Buying products in China? Only 15% is from China.

What goes into making your product? A lot more than you may think.

A point I always try to make with new importers is that the actual product you are buying in China is only a small part of the experience that you’re selling. There is packaging, marketing, product instructions, and so on which are important parts of the product equation, not to mention the logistics and after-purchase support that goes with it. Having just finished reading Martin Jacques When China Rules the World: The End of the Western World and the Birth of a New Global Order (full disclosure, a shameless Amazon affiliate link was inserted there) I was pleased to see my preachings backed up by some hard stats.

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Reader Question Regarding Taxes and Duties

Greetings Dave!

I had a quick question for you. I am senior at the University of Arkansas majoring in International Logistics and supply chain. I am fluent in Mandarin Chinese and have lives in Beijing and Shanghai for internships and study abroad programs. I am starting a business importing products from China to sell to the domestic market through various channels.

My question is the following: As someone who is just starting out, what legal and tax implications should I be aware of? I’m currently only shipping small amounts of product via carriers such as DHL. The factories that I am working with have been a huge help and have coordinated most of the logistics for me. If I am receiving these shipments to my front door, and using my garage as a distribution center, then do I need to be paying taxes on my imports since they are being shipped via DHL? Am I currently operating under the table? Any other advise, warnings, or additional tips would be greatly appreciated as well! Thanks again!

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Read Question: Importing Bluetooth/RFID products from China

questions-and-answers

Hi Dave,

I’m a fellow entrepreneur from Canada that has started a mobile software business. I think the site that you created is extremely useful for people like myself that are looking to leverage the Chinese market so first off a big thank you!

Our company is looking at importing some electronic products from China. I was actually thinking of making a trip over myself (as per your websites advice!). We are looking at sourcing a number of electronic parts from China (bluetooth and RFID technology). I wanted to ask if you had any contacts that you trust (in China, Vancouver, etc.) that you think would be good parties to go through. We are really looking to make sure that we partner with the right people and being new in the space if you had any references it would be worth its weight in gold.

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Reader Question Regarding Air Freight, EXW, and Insurance

Hey Dave,

Thanks for writing the costs associated and EXW blog post. It helped me wrap my head around a recent order quote I got from a supplier.

I’m in the process of phasing up to ordering more from this supplier as I liked the samples and want to order more to get a few products up for sale to test my market. Continue reading
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Working with a Sales Rep and Not the Owner

Chinese Sales Reps

If you’re making relatively small orders with a supplier, the chances are that you will eventually be passed onto a sales rep rather than dealing with the owner (owners typically deal with only their largest clients personally). When this happens, it helps to be aware of the type of relationship you will be getting into with the sales rep.
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Interview with Kyle Vucko from Indochino.com

Kyle Vucko with a tailor in China  Kyle Vucko from Indochino was recently kind enough to do an interview detailing some of his exploits doing business in China along with advice for those just starting. For those not familiar, Indochino was started by Kyle and his partner in 2006 and has since totally changed the job of buying a tailor made suit. Continue reading
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It’s Canton Fair Time! Tips and Advice

canton fair Pazhou Complex5

The Canton Fair will be taking place from October 15 to November 4 and many readers of this blog will likely be making their way down to Guangzhou. For those who are, and those are considering it in the future, here are some of my tips:

  • Registering before the fair saves time but you can register at the fair (especially important for those who are in a mad panic because they never received their invitation)
  • Make sure you attend the right phase of the fair. You don’t want to turn up for the Automotive phase while looking for a furniture supplier.
  • Take everything a supplier says with a grain of salt. Every supplier will say they sell to Walmart, have a 30 day lead time, and is a factory (not a trading company). Treat everything said with some skepticism
  • Setup a secondary email account. If you are generous handing out business cards, your email will be put on ten thousand different Chinese email lists. Some of these emails are actually quite useful but you probably don’t want your inbox flooded with them.
  • Remember, you need a visa for China! A Chinese Visa is straight forward to get (any major city with a sizable Chinese population normally has a consulate you can apply through).

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It’s Canton Fair Time! Pros and Cons of the Fair

Canton Fair

Next week is the start of the bi-annual Canton Fair in Guangzhou, China. Starting on October 15, it will run until November 4 over three phases. The Canton Fair is the largest trade show in China meaning it is one of the most important in the world. During the Spring 2014 session, there were nearly 25,000 exhibitors (yes-25,000 potential suppliers!) and nearly 200,000 buyers.

Canton Fair Exhibition Grounds

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Is it big or not? Your Order Sizes in the Eyes of Your Supplier

When I first started importing, I always wondered what my suppliers would consider a big order and what they would consider a small order. Admittedly, even today I am not entirely confident on this although I have a better understanding. The table below gives my experience on how a supplier views potential orders based on their dollar amount.

Total Order Value Chinese Supplier’s Perceived Value of You
Under $500 per SKU Small buyer. Little incentive to negotiate on price or fight for your business; May not respond to emails, phone calls, etc. Any order will be of least priority.
$500-$5000 per SKU Small buyer. Enough profit potential to offer some flexibility on pricing. Normally responds to communication requests. Some priority given to the order if the right buttons are pushed.
$5000-$20,000 per SKU Serious medium/large buyer. Will offer price discounts to get your business. Order is of good priority to ensure you stay happy.
$20,000+ per SKU Large buyer who must be a major player in their market. Ultimate price flexibility offered and top priority given to their orders.

This is entirely relative to the size of the supplier of course. For Foxconn, $10,000 worth of a SKU wouldn’t even get you in the door, while for other suppliers $10,000 would get you their first born. However, it gives a very rough idea of where you’ll potentially stand in the eyes of your supplier.

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China and Tariffs/Duties and Most Favored Nations

Tariff Rates for Countries

When you are importing goods into your country, you will have to declare the goods to customs and possibly pay duties. It may come as no surprise to you that, depending on which country you are importing your products from, you will pay different duties. So a toaster being imported from Canada into the Unites States will be treated differently than one being imported from China into the United States. If you live in North America, you probably know about NAFTA (a trade agreement which ensures most goods are duty free).

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