How to deal with price increases from Chinese suppliers

Today I wanted to share a blog post to hopefully help you and teach you how to deal with price increases from Chinese suppliers.

Read until the end – we have a giveaway on ImportDojo in the value of 997US$!!! But before that, let’s get into today’s blog post.

So you received an email from your supplier that prices have to be increased because the Chinese Yuan (RMB) is being appreciated, his labor costs have risen or some other reason.

Never accept any price increase blindly. Let’s first analyze the situation:

  • Has he increased the price within the last year? If yes, how often?
  • Has he stated on his last quotation the validity of the price?
  • What are the reasons he wants to increase prices?

Here are common reasons for price increases:

  • Labor costs need to be increased
  • Raw material costs have increased
  • Chinese Renminbi (YUAN) has appreciated against the USD
  • Purchase of machinery to upgrade the factory

Lets go through them one by one and see how you could avoid the increase or find an acceptable solution between the both of you. I also want to give you background on each so that you can understand these reasons.

Labor costs need to be increased:

When I moved to Hong Kong in 2005 the average salary of a worker was around 250USD per month. Yes, that’s right, per month!! Nowadays a worker in the production line can get up to 1000USD or sometimes more. Some of the workers earn more than the staff in the office. Factories need to pay a high salary to workers because it’s so difficult to find them.

Yes, China has over 1.3 billion people but not everyone wants to stand in a workshop or production line doing rudimentary work. Education has improved a great deal since the early 2000’s and people want to work in offices rather than on production lines. So factories have to reach out to far provinces to hire workers. Costs automatically rise in that process. I have been told that some factories rent a bus and drive to far away provinces actively hiring workers to bring them back to the factory that same day on the bus.

What can you do in that case? Honestly not much. But if a supplier keeps increasing prices because of labor costs you might want to look for another supplier who has more machinery or automated processes that require less workmanship. This can actually be more expensive (because of the investment for machinery) but you should have more stability on prices in the future.

Raw material costs have increased:

This requires a little research but if a supplier uses this reason for price increases you can quickly find out if he is lying.

Go onto websites like the following and research the price index on your product’s main material:

http://www.meps.co.uk/raw%20material%20index.html

http://www.indexmundi.com/

Unfortunately, there is not much free information on the Internet; you have to pay for most services if you want real accurate data. You can also check out your local stock or commodity market online and see if you can get free data. Once you find your product’s raw material price check the development over the last few months or even years.

Compare it with the orders that you made to your supplier at the specific price drops or increases. If for example you ordered your item before at a lower raw material price than now, you can use this information to negotiate with your supplier.

I often find that suppliers use this excuse of raw material price to increase their profit margin. When you have data that backs that the raw material price has perhaps even decreased since your last purchase, let the supplier know and share the link or information that you found. Demand the same or an even lower price than what you are paying now.

If raw material really has increased then you might want to check by how much. If the supplier’s price increase does not match the actual raw material price increase, let him know and demand a lower price increase.

Chinese Renminbi (YUAN /RMB) has appreciated against the USD

The Chinese Yuan has risen over 60% since its revaluation in 2005 (when it was pegged against the USD). It has been undervalued for a long time but that has changed since the economic reforms under Deng Xiaoping. Since China opened to the rest of the world and became the world’s factory the Yuan has risen a great deal.

Many factories increase prices once the Yuan gets appreciated against the USD.

If the Yuan gets appreciated against the USD it is usually in the news and you should hear about it. You can also check official USD/RMB exchange rates to verify this claim.

Not much you can do here either, except perhaps asking for one more order with the last price before you accept the new price.

Purchase of machinery to upgrade the factory

This usually doesn’t happen very often, but when the factory claims there is machinery to buy to upgrade the factory it’s actually a good thing for you. It will lower the labor costs over time and you should have a stable price for a while. Ask your supplier to explain the type of machinery he is buying and how you can benefit from it in the future. Let him give you a guarantee or confirmation that this will benefit your price in the future.

Advanced negotiation

Validity of prices

Always ask your supplier to give you a validity of the quoted price. A common time frame should be 90 days, sometimes more sometimes less. In any case, ask your supplier for a validity of 180 days (6 months). It might take you a long time to decide to order this product for various reasons.

If you get back to the supplier after a while and you haven’t confirmed validity he might increase the price. That can put you in a difficult spot if you gave the quoted price to your customer. You might have to re-offer to your customer and that’s never good.

Big retailers usually have 1 year or even longer terms with suppliers. They can do that because the suppliers know that the quantities will be large and retailers often take a long time to decide because of their decision chain/process.

How to avoid or battle a price increase:

Short term:

  • Insist on the last order price for this order. Tell him you are about to give him a re-order.
  • Look into raw material price sheets. There are free sources on the Internet. You don’t even need to be updated all the time, but simply look at a price curve of the main material of your product for the last few months.

Has the price dropped or risen significantly? Did the supplier claim that the “xxxy” material has sharply risen? Check it out before you trust him.

Long term:

  • Put measurements in place such as contracts or buying terms to which the supplier has to agree before you do business. Set up your own buying terms with, for example, a minimum validity of prices in all offers.
  • Ask for bonus payments or agreements. If you know that you will be reordering from this factory, make a written agreement that you will receive a discount of a certain percentage from the next order based on your previous year.

Bonus payments:

It is getting more common to agree on bonus payments these days. It works the same way as back home with your local supplier. You agree on certain delivery terms, merchandising payment, back-payments and bonuses if a certain turnover is reached per year.

This usually only works with suppliers that you already work with. But you can certainly try it on any supplier. Even if you get a few hundred USD discount or bonus payment it’s definitely worth it!

You could set the following simple bonus payments with your supplier:

Turnover Goal 2017: xxxxx USD

If reached, bonus payment of 5% (for example) to be discounted from the next order.

For every xxxx USD above this amount a further 1% (for example) to a maximum of X% applies.

Send this agreement to your supplier. You can obviously work out a more detailed agreement but this is a simple illustration on how it could look. In any case I am sure there is some bonus or discount that can be arranged on future orders. 

The best option would be a direct bank transfer of the bonus at the year’s end but most suppliers will only agree on a discount deducted from any future order.

Other ways:

How to negotiate a good price with a low order quantity:

It is quite common that the supplier will send you a price based on a certain order quantity. Say 10USD for a quantity of 1,000 pieces. Sometimes suppliers will give you 2-3 different prices for different quantities. If you are planning to order an item, you should have a general idea of how to negotiate when you ask your supplier for a quote. 

DOUBLE (2,000) or even TRIPLE (3,000) this expected order quantity when asking for a price. It’s a tactic I use to see what the price range can be. If I actually order this item later at the quoted price but I am below the requested MOQ of the supplier I will pledge with the supplier to keep the price so that we can get started.

I will also mention that it will be a trial order and if everything goes well I will order the initial MOQ that the price was based on.

Perhaps the supplier will not give you the price based on your 1,000 pieces but he will give you the price based on 2,000 pieces to show his support.

This works in most cases. A supplier always will want to support you because they need to feed their factories with orders, even if they t make less profit, just to keep production running and to be cost effective.

Ask for a mixed calculation:

Say you buy 4 items from the same supplier and there is one item out of your assortment that is really price sensitive but the other 3 items are not.

Ask your supplier to keep the price on the price sensitive item the same (or decreased) and allow him to increase the other items at the same time (up to the maximum of the original price increase).

This way you can still offer the price sensitive item at the same price to your customers and lose only a little bit of profit on your higher margin items.

Advanced raw material purchase:

Many suppliers like to increase the price on your re-order. Let him know that you have an order coming up and that he should purchase raw material now at the lowest prices and that you want to have a better price than the previous order. He may want a written order confirmation for that so that he can purchase raw material on your behalf. Other suppliers offer on hand (or not)

If you have other suppliers’ offers on hand that are cheaper than the same item from your current supplier then tell your supplier and demand at least the same price. If you don’t have another offer on hand you could also pretend that you have an offer that is (say 10%) cheaper. Some suppliers may ask who it is from or if they can see it, but you don’t necessarily have to send it to him.

If you do have an offer from another supplier I would actually send it to my current supplier and ask him to lower the price.

How I got 7 suppliers to pay my buyer 100,000USD in bonus payments 

I had a buyer for Christmas items flying in from Austria pre-order season. We arranged to meet up with 9 suppliers over 2 days in our office in Hong Kong. I asked the suppliers to come in and meet with us to discuss the upcoming orders and next season items. The suppliers were happy to come and meet us because we usually would place orders in excess of 100,000USD to each of them per year.

We started off each meeting the same way. We told them we would be selecting new items and then we would tell the supplier how happy we were with the previous season and that we wanted to enlarge business this year. This got them in a happy mood. We selected a few new items to add to the assortment with each supplier. Eventually my buyer sat back and I started to talk about newly introduced bonus payments to each supplier. 

We wanted 10% of the last year’s order amount in bonus payments to be deducted from the next order. I also prepared an agreement to fix the payments right there and then with the supplier’s signature. We sat a long time with each supplier explaining the difficult economic situation, the EUR/USD exchange rate and how this all made it difficult for the buyer to succeed in his business. 

We needed the supplier’s support, there and then or else there might not be any increased orders. (You can always use other reasons, such as economic situations in your country, etc.) Two suppliers wouldn’t pay anything but we ended the 2 days of negotiation with over 100,000USD in bonus payments (some suppliers had orders of over 300,000USD from us). This was a lot more than we expected. 

How did I do that?

Initially the suppliers were reluctant. Since I wasn’t the actual buyer but the product manager it sure was a good thing the buyer was there. This way the supplier saw the buyer and had no way of wriggling himself out easily. Chinese do not want to lose face in front of their customers. They often promise the “best prices / best services,” etc., and it was time to prove they meant what they said. If you continually insist on a bonus and financial support they will eventually give in, because they want your future business and they don’t want to upset you.

In your case, since you will be the buyer, you see the importance of coming to China to negotiate your deals. A negotiation like this is highly unlikely to succeed via a phone call or an email. You don’t need to have an office here. You can hold meetings and negotiations in your hotel or at the factory. 

Even if your quantities or order value are not as big as the example above you still have an edge. Even the smallest discounts on your next orders could cover the airfare ticket you bought to get to China. Not to mention the suppliers you met on other days to source for new ideas. It will definitely be worth it.

Before you go into a negotiation with a supplier, plan ahead with a clear strategy similar to the one described above.

I do hope that this blog post helped you in some ways to get leverage when negotiating with your suppliers.

If you enjoyed the blog post, please share or comment below 🙂

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Now, before I let you off, we are currently running a Prime Deal giveaway here at ImportDojo. You have the chance to win 1 lifetime membership worth over 997US$! For more information click on the link below and sign up 🙂

https://importdojo.lpages.co/import-dojo-giveaway/

All the best and happy sourcing,

Manuel

Zero To Hero: Building a Brand Series – Inventory Storage

Zero To Hero: Building a Brand Series

Inventory Storage, FBA Prep & Fulfillment Centres

 

Welcome to another part of our Building a Brand Blog Series. In last week’s blog post we went over a brief introduction on social media and which social networks are best for Ecommerce sellers or importers.

This week’s blog post will be on a completely different, but equally important subject – Inventory Storage & Fulfillment. When it comes to product-based businesses such as ours, it’s important to not only get your logistics right, but also have the best rates and fast shipping.

I have used both FBM(Fulfilled by Merchant) and also FBA so I will also give my point of view on what works and what doesn’t. Although my main focus is on FBA, I normally still leave some units in a storage facility either to reduce my Amazon fees or to fulfill any orders from my own Ecommerce store.

This blog post will be all about how you can manage your inventory effectively and save fees when compared to Amazon. I will also show you how you can use a third-party fulfillment center to take advantage of busy periods such as the Chinese New Year or the December holiday seasons.

So let’s have a look at what options are there for importers or sellers and explore different ways on how you can manage your inventory effectively.

What To Look For In a Fulfillment Center?

If using a third-party fulfillment centre, ideally it should be as similar to Amazon FBA as possible in terms of service and efficiency. However, here are some features I look for when making my decision:

  • The fulfillment centre should be in a strategic location so I reduce shipping costs from the country of origin.
  • The FC should have a backend software system that enables me to track my inventory  and gather other important data(fees, shipping rates, SKUs comparison, etc.).
  • They should have integrations with all major Ecommerce marketplaces(Ebay, Amazon, Shopify, BigCommerce, etc.). This allows me to manage all my marketplaces(in terms of logistics) from one place.
  • Their shipping rates should be as low as possible and they use all major courier services. Never use a fulfillment center that relies on one courier as it limits your options.
  • If I’m using the fulfillment center exclusively for Amazon, I look for ones that have extensive experience dealing with FBM. The requirements are more strict when it comes to FBM and a few late shipments can compromise your Amazon seller account.

The Benefits of Fulfillment Centers

 Fulfillment centers offer a lot of advantages for ecommerce sellers who want to expand towards other sales channels. Some of the benefits are:

  • Cheaper long term storage than Amazon.
  • Backend dashboard allows you to track inventory and shipping status of your products.
  • Some FCs offer great rates for oversize items and storage.
  • Ultimate control over pricing and customer experience(if selling from your own store).
  • Brand-able shipping packages.
  • No restrictions on inserts or marketing materials.
  • Multiple integrations with eCommerce marketplaces.
  • Ability to process returns easily.
  • FC’s can make custom orders for special clients.

 As you can see, choosing the right fulfillment center has a lot of benefits and if you’re planning on launching your own store, a FC outside of FBA is recommended. 

FBA Prep Companies

Prep centres are storage facilities specifically used for preparing or assembling your products according to your requirements. FBA prep centres will make sure to prepare your shipments according to Amazon’s guidelines. This service might be very useful if you want to make sure that you have everything in order or if your product(s) come in multiple pieces and need assembly.

Nowadays prep centers have evolved and offer multiple services, including:

  • Goods Inspection.
  • Product Photography.
  • Labeling, Knitting and Bundling.
  • Storage.
  • Inventory Updates.
  • & much more.

Please note that prep centers don’t fulfill any customer orders, they should be exclusively used for storage, inspection and prepping.

Location, Location, Location!

When choosing a fulfillment center or storage facility, location is very important. Since ideally you want to save on shipping costs from your supplier/manufacturer to the destination(if not an FBA warehouse). When it comes to locations, my preference would be coastal states in the US. In particular:

  • New York
  • California

 If your supplier is in China or any other Asian country, Los Angeles would be my choice. LA has both the busiest port and airport in the US in terms of cargo, making it an ideal destination to ship your inventory. Also, a lot of fulfillment centers and storage facilities are situated around LAX airport or close to the port.

Shipping your goods domestically will always be cheaper, so the only way to save time and money with your imports is to pick the closest location in the US from your supplier/manufacturer.

Amazon Multi-Channel Fulfillment

Image Source: Forbes

Amazon’s multi-channel fulfillment service where you can use FBA to fulfill third-party orders such as Ebay or your own ecommerce store. This is extremely convenient if you want to have all the shipping and fulfillment in one place. However, in my opinion, the

Amazon fees are quite high and you even have to pay extra to have a multi-channel order.

If you don’t have a lot of sales from other channels you can use Amazon’s multi-channel fulfillment, however, if you really want ultimate control over pricing and customer experience on your own website, you should pick a third-party FC.

Conclusion

Fulfillment centers, prep companies and storage facilities allow you to diversify how you manage your inventory. If you sell on your own ecommerce store or have large/oversize items, a fulfillment center will help you reduce your fees substantially.

I would still suggest you to use FBA if most of your sales come from Amazon, however, ideally you would want to expand into other sales channels. By using a FC you would have ultimate control on pricing and customer experience.

In next week’s blog post we will talk about Product Branding. Manuel will guide you on the best practices on how to brand your product effectively and create stunning inserts and marketing materials.

We hope this blog post was helpful and as always, if you have any questions, kindly leave a comment below.

All the best and happy selling,

Duncan

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 – 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

From Zero To Hero Post 1 – Branding done right

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

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

PROJECT OVERVIEW

Building a Brand    

❏ The importance of building an Ecommerce brand

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

❏ Creating a Logo

❏ Choosing a slogan that fits the brand

❏ Creating a story behind your brand

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

Business Incorporation   

❏ Why incorporating is essential for your business )

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

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

Choosing a Product  

❏ Product Research Guide

❏ Industry Research & Demographics 

❏ Competition Analysis

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

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

Manufacturing  

❏ Complete Guide on Manufacturing Overseas

❏ Certification

❏ Materials & components to avoid when starting

❏ Contracts – Protecting your brand 

❏ Choosing a supplier

❏ Ordering samples & how to test each sample effectively

❏ Product Design Guide

❏ Mould Process Guide

E-Commerce    

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

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

❏ Building you store

❏ Email Marketing & Building a List      

❏ E-commerce SEO and how to drive traffic 

❏ PPC Overview

❏ E-commerce blogging

❏ Why good product descriptions is key to success

Social Media Marketing   

❏ Setting up Social Media

❏ Gaining Exposure

❏ Social Media Marketing

❏ Connecting with Authority in your niche

Inventory Storage   

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

❏ List of fulfillment centres

❏ Fulfillment centres vs FBA 

Branding your Product      

❏ Product Photography

❏ Custom Packaging – standing out from your competition

❏ Shipping Boxes

❏ Insert Cards & Marketing Materials

❏ Customer Service & Experience

AMAZON 

▪ A guide on using sellers central platform effectively.

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

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

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

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

Retail & Wholesaling  

❏ Finding retailers & distributors in your niche

❏ Create a catalogue

❏ Contacting retailers

Going Forward 

❏ Expanding to other countries

❏ Maximising other sales channels

❏ Creating a product line

❏ Exhibitions & Tradeshows 

❏ Outsourcing

Now let’s go into today’s post.

 

The Key Areas To Building a Brand

Choosing a Brand Name

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

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

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

2. Category Specific – Example: Joe’s Beverage

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

3. Unique Brand Name – Example: Empower Drinks

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

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

Logo Design 

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

Simple but Detailed

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

Colour Scheme

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

Image Source: The Logo Company

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

Image Source: Entrepreneur.com

Demographics

 

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

1. Gender: Male or Female

2. Age Range

3. Location – Country and State/Province

How ImportDojo Applies Branding

 

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

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

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

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

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

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

 

Conclusion

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

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

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

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

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

All the best,

Duncan

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

From Zero to Hero – Building a Brand – Introduction


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

The Idea Behind The Series and Course

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

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

●      A good product

●      A strong brand

●      Multiple sales channels

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

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

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

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

●      Amazon has made several changes which affected sellers badly   

●      Building a business on one income stream is never good   

●      Higher competition & lower pricing   

●      Some markets are saturated

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

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

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

3.     Selling in Japan & EU

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

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

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

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

An Overview of Our Blog Series


 
 

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

All the best and happy selling 🙂

Duncan

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

News and trends from the October 2016 exhibitions in China

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

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

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

Global Sources Electronics (phase 1)

HKTDC Electronics Fair

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

Global Sources Electronics (phase 2, Mobile Electronics)

Global Sources Gifts & Home

Mega Show (Part 1)

Canton Fair Phase 2

HKTDC International Building and Hardware Fair

Mega Show (Part 2)

Canton Fair Phase 3

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

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

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Yep, thats 8 square meter of pure space  

 

 

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At least there’s a rooftop with a view


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And not so bad to work with this view  🙂

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There’s also a co-working space downstairs. 

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

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

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Rico Ngoma serial Entrepreneur and partner of EnterChina drops knowledge

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working on new projects for ImportDojo on the rooftop

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back at the office with the team 

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

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

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

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

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

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

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Smartphone cases. 

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I found this product to be quite interesting 🙂 

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An actual AI (Artificial Intelligence) 

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This automatic car cover peeked my interest. 


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Gaming & video backpacks seem to be popular as well. 

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

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

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


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

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Quite a lot of buyers on the first day. 

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You’ve got big brands from overseas

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and big local brands from China. 

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

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

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Not sure what these guys do. 

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


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

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

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


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

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

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

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

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

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

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Lots of packaging suppliers there as well. 



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

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Interesting design for a power bank. 



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

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


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

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

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

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

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


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I check the production and facilities. 

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Testing equipment within the factory. 

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My wife gets me a birthday gift 🙂

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


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

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Ignore the couple that is making out 🙂

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

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

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Office and stationery is also very present. 


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

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I meet familiar faces and friends from all over the world 🙂

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

Pheew! Lots of photos and stories to share. All in all I’d say I’ve met a lot of great people, made new friends, found new products and definitely had a good time the last weeks.

If you are planning on coming to China I highly recommend you do.

In the coming weeks I’ve got a lot of news and amazing content coming for you. I am starting a new blog-series here on ImportDojo focusing on building a brand and how to drive traffic to your Amazon listing.

Furthermore we are going to show you how you can build a business outside Amazon, so stay tuned!

All the best and happy sourcing,

Manuel

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

Product Liability Insurance

Do you need Product Liability Insurance (PLI)?

Yes, I do recommend you have it but I’d say you don’t need to have it before you list and launch your first or second product.

You are unlikely to get any insurance anyway if your business is very new, have no track record, never filed an annual return or have no experience working with factories in China.

How does Product Liability Insurance work?

Basically you can cover any product in a group of products or by product only under an insurance. Meaning if there is any issue with your end consumers the insurance will cover the damage. That is if you have done everything by the book. Meaning you have certifications, had an inspection, a letter of guarantee from your supplier of conform goods and everything went well during production. Thankfully I’ve never had to make use of my insurance so far and I pray I will never have to but just in case its good to have it. Especially if you sell in the US.

Who needs it?

I’d say anyone importing to the US needs it at some point. Be it low risk items or high risk items, it just is better to have as you never know what your customers may do with your product or if there’s any fault in manufacturing that you didn’t find out during inspection.

Who can apply for a Product Liability Insurance?

Basically anyone can apply for an insurance. After all the insurance companies want your money. BUT not everyone gets it. It really depends a lot on how long you have been in business, who are your suppliers (are they a 20 man factory or do they produce for Walmart), do they have certifications, do you yourself have experience buying from China etc. There are many factors that go into the insurers consideration to issue you a policy or not. Please note you need a company to apply for Product Liability Insurance. You cannot apply as a private individual.

Where can I get a Product Liability Insurance?

Here are some sites that broker insurances from the big Insurers (AXA, MSIG, BUPA,Generali, Globality etc.)
Send them an email with your introduction about your business and they’ll get back to you if they can help you. Mind you these companies are based in Hong Kong so you need to have a HK Ltd. company to apply.
To find insurers in your country you’ll need to check with your local insuring companies.

http://www.lfsinsurance.com/business-insurance/
http://www.hkpli.com/
http://www.business.hsbc.com.hk/en-gb/protection-and-investment/general-insurance?DCSext.nav=foot-mat

(Note: HSBC does not cover US businesses)

Miscellaneous:

You need to understand while almost every insurance company will receive you with arms wide open for a life or health insurance it is actually NOT easy at all to get a product liability insurance.
You will be audited by either the insurance company or the broker and there will be extensive background research on you, your company, your products before you can actually get the insurance.

Like I say in nearly all of my posts, always work with reliable and experienced factories – always have certification available to meet country specific requirements (CE, ROHS, FDA etc).

When you apply for a PLI It is a minimum requirement that you have avilable certification.
I mean it’s only obvious that a insurer will only insure you if you have a quality product and not a product that falls apart or lights up in flames the moment you use it.

So you need to provide a lot of documents. Here are just some of the main documents needed:

  1. High Quality Product Photo of at least one item on each category
  2. Test report on at least one item on each category
  3. User Manual on at least one item on each category
  4. Warning Labels on at least one item on each category
  5. Completed and signed PLI application.
  6. Quality website with detailed information on your products
  7. Ideally you have a background in sourcing. If not, provide an action plan on how you source sustainable and quality items in China

 

I hope this helps as a general guideline. Please feel free to share or comment if you have any questions 🙂

All the best and happy sourcing,

Manuel

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