launch my product, I know already who to target. Facebook also allows you to target audiences who liked a particular page, so if you have a fitness brand and want to target female audiences aged 18-25 who like Nike, Adidas & Under Armour; you can do that with FB Ads.

What this allows is to have better converting Ads and more clicks to your sponsored posts. One suggestion I can give is to not direct the audience to your Amazon listing(unless you have a lot of positive reviews), but instead to your website/landing page to collect email addresses.

We will talk in more detail about Facebook Advertising in the coming weeks, however, as a business in 2017 and beyond, you need to be on Facebook – it’s where your target market hangs out most of the time so take advantage of it!

Instagram

Instagram is the platform of choice if you want to showcase your products, brand and your story. The visual aspect of Instagram allows you to truly differentiate yourself from your competitors. Since Instagram is owned by Facebook, you can use their advertising platform to also target Instagram users.

What I really like about Instagram though, is the ability to connect with authority in your niche and even larger brands. This makes it the perfect social media platform alongside YouTube to gain massive exposure for your brand.

However, the downside of Instagram is that you only have one clickable link in your whole profile – The Bio. This makes it very hard to direct audiences to click the link, for this reason, although Instagram can be used to drive sales, the main use of the platform is to gain exposure.

Twitter

Twitter is one of the top social media networks, however, their follower base has been declining in recent years so in my opinion, other social media platforms are much better. Twitter works best for announcements or to give news regarding your brand or products.

I would still suggest you to have a Twitter account though, not only it works great for some niches such as fitness, yoga and cosmetics; but also because as a brand you need to be everywhere! The more places you are, being social media platforms, marketplaces or countries, the better.

So while in some cases twitter can work great, it’s not an ideal platform for Ecommerce sellers.

Snapchat

Out of all the most popular social media platforms, snapchat is the newest one. However, they are quickly gaining a large following(particularly amongst younger audiences) and they are set to go public soon. Snapchat is a video-based application that allows you for to share videos which are only available for a limited amount of time.

This is a great app if you want to make quick promotional videos or even use it to make instruction-based videos on your products. However, unlike most social media platforms, Snapchat only applies to certain categories.

Nonetheless, if your market is mostly younger audiences, you need to use the app as it’s quickly becoming the number 1 social media platform amongst the younger generation.

YouTube

YouTube is by far the best social media platform for exposure and driving insane amounts of traffic to your website or Amazon listing. With the introduction of their Video Advertising Platform, you can quickly gain enough exposure or even go viral. It’s not uncommon for unknown brands to go viral and get massive sales via YouTube. Video based ads convert much better also, however, at $0.20 a click, it can become quite expensive.

The power of YouTube relies in a pool of YouTubers from all kinds of niches, in fact, if you can find influencers or brand ambassadors willing to make an unboxing review or How-To-Guides for your product, you will get more sales than any other method, such as PPC or FB Ads.

The major tips I can give regarding YouTube are:

  • If you’re starting your own channel, your videos must be very well made.
  • Focus on providing value and showcasing your brand.
  • If sponsoring other videos, make sure that your products are of a higher quality. Packaging, inserts and the product itself need to look professional.
  • With thousands of videos uploaded every minute on YouTube, your videos can easily get lost, have a keyword strategy in place and leverage other social media networks to get views.

If used right, YouTube can be the single platform that elevates your brand from a small business to a well-known brand loved by its audiences. Unless you have enough video making or editing experience, I wouldn’t suggest you make YouTube videos yourself(as a brand), instead, outsource the whole process or even better, leverage the audience of other YouTubers.

Pinterest

Pinterest is a social media platform that very different from the rest. It focuses mainly on images where they are structured using pins and boards. What makes Pinterest unique is that the platform has a majority of women followers, so if your brand or products are aimed at this demographic, you need to focus your marketing efforts on Pinterest.

Pinterest, unlike Instagram, has clickable images, so every image you put in the platform can be directed to your website or Amazon listing. This becomes really powerful when your follower base get bigger as it can help increase conversions.

Social Media & E-Commerce

Social media and E-Commerce are a perfect match for each other! No other platform gives you the ability to showcase your products in front of thousands of potential buyers. When it comes to promoting your products on social media, you need to focus on these points:

  • Show what your brand is about(your brand story). People are more willing to buy from brands they can connect with.
  • Run Giveaways, Polls and Promotions frequently. These will not only boost sales but it will also give you some great data about your customer base and buying habits.
  • Show unique features about your products and great looking pictures will attract more followers.
  • Use social media to provide great customer service. Check your inboxes frequently and reply to comments you get on your posts.

However, the most powerful way to gain followers and exposure to your brand via social media is by advertising. Facebook and YouTube provide the best converting advertising platforms and give you a lot of data about your customer behaviour.

Amazon PPC can get very expensive after a while and social media is another great way to drive traffic. It is recommended to not drive traffic directly to your Amazon listing via social media advertising, but instead, use the following strategy:

  1. Set-Up your Facebook/Instagram/Youtube Ads targeting your ideal audience.
  2. Links should point to your website or Ecommerce store.
  3. Have a landing page and an offer to get email subscribers.
  4. Provide customers the option to either buy from your website or Amazon itself. 

By driving traffic to your website you have the ability to collect email subscribers. Email subscribers allow you to:

  • Pitch offers during holiday seasons or when you experience slow sales.
  • Connect with your customers to build a relationship with your brand.
  • Send an email blast when launching new products so you not only get some sales, but also some traffic to your listings.

Conclusion

Social Media Marketing can be a great asset to have for your business. No other tool comes close when it comes to connecting with your target audiences and getting exposure for your brand. Keep in mind that social media is a slow process and not every platform will suit your brand.

We recommend focusing your efforts on 2 or 3 social media platforms and outsource the rest to a virtual assistant.

In next week’s blog post we will discuss Inventory Management, FBA Prep and Storage. Amazon has been constantly increasing their fees so it makes sense to look for alternative options to store part or all of your inventory.

We hope this short guide prove helpful and as always, if you have any questions, kindly leave a comment below.

All the best and happy selling,

Duncan

https://importdojo.com/importdojo-masterclass/

Zero To Hero: Building a Brand Series – An Introduction To eCommerce

Zero To Hero: Building a Brand Series

An Introduction To E-commerce: How To Build Your Own Audience and Gain Control Over Your Brand

In last week’s blog post, Manuel explored in detail how to deal with overseas manufacturers and the best practices for Private Label. In today’s blog post we will focus about building your own E-commerce store. While selling on Amazon has numerous benefits, nothing beats the feeling of having your own store and having full control over your brand.

While the process is time consuming and requires some capital investment, in the long run it will pay off. Here at ImportDojo we always recommend to expand into new countries and to have more than one sales channel – nothing beats having your own sales channel!

The Importance of Having Your Own Store

1.      Have a Stronger Online Presence

A website is not only an additional sales channel, but also an asset. If you manage to build up enough sales volume, the valuation of the site can be added to your company’s overall valuation. It’s never wise to build a business solely on someone else’s platform(Amazon/Ebay), by having your own website you have an additional channel to drive traffic to.

2.      Control Pricing, Offers & Marketing

Marketplaces like Amazon and Ebay have a lot of sellers competing for the same customers. This causes price wars and more often than not, it’s a race to the bottom. By having your own website, you can control your pricing, make your own offers and be in control of what you charge.

3.      Better Branding

A website offers endless possibilities when it comes to customization. Marketplaces have guidelines which restrict the amount of customization you can make. With your own site, you have complete say on what goes into the design, colours and overall branding.

4.      Customer Relationship Building

Through email marketing and social media, you can truly connect with customers in a much more meaningful way than Amazon. Amazon limits sellers on having buyer’s information and restricts communication with them. When you have your own website, you can focus more on the customers and listen to their needs.

The Challenges

Capital Investment

Although building an online store requires minimum capital investment, marketing will require a significant amount of money. This can be difficult in the early stages as you also need to outsource website copywriting, blogs and design.

Getting Traffic

This is by far the biggest challenge of an online store. With Amazon, sellers don’t need to focus much on traffic(except Amazon PPC) as the marketplace gets enormous traffic. With your store, chances are you won’t have visitors on day 1 so you need to dedicate a lot of effort for driving traffic. These include:

  • Facebook Ads
  • PPC(Adwords/Bing)
  • Blogging and SEO
  • Social Media Marketing

Website Set Up 

Luckily many platforms have made this part easy. However, you still need a lot of time to make the design of your store ideal. Most platforms like Shopify and BigCommerce have a lot of integrations which helps you sync inventory across all marketplaces.

Besides the design, the most important parts of a website are:

  • Have an SEO friendly website.
  • Design fits your brand and audience.

This can be easily done with the use of integrations, plugins and premium themes.

Content

Between the blog, website copy and your email capture & sequence, you need to write a lot of content. If you’re not a good writer, you need to outsource all of the writing which requires a lot of capital initially.

When writing content, a good tip is to diversify content not just on your niche but the whole category or subcategory. Use different long tail keywords that cover different topics and once you monitor traffic and engagement for a few months, you will find out what your audience is interested in.

You can use the data to release new products based on what your audience wants.

Essential Pages & Content For Your Site

About US Page

The about us page allows you to tell your brand story, mission and goals behind your products. This page is very important as it gives a “face” to your brand that customers can identify themselves to.

Store/Shop

The store should be simple and easy to navigate. Like Amazon, include keyword focused descriptions and great images.

Blog

A blog not only give important updates and information about your niche, but it also helps drive traffic to your site and build up SEO.

Policies

The most important policies you should put on your website are: 

  • Privacy Policy
  • Terms&Conditions
  •  Shipping & Returns

Building an Audience & Getting Traffic To Your Website

The beauty of selling on Amazon is that you don’t have to worry about driving external traffic to your products. Aside from Amazon Sponsored Ads and Facebook Ads, Amazon generates enough traffic to their marketplace. What makes Amazon unique is that the traffic is mostly buyers.

When it comes to your own website, getting traffic will be the major challenge. However, there are a number of ways to drive traffic(and sales) to your E-commerce store.

Pay Per Click Advertising

Like Amazon Sponsored Ads, pay per click marketing is very powerful in driving traffic towards your products. The most popular pay per click networks are Google Adwords and Bing, when it comes to these two however, you will have higher competition on keywords so your strategy has to focus on long tail, less popular keywords.

Blogger Outreach

This is a similar technique to the one Manuel used for his French Press Case Study. When you’re a new brand, chances are that few people know about you. In this case you have 2 options:

  1. Build an audience yourself which requires time and money.
  2. Leverage someone’s existing audience to gain exposure.

Bloggers are perfect for gaining exposure! They are trusted by their audiences and gain consistent traffic to their blogs. When choosing bloggers to promote your brand or products, take into consideration the following:

  • Are they well known and trusted in my category/niche?
  • How much traffic does their blog get?(use Alexa to check this)
  • Are they active on social media?
  • Are they experienced in promoting products similar to my category/niche?
  • What is their target audience demographics?

One advice is to find someone that truly fits your brand, audiences can tell if someone is truly passionate about your product(s), so be very careful in who you pick. Once you filter down the blogger(s) of your choice, you need to contact them. You can do this either via their website(normally they have a specific Advertisers page) or via social media. Based on experience, these two incentives work best:

  1. Money offer with no commission involved(This can normally range from $50 to $1000 depending on the blogger).
  2. A free product sent to them and they get commission for each referral. They can use the Amazon Associates program or you can create your affiliate program on your website.

The second option normally works best as the blogger will be more incentivised to promote your brand. Bloggers are a great way to drive high amounts of traffic both to your Amazon listing and your website. If a blogger proves very successful, a good option would be for your brand to sponsor the blog as you get a permanent advertising presence.

Social Media Marketing

Social Media Marketing is the number one tool to drive traffic to your website and get exposure for your brand. Although building a following takes some time, you can drive huge amount of sales and traffic with targeted discounts or giveaways. The most popular social networks for E-commerce are:

  • Facebook – Great for all types of businesses and they have the best converting ads out of all social media networks.
  • Twitter – Although not very ideal for promotions and showing your products, it’s excellent for giving news, updates and connecting with influential people in your category.
  • Instagram – The most popular social network for E-commerce entrepreneurs, it’s design and features make it ideal to show your products. The only downside is that only the bio is clickable so you don’t have many options for driving traffic. However, it’s by far the number 1 tool for getting exposure.
  • Pinterest – Another great social media platform ideal to show your products and branding through images. It is the only social network that has a majority female following, so if your target audience is in this group, it is recommended to focus your efforts here.
  • Snapchat – This social media platfoorm is not ideal for every businesses, however, its popularity is growing and if you’re targeting millenials – you need to be on Snapchat.
  • YouTube – Out of all the social networks, YouTube has the most power to drive huge amounts of traffic and make your brand go viral. The only downside is that producing videos requires capital investment and a lo of time. A way to go around this is to send your products to YouTubers who target your niche, by doing this you leverage the audience of the YouTuber.

Conclusion

Building your own e-commerce store requires a lot of work and patience. However, the benefit of having your own platform and customers is very rewarding. While the Amazon platform will most likely always be the main source of revenue, having an additional sales channel that you fully control is the ultimate step towards having a strong brand.

We hope this blog post was helpful in clearing up some issues you may have when starting your own website and while e-commerce is a vast topic, this guide can surely point you in the right direction. In next week’s blog post will will dive into Social Media Marketing. Social Media has become a really powerful tool to drive traffic, sales and awareness of your brand – so having a social media marketing strategy is essential to quickly grow your customer base.

If you have any questions regarding this blog post, please leave a comment below. The aim of this series is to find out your concerns regarding importing & e-commerce, so we would really love to hear from you!

All the best & happy selling,

Duncan

Zero to Hero: Build a Brand series – Overseas manufacturing guide

I’ve probably written about this topic for as long as the blog is up (March 2015) but I’d like to give you a summary of the most important parts of manufacturing overseas in this blog series on how to build a brand.  

WARNING – LONG POST 🙂

So here goes: 

Guide on Manufacturing Overseas

There are a lot of statistics I could give you but I wouldn’t know where to begin. I want to break down China and its manufacturing in a few sentences.

Believe it or not, China is still the biggest production site by far. While there are several countries in the vicinity, such as Vietnam, Thailand, and Bangladesh, they simply do not have the infrastructure that China does. Imagine you need sanitary items, furniture, household appliances, insurance, and a smart phone. You walk into a Wal-Mart. You can find practically anything you need in there and that’s within 10,000 square feet. That pretty much sums up China’s infrastructure. 

Factory A provides plastic and tooling, Factory B provides packaging, Factory C provides raw material and components, and Factory D assembles everything. They are all within a stone’s throw away from each other. 

Most of the factory bosses are related to each other. They set up a perfect system within their “community.”

I’ll give you an example, and I am not kidding you, 95% of the world’s supply of electrical multi-sockets comes from a small town in Cixi near Ningbo/Shanghai. When I say “small” I actually mean small for China. 

There are over 1.4 million people in this town. When you step into “Ningbo Kaifeng” (World largest factory for electrical multisockets) you are overwhelmed. And when you step outside of the building you see five competitors across the street. All the factory bosses are related to each other. And down the street they can find everything they need – factories that make packaging, tooling, plastic, steel, and so on.

The Chinese are so effective in terms of production and infrastructure that some first world countries could really learn a lot.

The big retailers figured out a long time ago that nearly every large corporation, retailer, discounter, or online shop has a buying office somewhere in China/Hong Kong. I know this because I have been in the industry for over 17 years. When you walk into a factory and look at the production line you see cartons of goods with famous names on them. Whether it is a fan from Home Depot, an audio speaker from Target, or a ceramic pot from Bed, Bath, & Beyond, they were all made in China. Most products are made in specific areas.

Here are a few examples:

  • Guangdong province (South of China): Electronics of any kind, especially consumer and household, toys
  • Zhejiang province (Shanghai area): DIY products, tools, metal and fabrics, lighting
  • Hebei province (Beijing area): Textiles, coal, steel, iron, engineering, chemicals, power, ceramics and food

These are the main areas for production. However, nowadays production is also shifting inland to take advantage of lower labor and production costs.

Certification

First things first. You need to understand that certifications are based on directives and legislations. So for example the GPSD in Europe (General Product Safety Directive Legislation) or the CPSC for the US (Consumer Products Safety Commission) says that a product needs to meet certain standards and need to be safe in general to import or bring to the market. Simple right? Unfortunately not. The GPSD has tons of directives under its belt such as the CE, RoHS, REACH directive). Which means that for each product or category there are further sub-categories that have directives which tell you exactly what your product needs to meet. Wait a minute, what exactly are you saying? I can’t read all this technical jargon…. 

Ever went onto Google to look what your product needs to meet under which directive? Found a site and then there’s a 200 page PDF that tells you in technical mumbo jumbo what the directive is about and after reading that you still don’t know what to do? Well this is where a lot of people struggle (I am actually working on a course as of writing this that will take the guesswork out and make you understand what you need to know)

So which certificates do I need and do I need them all? 

Yes and No

The good news first. No you do not have to have all tests and certificates done by third party laboratories (both the US and Europe). What would suffice in (almost) all cases would be a declaration of conformity. Wow really? Yes, and here is the “however”. If you trust your suppliers blindly that all raw materials are free of hazardous chemicals, comply with electromagnetic compatibility (electronics for example) or meet certain other standards then that would be very foolish. If your supplier can’t provide any certification and claims that he complies with everything you ask for thats a huge red flag. I also understand that you don’t want to invest in any certification not knowing if it will sell. And this is the most important part where you as a entrepreneur and business person need to come to a decision. A) Is my product potentially dangerous (can it explode??). B) Is my product relatively simple and can’t harm anyone (e.g. leather wallet)? Once you’ve figured out what you need for your product you need to evaluate what should be invested. Lets take an example. For the sake of it lets look at a simple and a complicated product. 

Simple product:

Solar powered garden light for 1.2$. Comes with nothing but a few cables, some plastic and a solar cell. Simple right? Technically I have to meet the following: LVD (EMC), ROHS, REACH & CE in general for Europe. Now if I were to test all of these the costs would amount to roughly 2000USD with a very cheap Chinese laboratory. If it was TUV or SGS the costs would be triple that. Now what if I am going to order 1,000 pieces and my testing costs would already cost more? That doesn’t make sense. In this case I suggest to get self declaration of the above regulations and save yourself these costs. Obviously you’d still want your supplier to declare that he can fulfil those requirements so look for suppliers who already deal with customers in the country you want to import to and have a good reputation or can back up their claim that the item is compliant with raw material certificates for example (from the raw material supplier). 

Complicated product:

Small Electric fan heater 5.9$. Comes also with a few cables, some plastic, a plug and a PCB. Simple right? No. You see, I need to plug this product into the socket (230Volts plus) and the potential dangers are very high. If the unit tips over or a child puts a cover on top, the entire unit can burn up (and the house with it). Also here technically I have to meet the following: LVD (EMC), ROHS, REACH & CE in general for Europe. Ideally I will also want a GS mark for Germany because this is a product consumers want to have with GS. On top of that I want abnormal testing from TUV for example. Abnormal testing means they would test what happens if you cover the unit with a blanket or if it tips over that the unit switches off automatically. A good supplier knows that there needs to be a tip over switch installed and overheating fuse included. This abnormal test alone costs 4-5,000USD. A GS mark costs somewhere in the same vicinity (2-4000US$). The other tests (LVD, RoHS, REACH & CE) are roughly 2,000USD. Now we are looking at 10-12,000USD investment costs. Would I do all these testings before purchasing? Yes, 1000%. I do not want to risk my business or anyone else’s life because I wanted cheap. You may say ok but I don’t have that kind of money. Then you need to find a supplier who either has these certificates already or is willing to invest the money for you. If you can’t find one then its simple – the product is not for you and your budget. You can still go for it without all the testing and certifications but I think we are on the same page here that that would be a very foolish decision in case anything happens.  

Now I can’t go into hundreds of products or case studies here, that just isn’t possible. But I think you see my point. First I need to evaluate if the trouble is worth it and if I even want to deal with complicated products. 

If the answer is yes then the strategy is pretty clear I think – test and get certificates. If you don’t dare to sell these risky (but profitable) products go the easy way and pick simple products or walk away. 

Products & components to avoid when starting 

Some items really don’t make sense to import (together with the antidumping rate items). These items are usually license-required items, large items or items that are manufactured in a low-income country near you. 

China is getting some competition from a few countries, not only because of labor costs but also due to government import restrictions (antidumping fees for example).

Products that are difficult for importing:

  • Anything related to gas
  • Cars
  • Supplements
  • Foods, drinks
  • Animals
  • Guns, weaponry
  • Hazardous material
  • and more

For the above items you would need to obtain proper licenses first and this can be quite difficult. So the above might not be your first choice of import. 

Contracts & Tooling Guide 

A lot of people are concerned when they produce their own design in China that the supplier will copy it and sell to other sellers.

First I would like to point out that in my nearly 12 years in China I have had almost only good experiences with suppliers even with my own designs and exclusivity agreements.

Let’s look at your options and what it actually means to have NDA’s or Exclusivity Agreements in China and how likely it is to enforce it or hold up in a court.

Lets look at the terminology first and what they mean:

NDA’s

Whats an NDA and when do you use it?

An NDA or Non-Disclosure Agreement is used when you have your own product design and want that developed by a factory in China. You basically agree with the factory that they are not allowed to disclose, share or produce your design (or even ideas) with any other customer or supplier. Neither local or overseas. In most cases if you have your own design a tooling is likely need to be made. The first step you take before you send any designs to a factory is to ask them to sign the NDA.

Tooling

To produce your design it is very likely that the factory needs to make a mould or tooling for you. With this tooling – parts of your product will be manufactured and eventually assembled into the final product.

(Categories like Textile or Food do not need tooling). Toolings are often included in the price quoted to you when you hand over your design. However you can also opt to pay for the tooling if you want to own the tooling as well.

Toolings can go anywhere from 1,000-30,000+USD depending on the size of the product. Yes, things can get pretty expensive.

Can I move my own tooling to a secure location?

Toolings are usually very large and heavy as they are made out of die-cast in most cases. Moving them requires quite some logistics.

So if you are unsure that your supplier is going to use them for other customers you should move them to a secure location (e.g. a rented warehouse). This can easily cost a few hundred US$.

And every time you would place an order this tooling needs to be moved to the factory and after production back to the warehouse. An expensive enterprise.

So having said all that if you feel you need to have your tooling secure somewhere else you should not work with this factory in the first place.

So whats the best way to go about having your own designs & tooling?

Two scenarios:

  • You are just starting out and have no factory contacts whatsoever.

My tip is to work with a sourcing agent  that can help you find reliable and trustworthy factories.

Don’t go onto Alibaba and randomly look for factories that could make your product. You don’t know them, they don’t know you and are unlikely to help you anyway.

Even if they tell you: “no problem, we can make it for you” they are likely to copy your product or sell the idea to other sellers the minute you place an order.

Just the other day a reader of mine told me he found a trading company on Alibaba for his design and placed an order of 300 pieces.

When he got contacted by the actual factory about labels and other things they needed from him he found out that the trading company placed a total of 500 pieces with that factory.

They ordered an additional 200 pieces (without the knowledge of the client & even with the clients logo) for themselves probably to sell it on Aliexpress or even Amazon themselves.

  • You’ve been placing orders in China for a while.

Work with the factory of your trust. Even if the product you are now looking to manufacture doesn’t fit into their assortment. Factories have a large network and contacts with other factories.

Ask them to help you source a factory that can make your product whom they trust. I’d he happy to pay a few cents more for this type of help if it means I get connected to someone trustworthy.

Ideally your existing factory can help you manufacture your new design.

Mutual Exclusivity Agreement

Let say you find a product on Alibaba or at the shows and you want to buy this product exclusively to sell on Amazon. Suppliers are likely not to give you a Exclusivity Agreement if you don’t purchase high quantities from them or if you haven’t had any previous business with them. FBA sellers are in general very small customers for factories. The 1000 pieces (if even) you & I are going to want to place as a trial order cause more trouble to the factory than you could imagine. Setting up production and purchasing raw material for only a 1000 pieces is an expensive endeavour for factories. Most raw material suppliers have MOQ’s of 5000 pieces (per raw material) and up. So getting the material for 1000 pieces can be quite expensive. While some factories may have stock left of material or might agree to purchase the larger quantity from the raw material supplier in order to produce your order it is unlikely to happen in reality. Having said that you could approach things a little different to get your exclusivity:

You could ask the supplier to sign exclusivity agreements for 6 months. Meaning you could agree on a quantity that you will place within those 6 months and if you don’t reach the quantity the contract will be voided.

Which will give you the time to figure out if the product is selling and the supplier on the other hand isn’t forced to sign a deal for a long time.

After this period of 6 months the contract/agreement can be reviewed and extended for a longer period. Even if the supplier does not agree to an extension you have at least a head start of 6 months on other sellers.

Validity of agreements & contracts:

In the FB groups I often see question like: “How are those agreements going to hold up and what are your chances of winning an NDA dispute in China if you find out your supplier has betrayed you?”

Well to be honest the chances are slim. Does it help to have an agreement in Chinese? No. Even if you hire an expensive lawyer in China and win the case by the time you resolve the issue your expenses will have ballooned into thousands of $.

So unless you have a patent it isn’t even worth it pursuing a law suit.

You will also have difficulties finding out if your supplier actually used your tooling for another client. An un-trustworthy supplier will find many ways to wiggle himself out of the situation.

For example he could claim a disgruntled engineer of the company left the factory and took the designs to the next factory he started to work for. You won’t be able to proof him differently.

So whats the point of having an agreement at all and whats best approach?

To ask a supplier to sign an agreement or NDA shows that you mean serious business and they will take you and your project more seriously. If he doesn’t agree to it in the first place move on to the next supplier.

Work with a supplier whom you trust and have worked with for many months/years already. You will still need to have agreements in place with that supplier but the understanding is entirely different.

If you work with a supplier and you let him know he can grow his business with you over the years he will honour your agreement. The contract is more or less a formality.

Either place orders with a factory for ODM (products off the rack) in the beginning and eventually propose your ideas and designs after you worked with them for a while or hire a Sourcing Agent who can help you get you in touch with trustworthy factories.

For example in my case study I actually got exclusivity for my product (for an initial 1000 pieces order).

And the supplier honoured it. How do I know that? As you know my case study is public and people who join the course can see contacts of my supplier within the course.

After I launched my product and case study only a few days went by and my supplier contacted me to tell me that he had received quotation requests from 2 different US sellers already. Those 2 people wanted to copy my process (they even used my email templates and quotation forms that I offer in my course). The supplier refused to offer my product to those 2 guys. Thats not to say that they can’t go anywhere else but at least I know I have a reliable and trustworthy supplier.

So its all about finding the right supplier and develop a relationship with him. You will want to have agreements in place even after a long relationship but again, thats just really formality and if you found a trustworthy supplier they will honour agreements and in 95% of the cases help you if you have to claim money for example (defect or returned goods).

The point I want to get across to you is not to worry too much about getting copied in China if you approach things professionally.

Getting copied will happen eventually because either:

  • Another factory copies/modifies the designs because they have seen it on Amazon.
  • Your competitor copies your product or modifies it.
  • Your approach was unprofessional.

Take the head-start that you have with your product and move on. Thats how this business is.

And remember the above goes only for your own designs. It is a different story if you are buying products off the rack maybe with small modifications from a supplier that you found on Alibaba for example. In these cases it doesn’t make much sense to have NDA’s or Exclusivity Agreements because it is not your design in the first place. It belongs to the supplier. However if you make significant modifications and are able to place larger orders it makes sense to have agreements.

Choosing a supplier

Most people start out on Alibaba because they cannot come to China. While I do recommend to come to China it doesn’t make sense if you are just starting out. If you are starting out, head over here to my Alibaba screencast which helps on choosing a supplier:  https://importdojo.com/alibaba-hacks/

Ordering samples & how to test each sample effectively

I ll cover three topics about sample management:

  • Sample costs
  • Communication
  • Supervision

Sample costs

Once you have settled on a supplier for your new product it is time to purchase a sample. Most suppliers will charge you for sending a sample. There is usually no way around this unless you have worked with the supplier for a longer time.

Even for me, being here and dealing with suppliers on a daily basis I can’t guarantee that I don’t have to pay for a sample.

Here are some Insider tips to “try” to get a sample for free.

  • Introduce yourself as an assistant of a large company. Suppliers tend to smell money when a large company is interested and are more likely to give away samples for free.
  • State that if the sample is OK you will place a large order
  • State that you have especially chosen this supplier to be your exclusive supplier for this product and he has the chance now to do business with you.
  • Ask him to put the sample cost on top of the official order that may follow if the sample is what you are looking for.
  • State that it is company policy that you/your company don’t pay for samples and if he wishes to do business he should agree to your sample terms.
  • Split the costs. Offer to pay for either the samples or the freight costs.

If none of these work I recommend you to agree with the supplier to deduct the sample costs from the official (larger) order. At least this way you save the sample costs if you decide to order from this particular supplier.

Be wary of sample costs in general

On one occasion I was sourcing for a textile accessory. The item itself can be made for approx 2 USD.

I screened around 10 suppliers and eventually narrowed my selection down to 5 suppliers. They were all in a similar price range.

When it came down to ordering samples one of the suppliers (who was also the most expensive) asked me for a sample fee of 100 USD to be transferred to his bank account. That didn’t make sense. I immediately knew it must be a trading company with no factory background.

They probably outsource the work to a factory because they have no own facilities. Eliminate suppliers that have high sample costs right in the beginning.

Samples are usually 10-50% more expensive than the originally quoted price. It is a common practice to charge more for samples, as many of the samples need to be handmade for the customer, especially if you have some sort of modification request.

Another reason why samples are usually more expensive than the quoted price is that they want to see if you are serious & sincere about placing a larger order later.

I can tell you that from my own experience as a manufacturer. I get about 5 sample requests per week and all of them want it for free. If a buyer is not willing to pay for a sample I won’t send it to him because I will be thinking he just wants to get a sample and there will be no follow up order.

Sometimes suppliers have stock of their items. If you do not need to have any modifications done, or you just want to check the quality before asking for more, request a sample they have in stock. If they have stock, they usually charge the regular (MOQ) price.

Communication

In my 12 years living and working in China I have learned to communicate with Chinese suppliers in different ways compared to communicating with Western companies.

What is being said or promised on the phone/chat or email is not always being followed by the factory or the supplier. Often you will find that something you said or agreed on is being done completely different.

For example you ordered a sample of a certain product in a certain color & quantity but what you receive is completely different from what you asked/paid for.

Unfortunately the chain of command in factories is not always direct. So when your sales contact gives your sample order to his sample or engineering team there may be 2 or 3 people in between.

In between often some information gets lost. So eventually the person responsible for making your sample will receive different instructions that deviate from your original briefing. Often there will be no meetings held on projects from clients (like we are used to in the western world), but rather a quick email to another person that has not fully understood what you actually want or need.

Often there will be no message or notification that your project may be urgent or requires special attention. That might be a simple instruction, for example telling the sample team to make the sample with a US plug or adapter. No one has told the sample team and common sense is unfortunately not requested when being a worker in the factory.

Which brings us to:

Supervision

I can’t stress enough how important it is to supervise & monitor your order/samples or other projects that you have with your supplier. Westerners work differently. We are more detailed and we expect people to have the same common sense that most of us have. Information will get lost. You need to plan for it.

After each discussion on the phone/chat or email you should follow up with written and agreed on-points. Try to think of everything for the supplier and make it as easy as possible for him to follow up & complete your instructions. Give him a “goodie” at the end of the email to advise him of the potential to be working with you.

For example (content in BLUE are my notes for you):

Hi Tony,

Thanks for the talk just now. I would like to summarize the discussed points:

– Sample to be sent to ……. (your address)

– Sample needs to be in working mode. A non-working sample is not accepted, as the sample will undergo quality tests by my third party laboratory. (this part doesn’t need to be true but he will think twice before sending you a sample in poor condition)

– Sample needs to have a US plug (attach him a picture of a US plug-make it easy for him)

– Please make sure the sample is tested on your side before being sent out.

– Please attach your model number & supplier name-tag to the sample as I am getting many samples and would like to know who sent which sample. (this way you will not lose reference of which supplier made your sample if you order from more than one)

– Make sure you mention “samples of no commercial value” to the Sample Invoice (in order to avoid customs tax on samples at your destination).

– Etc.

Please give me a written confirmation of all discussed points and your understanding.

If the sample works out well and everything is as it is agreed on, expect an order of… pcs.

Best,

…..

Here a few more tips on communication & supervision with your supplier:

  • Give deadlines to suppliers that you both agreed on.
  • Set yourself reminders on your smart phone/computer that will help you to remind your supplier.
  • Make simple sketches & drawings of your requests if the supplier misunderstands you.
  • Have him confirm each step of your modification or request
  • Keep emails clear and with bullet points to make your requests stand out

Once you have a feeling on what you need to pay attention to it gets a lot easier and your sample orders in China will be a lot smoother.

Inspections

I’ve been saying this forever and I still see people shipping their products from China without inspecting their products by professionals but my recommendation is never ever ship without inspecting your goods. 

Especially not if you ship directly to Amazon. If there’s a problem it’s too late to re-work the goods (in most cases) or ship back to China. 

There are several third-party inspection companies in Asia. Some of the big names are: Buereau Veritas, TUV-SUD, TUV-RHEINLAND, and AsiaInspection  (which I personally use) to name a few. The first three are usually expensive but also very thorough. AsiaInspection is a simple and cost efficient service that should work in the beginning for you. Register on their website and simply create an order with them. You can fill out all the details or even better ask your supplier to send them a sample.

Simple steps: You ask your supplier for a date when you can send an inspector (usually around 70-80% of the finished production), you book the inspection online and the Inspector will go to the factory on the arranged date. 

Once the inspection is completed they will send you an inspection report. Based on this report you can either:

  • Release the shipment to the supplier
  • Ask the supplier to re-work the goods according to your agreed terms and fix problems found during the inspection

Only when you are entirely satisfied should you release the shipment. In most cases there will be minor findings, such as scratches, dents, or packaging issues. If this doesn’t bother you then release. If there are major problems like faulty wires or wrong colours, ask your supplier to re-work the goods.

Trust me, he will re-work, as he is still waiting to get the full payment. Remember, NEVER pay everything up front. Once everything is as it should be you can give your logistics provider the order to pick up the goods and send them to the port.

You are of course entitled to skip this process, but it is highly recommended, especially for first-timers and for order amounts above 1,000USD.

Pheeww that was a long post but I hope that this serves as a refreshment or reminder on what to pay attention to 🙂

Next week in our blog series we’ll talk about eCommerce, what channels exist, how to build an audience, social media following and more so stay tuned 🙂

If you enjoyed this post please comment or share on your social media 🙂

All the best and happy sourcing,

Manuel

https://importdojo.com/importdojo-masterclass/

Zero to Hero: Build a Brand Series – Product Industry & Demographics


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: https://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 

1) I go onto Google and start my search. 

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. 

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”. 

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. 

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). 

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).

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

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). 

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

https://importdojo.com/importdojo-masterclass/

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

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:

2

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

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

 

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

 

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:

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

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

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.

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

Amazon ES

Amazon Japan

 

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

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

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

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

https://importdojo.com/importdojo-masterclass/

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

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

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

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

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

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

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

 

Norwich & Peterborough Building Society

  • 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

  • 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

  • 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

 

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

  • 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: 

Simple – US Only

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

 

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

https://importdojo.com/importdojo-masterclass/

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: https://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

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

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.

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)

 

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

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

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

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

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.

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

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!

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

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

https://importdojo.com/importdojo-masterclass/

ImportDojo

Contact Info

18/F., Blk. B, Tung Luen Ind. Bldg. 1 Yip Shing St., Kwai Chung, Hong Kong

mail@importdojo.com

Copyright 2017 © All Rights Reserved