What is going on in China right now – Part 2

In November last year I shared a blog post from the sourcing and manufacturing side in China. There were shortages on packaging material and many price increases across all suppliers in China.

To read about this blog post check it out here: https://importdojo.com/what-is-going-on-in-china-right-now/

Today me and my partners in our Sourcing Company (https://importdojo.com/sourcing/) wanted to give you an update on the market situation in China.

The world is changing. In the past 6 months we have been through ups and downs of currency, raw material and labour cost fluctuation. Also the political landscape does not prove to be as stable and solid as it was considered to be in the end of 2016. With the US taking a turn away from China the economies in Asia are looking at a changed customer landscape and an insecure future.

This newsletter will help you gain a bit more insight in what is happening on this side of the world.

What is going on in Asia?

As we enter Q2 2017, global demand for goods produced in low cost sourcing destination looked positive, with growing exporters such as Bangladesh, Vietnam, India and Indonesia all seeing big growth in exports and foreign investment. Some shifting of exports and trade allegiance was evident due to the U.S./Trump policy. It is very important to note, that alternatives to China are quickly developing in countries like Vietnam, India, Bangladesh and Thailand. These countries are taking a fair share of what is rightfully theirs. Especially the economic growth and the growth in export from Vietnam is remarkable, with a 15% increase compared to the last years first quarter.

So the small countries are on the fast lane while good old China keeps doing, what they do best. And let us be realistic, there is still no feasible alternative to China in terms of infrastructure, automation and efficiency.

It is also remarkable to see that based on China National Bureau of Statistics (NBS) data, the average monthly wage of migrant workers (who tend to work in China’s manufacturing sector) increased by 6.6% to 3,275 yuan in 2016, which is almost comparable to the average income of an eastern European worker in countries like Romania, Bulgaria or Hungary. 

What about the money?

Well, not much to say here. Since the USD/CNY exchange rate adjusted to its new level, the Euro zone is suffering whereas the USD zone is happily jumping around about their favourable purchasing prices.

The lush movement in the currency gave a bit of stability to the trading environment and is not expected to change unless the US politics dramatically change the course of the country.

Now what is going on with the raw materials? If production volume in China is going down then we probably have good cards to buy cheap raw material because the government wants to drive the economy.

Unfortunately the answer to that is a clear NO. Some analysts are predicting that oil prices will increase by up to 20% by late 2017, with ongoing conflict in the Middle-East and attempts by OPEC countries to limit supply. Natural fibers such as cotton and wool have trended up, reflecting stronger consumer demand and healthier global economic conditions.

Natural rubber prices increased through Q1, steadying off into Q2 as Asian buyers slowed down on purchasing. Prices are expected to increase, through 2017 based on expectations of a global economic recovery and a reduction in supply from rubber major producers. Metal prices will follow this trend. Cotton prices were strong through Q1 and into Q2, a trend which some analysts do not expect to continue through 2017. According to the International Cotton Advisory Council (ICAC), cotton stock-piles will reduce due to solid production, growth in global consumption and demand for exports.

Fine wool prices followed a similar trend to cotton, breaking a 29 year high in March, based on demand for better quality wool from Chinese mills. Unlike cotton or synthetic fibers, wool only comprises 1.5% of global fiber consumption and as a premium product, the price is really an indicator of consumer demand.

China is not a department store

On a last note I wanted to share some of our findings over the course of working with private label sellers. Many private label sellers believe that when they purchase something in China, the factories are just waiting for them to place a 500 pieces order with many changes, packaging requirements, additional features AND the lowest price.

Unfortunately this is not the case. China is not a department store where you can simply walk in and purchase something within a day and expect it to be delivered within 2 weeks. There is a lot to it. Supplier relationships, years of doing business together, production lead times, raw material purchase, packaging print and much more.

While some factories do adapt to the new eCommerce world with smaller quantities, many factories actually still have 90% of their turnover coming from large retailers, importers or wholesalers. We as Amazon/eCommerce sellers are small fish for most factories and while the trend is going into eCommerce rather than actual retail there is still a long way to go.

So you can’t expect to get the same price, priority handling or delivery time as a Walmart or HomeDepot. These guys buy hundreds of thousands of units per month, therefore they get the best price and are put in front of the production queue. Often you don’t have a chance against these retailers if they are also selling on Amazon. So the only way you can distinguish yourself is trough customer service, packaging and additional services.

I’ve also noticed that buyers are expecting drastic price decreases like 30-40% if they increase the order quantity say from 1,000 to 2,000 units. This is very unlikely unless you increase from 1,000 to 40,000 or 50,000 units. Price decreases when doubling the quantity usually results in 3% to maximum 6%. Most factories are laid out to produce 10-30,000 units of a single product in a day. Yes, believe me 🙂 So when a buyer comes with a 500 unit order it is certainly appreciated but it means that they have to squeeze in your order somewhere, negotiate low raw material purchase with their sub supplier etc. which is more of a hassle than profit for them.

Don’t try to squeeze every little cent out of a product when you negotiate. Let them have their profits so that they can continue to run their factory. Because what is it worth if you get the lowest price but then the supplier goes bankrupt or doesn’t help you in case you are facing quality problems. Live and let live.

Having said all that, with the right approach towards a supplier you can get your way around things. There are many suppliers who specialise on small order quantities or eCommerce sellers in general. Speak to your supplier in your initial inquiry if he is willing to work on your MOQ, prices etc. If you have the feeling they are hesitant move on to the next supplier. There’s nothing worse than making a deposit of 30% on your order and the supplier afterwards struggles to keep the prices or delivery terms and eventually not really motivated to produce according to your requirements.

Update on Import Dojo Sourcing Service

If you need help sourcing you are in the right place. We have recently celebrated our 1,000th customer and are growing together with the demand for know how and for the need of „eyes on the ground“. Our placed orders have generated a turnover of around 1.4 Mio USD with a steady customer base of around 250 customers. Together with this growth we could see that there is the need to adjust our service and pricing structure slightly.

With our 6 person strong sourcing team based in Hong Kong we want to provide the best possible service to our customers and we believe that the adjustment of our conditions and how our service is put together will help our customers be more effective, more cost efficient and more successful.

With our new concept we have less variety and are more focused on your needs. We are introducing the quick and easy Basic Sourcing for 99 USD, which delivers a quick supplier offer for an item within 5 – 7 working days to evaluate if your project is workable. In addition to that we have decided to provide at least 3 offers and supplier contacts with the standard sourcing request.

We have also decreased our photography prices by 25% and we can deliver 2 reference sourcing results if you decided to do sourcing and development with us for your price comparison and back up.

What is actually changing?

  1. Introducing our BASIC sourcing request for 99 USD – Delivering one supplier offer and their contact in 5-7 working days for quick reference.
  2. Extending service of STANDARD sourcing request starting from 169 USD – Delivering three supplier offers and their contact in 7-9 working days to you for a well established project base. 

Our service starts at 169 USD for one item, 299 USD for two items and additional 100 USD for every additional item. We are reducing complexity and increasing efficiency.

Decreasing photography costs

Reducing white background shots from 69 USD per picture to 49 USD per picture since we want to provide this service as a roundup for our customers.

We also adjust our full service pricing and keep splitting it to reorders and new orders. All other services will remain the same as before.

For those who believe our previous pricing is a better fit for them, you can still come to us and place your orders until 31/7/2017 with the coupon code #lastcall. If you present this in your email or in the flat-rate submission, we will be happy to handle your order with our old price logic even if we believe our new one is more beneficial to you. Please remember that all coupon codes are only applicable on flat rates. 

As always, it is a pleasure serving you and we are looking forward to the second half of 2017!

All the best,

Manuel & ImportDojo Sourcing team

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 🙂

IMPORTDOJO GIVEAWAY VALUED AT 997$!!

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: 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/

What is going on in China right now?

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

What is going on in China?

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

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

The US Dollar and its Chinese brother CNY

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

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

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

The environment

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

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

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

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

Chinese New Year

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

The potential chances in this situation

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

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

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

All the best and happy sourcing,

Manuel

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

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

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

The Ultimate Double Taxation Guide

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

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

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

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

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

What is Double Taxation?

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

1. Juridical

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

2. Economic

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

Important

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

International Double Taxation

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

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

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

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

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

How can I avoid Double Taxation?

To avoid double taxation, there are two ways:

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

The Advantage of Having a US LLC

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

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

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

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

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

Offshore Incorporations

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

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

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

British Virgin Islands(BVI)

 

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

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

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

Main Features

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

Requirements

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

Capital

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

Tax Rates

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

Annual Fees

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

Public Records

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

There are no accounting and audit requirements for BVI companies.

Time-frames of Incorporation

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

Overall Costs

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

 Estonia E-Residency

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

Features

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

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

Singapore

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

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

Features and Benefits

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

Registration Process and Requirements

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

 

Hong Kong Company

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

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

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

Requirements for HK Companies

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

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

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

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

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

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

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

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

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

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

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

Documents Required

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

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

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

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

For resident shareholders and directors:

  • Copy of Hong Kong identity card
  • Proof of address

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

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

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

Further Assistance

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

You can check out the course here:

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

*Please note that the link is an affiliate link

Conclusion

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

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

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

All the best & happy selling,

Duncan

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

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

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

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

Why Incorporate? 

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

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

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

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

Personal Asset Protection

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

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

Transferable Ownership

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

Tax Benefits

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

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

Separate Credit Rating

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

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

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

Retirement Plans and Payroll

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

Disadvantages of Incorporation

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

A Lot of Paperwork

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

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

Fees! Fees! Fees!

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

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

Liability Is Not Guaranteed

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

USA Incorporation

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

  • Reseller Licence
  • Employer Identification Number 

US LLC State Registration

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

Delaware

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

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

Nevada

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

 

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

Wyoming

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

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

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

Employer Identification Number

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

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

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

Getting a Bank Account

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

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

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

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

Virtual Address

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

Phone Number

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

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

Conclusion

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

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

All the best & Happy Selling,

Duncan

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

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/

How to scale your (Amazon) business

A lot of people ask me how to scale their business. They get to a point where they have 2, 3 maybe 5 products online and are either facing cash flow problems or don’t know what to do to grow to the next magical number.  

When I have calls with them to find out what can be done it is often one thing that they overdo - optimizing. Be it their listings, backend keywords or PPC marketing. 

Don’t get me wrong this is important and you need to optimize to grow from 2 pieces a day to 10 pieces or more. But it doesn’t mean thats what you should be doing all day. 

Second reason I find is that they are obsessed with numbers, hijackers, copy cats or their competition. Again, you do need to look at these things but honestly I have better things to do than obsess about my numbers or competitors. 

When I put my French Press case study out there in public I didn’t worry about copy cats. Because if I would have decided not to do it I would have missed out on a product thats making me good money for over 6 months. First of all I wanted to document on a generic product how the process is done and second if I make good money for 6 months with that product and then the competition comes so be it. In those 6 months I will already have developed my next products or built further passive income. Yes it is frustrating when someone copies you but that happens in every business. Move on. 

I understand that if you have 1-2 products online its very exciting to look at your growing numbers by the day. But you can only grow that much if you try to optimise all the time and not look into developing new products, your brand, your company or your idea. 

I am sure most of you heard of guys like Will Tjernlund (24 year old Multi Million $ seller or was it 25 ? :) ) or Ryan Moran (Freedomfastlane). Yes they do perfect their listing, photos, keywords and such but they don’t obsess over it. They rather take action, develop the next product or make a call to a wholesaler or factory and land another exclusivity deal that will make them thousands of $ while we review our keywords for the 50th time. 

If you recall in my last blog post I was in Hamburg at a conference and Will was also there. After the conference sitting together on the last day before everyone went home while most of us were discussing strategies on optimising, Will found another product online, picked up the phone, called the sales rep of the company in the US then and there, offered them to purchase and list for them on Amazon exclusively and landed another deal that will make him (hopefully) thousands of $. I wasn’t there in person but I was told by my friend who organised the event. Reminds me of a famous saying from Scott Voelkers (The Amazing Seller) podcast “Take action”. I know easier said than done but it really is just that - pick up the phone, make the call, negotiate and place the order. Don’t over procrastinate and optimise - go for your next product. Obviously research and product validation has to be done but hopefully you don’t fall into paralysis/analysis. 

All of these guys also outsource many parts of their business. That could be virtual assistants for your customer feedback, letting professionals handle your sourcing and manufacturing in China or copywriting for your listings and products.

Why is optimizing your listings less important than developing new ideas and products? 

I’ve touched on this in the last blog post also:

Constantly re-inventing yourself and focusing on the direction of your company – because there is no one there to tell you what to do. You are responsible for the success of your business. 

If you only focus on optimising who is going to develop new products and strategies? 

Scaling up with more products means you need more cash.  

Which brings me to the second issue why people stagnate - cash flow. Yes Amazon makes a nice income after a while but what most people forget is that a lot of your cash will be tied up in inventory and re-orders, especially in the beginning. 

Therefore diversify your income and don’t put all eggs in one basket.. At least at a point where you are making 2-3000$ profit a month on Amazon to support your lifestyle, pay your bills or put even more money into the business. As I explained in my last blog post I made the mistake myself taking out money of the company in the beginning. Today I put nearly every $ made back into my business. That’s how you scale up. Because what is the money good to you in your savings account when you can re-invest it into your business and double it at a much much faster rate than the banks interest rates. Yes of course I put money aside for the rainy days and save up a bit of cash but its less than 10% of my monthly income. If you want to scale up you need to invest in yourself and trust your abilities. 

Therefore to generate more cash flow and pay your bills diversify your income stream as soon as possible. Or maybe you are doing this on the side and still have a full time job? Also good but there are still ways to generate extra income. 

1) Your own eCommerce store

Ok not the ideal way because you will need more cashflow but you can start by adding a small quantity to your next Amazon order placed in China and send it to your warehouse/garage/fullfilment center selling trough your own eCommerce site (Shopify for example). This can be a trial and test and if it works out you can decide whether to continue the eCommerce lane or not. 

2) Teaching your knowledge

Have you heard of  UDEMY? It’s the largest website where instructors/teachers can offer their knowledge in the form of an online course and over 5,000,000 students can view your (paid) content. The downside is that UDEMY takes 50% of the cut (unless you send the traffic there). But you could also set up your own site and offer your course trough that way, all the money goes into your pocket. If you aren’t familiar with setting up websites and online courses you can try teachable.com which offers people templates and ready made landing pages for your course for a 3% commission. 

3) Starting a blog  

I never was much of a writer or blogger. I started my first blog in 2006 with a few entries now and then. I had no idea what I actually wanted to blog about or how this whole blogging thing works. So the blog kind of died down until I started my first actual blog (ImportDojo) in 2015. There are so many ways you can make money trough a blog and while I don’t recommend you start the next cooking or travelling blog (very competitive) there are still so many niches people like to read about or make money in. That could be a small niche like home brewing, diving harpoons or whatever. Just making things up her as I go :) 

Check out this excellent resource on how and what you should do when starting a blog: onestep4ward.com 

Ideally the blog is somewhere in the nature of your physical products that you are selling. Say I sell a French Press I should naturally start a blog about coffee, coffee machines and such. Good thing is the sooner you start a blog or social media presence and the more followers you get the more traffic you can bring to Amazon or your eCommerce store. On top of that you create authority among your readers. People trust you and are willing to purchase your product. Key to blogging is (I find at least) is to give a lot of value. You can also integrate a eCommerce shop (or direct people to your Amazon store) at some point in your blog to create extra income trough physical products on your blog. 

4) Consulting 

You can put up your skills for sale. Be it trough a course or trough a personal one on one phone call. You can either integrate coaching calls trough your own site/blog or even list your skills on sites like Clarity, UpWork, Fiver etc. 

5) Writing eBooks 

As I said already I was never much of a writer but I just put my knowledge on paper. Plain, not very entertaining and fact/experience driven. People need that especially if you are in a niche where you have experience and people can rely on your knowledge. Information and knowledge equals money. Start writing a 15, 30 60 pages eBook and put it on Amazon or your own site. Even if it “only” makes you 30$ a month.  

6) Approach retailers 

I started the other way around. I went to retailers first and then onto Amazon. But that’s because I have 17 years of experience and contacts in retail. If you have a well selling or unique product on Amazon, retailers, brick & mortar stores will approach you. Believe me, it happens eventually. And even if not - walk down to your local retailer and speak to the Manager if they are interested in buying stock for their store. You can also do this online and approach retailers that you think may fit with your product. Do your research, prepare yourself properly put on a suit and try to get a meeting with the purchase department. 

Every dollar counts, ESPECIALLY passive income. I don’t care if I work 2 weeks non stop on a new project and it “only” brings 50$ a month extra. Thats 50$ I didn’t have before and ideally I don’t need to do anything for it anymore and I still make that every month. Imagine if you have 10 projects or side/passive income that make you 50$ each. Thats 500$ a month for a few weeks work. The key word to diversifying and building passive income is hustling and grinding. Passive money takes a long time to build up but believe me the sweat and tears are worth it. 

Key points today to scale your (Amazon) business:

  1. Don’t over optimize your listings - spend the time on developing new products 
  2. Build more income streams, especially passive money. 
  3. Use your passive income to pay the bills. The profits from Amazon go back into Amazon (or other businesses) creating more products up to a point where you either sell it all, retire on a beach, keep working or just spend time with your kids at home. 

Pheew another motivational post, didn’t plan on that. I hope there’s something in it for you nonetheless :)

All the best and happy sourcing,

Manuel 

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

The lifestyle of an Amazon seller – my story

It’s been a while since my last post and the main reason for that is because I was on my first vacation in over 2 1/2years 🙂

Well it was also a bit of work in the end but mainly vacation (I was speaking at the Privatelabeldays Amazon FBA conference in Hamburg) among a lot of great speakers meeting hundreds of like minded people. 

This post is also a little different than my other posts. Today I wanted to give you an insight of whats is like to live the life of an eCommerce seller and Entrepreneur. 

It’s not all as peachy as you might think or what you read from all the success stories out there. 

Lots of work, endless nights, ups and downs, frustration, close to giving up but yes eventually after putting in effort and hard work there are glorious moments that make up for everything. 

When I first started my own business (late 2013) I had about 30,000US$ in savings. 

I started my own private label right away selling to retailers and importers in Europe. During my years in Hong Kong I made a lot of contacts in the retail industry so naturally that was my starting point. 

I only heard about Amazon FBA around August 2014 when a friend of mine mentioned it to me. So I went the other way compared to many of my readers. 

Had I known back then how easy it was to start a business on Amazon I would have taken the entire 50,000$ and started with Amazon from the beginning. 

From August 2014 I teamed up with that friend, he was the investor and I took care of the sourcing, delivering to Amazon and launching the products. 

All the while I was running my retail business also. 

I was actually running out of cash at that point (August 2014) because I had pretty much everything in my retail business and not much money to spare for Amazon. 

I made the biggest mistake a becoming Entrepreneur could make. While I did have some incoming orders from my retail business I still lived my lifestyle as if I had a regular income. 

My savings dwindled and altough money would come in soon from the retail business I was running very low on funds. Amazon FBA was exactly what I needed – fast cash. 

Or so I thought. I was once again thinking money would come fast but I haven’t accounted for re-orders and that I shouldn’t take money out of the business right away. 

My one and most important advice for you today would be that you need to account for expenses and you can’t take money out of your business for many months – IF you are planning on doing this full-time.  

Your profits need to go back into your company. 

Today I am very happy with the products I have created and wanted to give you a little advice on how to build your brand: 

Focus on building a brand from the beginning. Keep this in the back of your head with everything you do. 

The majority just starting out or having a few items running has limited capital and can therefore not play around. 

So build better products from the beginning, have A+ photos and listings, great customer service and if you have existing items improve those constantly. 

Also don’t be afraid to invest your money in the future into higher priced and better quality products, be unique in what you do.

Look at this business not as a get-rich-quick scheme but rather see your investment as an opportunity to build your brand and in turn make more money in the long run (do this as opposed to release and launching a product every week). Build it slowly and keep quality and focus in the back of your head.”

So save up more than the initial product and shipping costs and don’t quit your job. You still need money to live on. 

Fast forward to today. 

My second most important advice to you is to not put all eggs in one basket. Diversify your income streams and don’t rely on one income stream only. 

Obviously in the beginning you can’t focus on too many different things but in time and in between you need to take your time and look out for different income streams. 

That could be teaching your knowledge, blogging, writing books, finding more eCommerce plattforms than Amazon, opening your own shop (Etsy, Shopify…) or even selling to retail. 

I actually recommend you going the other way (as opposed to me) and start with Amazon first and then move onto retail or other eCommerce stores as it is “easier”, especially if you do not have any contacts in retail. 

I now run several different businesses. 

1) I teach importing from China in my online class “The ImportDojo Masterclass”.

2) I wrote books that I sell on Amazon 

3) I teach my knowledge on Udemy and other online course platforms  

4) I run a sourcing company based in Hong Kong that helps importers find factories, negotiate prices and deliver to your (or Amazon’s) doorstep 

5) I sell on Amazon (currently about 20 products with the goal of having 50 by mid next year)

6) I sell to retail 

7) I consult one on one 

8) I have guided tours to China, its exhibitions and factories

9) Several small things that help pay the bills 

Make use of your knowledge, diversify as soon as possible. Dreams come true but you need to put in the hours and work for it.

My third advice: Obviously you can’t run everything yourself so as soon as you’ve mastered a process try outsourcing it. 

That could be finding professional help for your orders in China, hiring a Virtual Assistant for daily simple tasks, hiring full time staff taking care of your Amazon business etc. 

I know I know, it is hard to let go of a task that you think can only be done by you. But that’s not true at all! 

I am so glad I gave some of my tasks away to my staff because now I have so much more time to focus on what really matters for an Entrepreneur: 

Constantly re-inventing yourself and focusing on the direction of your company – because there is no one there to tell you what to do. You are responsible for the success of your business. 

Be it to invest into more staff, build more products or come up with new ideas that help you and your customers. 

My story isn’t some paved road to sucess either. I worked very hard (and still do) for over 2 1/2 years to get to this point (I worked 16 years in corporate jobs and paid my dues to gather experience). I am still nowhere near on retiring in my 30’s and I don’t plan on anyway but there is a lot more hard work ahead. 

Countless hours with no sleep, worries on how I can pay the next bills up to the point where I was applying for jobs again just when the money eventually came in. 

There are many “success stories” out there on how easy it is to make money online but I can tell you that it is a lot more difficult than people make it sound like – including me sometimes 🙂 

If you are really interested in starting your own online importing business or really any eCommerce business then I recommend you spend at least 6-8 weeks learning the basics. 

How to import from China, how to sell online, how to do your own marketing, regulations and procedures etc. Yes, learning by doing is one way to go but there will be stages in your path where you need to look things up or hire professionals who have been doing things for a while. 

I too hire professionals sometimes because I feel its worth to pay someone who can properly help you instead of stumbling my way through things. 

Today I can safely say I am running my own business and I have helped others along the way. 

When I used to have a corporate job I never got an email thanking me for negotiating thousands of $ or helping a buyer in a difficult situation. It was my job and I was paid to do these things. 

Running your own business can be frustrating but it can be very rewarding. I now get emails from people (sometimes even meeting people in real) thanking me for what I do. 

I am extremely happy when I hear of success stories of my students because it keeps me going. 

The point I want to get across to you today is that if you do something that you have a passion for (or experience), people will thank you along the way and money comes later. 

Of course money plays a role ( & is probably constantly on your mind in the beginning) and it enables you to live a certain life style, pay for your kids college tuition, afford those gadgets you always wanted or just save up for the rainy days. I know it’s difficult but try not starting your business because you want to be rich. Start your business because you want to be free, help others and be location independent. I promise you if you work hard and have passion in what you are doing money will come eventually. Actually money eventually doesn’t become so important anymore because perhaps today you decide you work in the park or at the beach. 

I still get up nearly every day around 6am, get some coffee sit on my laptop for a few hours, go to the gym, work some more, take breaks and even work on most weekends. But I can decide when and how long I work every day and most importantly for me – you can work from anywhere.

Exercising regularly is something I really recommend you to do. No matter how much you work there’s always an hour that you can spare for a walk, a hike, going to the gym or play some ball. Did you know what most of the successful CEO’s and Entrepreneurs have in common? They exercise regularly.    

I worked non-stop the last 2 1/2 years and finally took a holiday this month with my wife travelling to Europe, visting some friends and staying in a cabin on a lake in Sweden for nearly 2 weeks. 

I also spoke at the Privatelabeldays Amazon FBA conference (www.privatelabeldays.de) and some people told me I need to be more personal on my blog 🙂  

So without further ado I wanted to share some moments of the last 2 years with you and how a life style from working 9-6 in an office can change when you work for yourself:

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I got married on December 14th 2013 in Hong Kong. The very next day I decided to change my life from working 9-6 to being my own boss. I brainstormed the entire week and Mandarin-Gear was born.

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My last day “on the job”. This was on 30th pf April 2014 when I accompanied a buyer from Switzerland to a factory near Shanghai. The next day I flew to Hong Kong “free as a bird” and excited to start a new life.

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I went to visit one of my suppliers in Shenzhen to discuss the assortment of products I wanted to launch to my retail customers.

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2 months in and I sold my first product to retail under their Private Label.

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 I barely left the office in the first 4 months, this was pretty much lunch every day 🙂

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Checking the first packagings under my own brand.

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7 months in and I had about 20 products under my brand

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My first 5000 unit order from a large retailer in Germany. Only to be cancelled later.

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Time to celebrate that order. 2 months later it got cancelled and I was stuck with a 30,000$ debt. At this point my friend introduced me to Amazon FBA (August 2014). I continue to sell to retailers and start putting things together for Amazon FBA.

IMG_4480 March 2015 – ImportDojo was born.

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March 2015.  I publish “The Import Bible” on Amazon – 3 months later is is the No.1 Seller in its category.

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April 2015. I exhibit my own brand at the Global Sources Electronics show.

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I think there’s a decent assortment? 🙂

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Discussing possible orders with a US customer.

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May-June 2015 – I write three more books and turn them into a course (The ImportDojo Masterclass)

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In between work I always try to exercise and hike the mountains of Hong Kong as much as possible.

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Yep, this is in Hong Kong.

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In China visiting a factory and negotiating a claim with a supplier, she is not happy I m here 🙂

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Ningbo, China at night

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and another hike in Hong Kong.

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September 2015. Together with a friend we work on our first own real developed product from the scratch (to be launched September this year). It took a year to develop and fine tune.

IMG_6160 Always at the airport. Chinese have a certain way of taking photographs 🙂

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October 2015. I find a product at the Canton Fair that I later launch publicly.

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The FBA community is growing. More and more sellers are coming to China.

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Greg from Junglescout organises a big meetup in Guangzhou. Lots of familiar online faces meet in person.

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Sometimes I take the office outside.

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Or to the beach.

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Or on a lake. IMG_5640

Or to my Mum’s. No matter where, no matter when, Monday to Sunday – I work every day but I enjoy it.

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The office can be fun too tho 🙂

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I get to speak at the Global Sources Summit for online and Amazon sellers in April 2016.

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April 2016. I publicly launch the French Press.

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I get up early every day even if I don’t have to. Then again I get to enjoy this with my coffee.

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I get to travel. Sometimes on a motorbike in Northern Thailand….

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…and sometimes in style…

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to drink Tea in the middle of nowhere…

img_3767or to see the beauties of our world.

You get to meet great and like minded people along the way

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with Will Tjernlund


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BBQ before the Privatelabeldays conference

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with Bastian from officeflucht.de

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with Thomas from Privatelabeljourney.de

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You make new friends along the way

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or suddenly you get to speak in front of 450 people (sooo nervous 🙂 )

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always on the lookout for new products…

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and sometimes beautiful sunsets 🙂

 

There’s so many photos and things I wanted to share with you but I’ll leave it here.

Follow your dreams, start your journey today, help as many people along the way as possible and in time hard work will pay off, I promise 🙂

All the best and to our success!

Manuel

 

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

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