In this article, we will outline the key factors for importing small quantities of goods from China.
Buying goods from China in small quantities can be a difficult task as you have to comply with the minimum order quantity (MOQ) required by suppliers and, in addition, certification tests can cost several thousand euros (and buying small quantities does not allow them to pay for themselves). But that’s not all: for most consumer goods, the market is now saturated and maintaining a good profit margin becomes difficult even for multinationals.
Why even small importers need to turn to manufacturing companies (rather than wholesalers)
First of all, I would like to clarify an important detail: if you are a small business owner, forget about filling the shelves of an entire store or e-commerce by importing customized products from China. The reason is simple: you won’t be able to reach the required MOQ for each product, and besides, the process of designing and buying even one or two products from China is complex enough for a business owner with limited resources. Imagine then if you try to manage the import of ten or fifteen products, perhaps from different suppliers, at the same time.
However, this does not mean that you should buy products from sites such as Aliexpress or DHGate – where you will find almost only wholesalers – instead of going to a manufacturing company.
No, those who are successful on a limited budget are usually content to start importing small quantities of goods from China, obviously being careful to import the main products (i.e. those that sell the most), perhaps buying the secondary products from wholesalers (Italian or found on Aliexpress). Secondary products are used to fill the shelves since a store or e-commerce that displays only one or two products would not impress anyone.
Products to avoid when buying small quantities of goods from China
For some classes of products, such as electronics, toys, cosmetics and chemicals, it is extremely difficult to import small quantities of goods, as the goods found on sites such as Aliexpress are designed for the Chinese market and do not comply with European certification standards at all.
When importing non-compliant products, there is a risk that the goods will be seized upon arrival at customs or, worse, that you will face a criminal complaint if a customer is injured or incurs an economic loss due to the malfunction of the product.
How do you solve this problem? By purchasing goods from a manufacturing company capable of producing products in accordance with the law and by carrying out quality controls and laboratory tests that ensure the compliance of the goods with European directives. Of course, all this has a cost, and if your company has limited resources, my suggestion is to invest them in the purchase of products.
It is therefore preferable to import products for which no European legislation must be complied with (or for which the regulations are less stringent) such as many textile products, accessories, watches, etc.
How to reduce the MOQ required by your supplier
As mentioned above, one of the biggest problems faced by small importers is the need to comply with the minimum order quantity (MOQ) imposed by suppliers. The point is that the MOQ must be calculated for each individual product. So if a supplier requires you to order at least 500-1000 pieces for each type of product, it becomes difficult for a small company to order more than one or two types of products at a time.
This does not mean that, in case you want to import T-shirts, for example, you will have to order 500 green T-shirts size S, 500 green T-shirts size M, 500 red T-shirts size S, and so on. No, usually when we talk about “MOQ” we refer to a given model.
So, still continuing with the same example, the supplier may tell you that the MOQ for a t-shirt of a certain model is 500 units and that, among these 500 t-shirts, you can choose 4 different sizes (for example 125 t-shirts size S, 125 size M, 125 size L and 125 size XL) and 5 different colors (so for every 125 t-shirts in size S you could have 25 red t-shirts, 25 yellow, 25 green, 25 black and 25 white, and so on for the other sizes).
It is important to understand that the MOQ is not something that can be negotiated as suppliers also have, in turn, suppliers of materials and components that demand compliance with a given MOQ and moreover, it makes no sense to go into production to make three mobile phones: there are different logics of economy of scale to be respected.
What can be done to reduce the MOQ?
The most effective strategy is undoubtedly to use the same materials and components to make different types of products. For example, I remember that in 2012 we happened to have a customer interested in buying bath mats. The problem was that the customer had a budget just enough to meet the MOQ of a product (500 pieces, in that case). Of course, it didn’t make any sense for a small retailer to buy just one type of rug.
Although the supplier refused to go below 500 pieces, he offered the customer to cut the carpets into four different shapes and paint them in three different colors. This means that, although the carpets were all made of the same material, the customer would have obtained twelve different types of carpets (i.e. carpets of three different colours for each of the four shapes available). This compromise satisfied both the supplier (who could produce 500 carpets, which is the minimum quantity required) and the importer, who found himself with twelve types of carpets to resell.
Create a brand for your product
While we discourage entrepreneurs on a tight budget from importing products with a high degree of customization (as this is a much more complex process to complete), we still believe that creating your own brand is one of the most important factors in our strategy.
Many importers think that having their own brand is useless unless the brand is already famous. This is obviously a paradox as no brand is “born” famous. Although it may seem strange to you, there was a time when brands such as Nike, Apple or Coca Cola were completely unknown.
While it can take years for people to recognize your brand on the street, the detail you’re perhaps overlooking is that a product that has its own brand is worth much more than an anonymous product. Even if the brand is new and completely unknown? Yes, because a brand conveys character and identity to the product. And this is, often, what people are looking for in a product.
THE ADVANTAGE OF DEVELOPING YOUR OWN BRAND
Finally, the last advantage of developing your own brand is that, one day, you may decide to resell your business. But this is only possible if you have a brand; if, on the other hand, you sell completely anonymous bath mats, no one can recognize you and, consequently, your business has no intrinsic value (if not your experience, but that seems to me more difficult to sell).
But, you’ll tell me, branding my products will cost me an arm and a leg, right? No! The beauty is that a “brand”, on a practical level, is nothing more than a logo on the product or on its packaging. Not only is it very simple, but the price difference between a product with a printed logo and an identical product without a logo is minimal as Chinese suppliers are used to performing this kind of operation and, moreover, it costs them only a few cents more per unit of product.
Of course, the concept of “brand” can go far beyond that of a logo printed on the product. For example, you might want to think about using custom colors or adding some functionality to your product so that you can differentiate yourself from the competition.
Invest in a quality product and don’t try to compete on price
Is it possible to compete on price with large distribution chains such as Carrefour or Media World? The answer is NO. Forget about competing on price: no matter what product you import, you can never resell it at the same price as Carrefour and, at the same time, think you can make a profit.
Large retail chains often work with negligible profit margins, competing on price and relying on huge sales volumes to generate a profit.
But if you are buying small volumes of goods, this strategy is equivalent to working for free because, if your profit margin is one Euro per piece and you sell only 300 pieces per month, it means that at the end of the month you will have scraped together the beauty of 300 Euros. Is it really worth throwing yourself into such a risky business as that of international trade to earn a few pennies?
Also consider that, with such a tight profit margin, a delay in delivery or a higher than normal defect rate could wipe out months of sacrifice in one fell swoop.
What is the solution?
Obviously that of aiming for products that allow you to obtain at least a decent profit margin. But don’t think you can sell a Xiaomi mobile (a Chinese brand) for the price of an iPhone, because consumers are not idiots. The strategy we recommend you adopt is to choose your supplier based on the quality of their products, even if it means paying a little more than the minimum price you would be able to get.
And what do the majority of importers (yes, even many of our customers) do? He chooses the supplier who offers the lowest price, not caring about the quality of the product. This is obviously a short-sighted choice because, in order to save a few euros at the time of purchase, you give up profit margins even ten times higher at the time of sale.
Here’s an example: in China, buying watches with a zinc alloy case can cost as little as 3 Euros per piece, while watches with a stainless steel case can cost as much as 15 Euros per piece. The difference, however, is that, once imported into Europe, a watch with a zinc alloy case can be resold for a maximum of 20 Euros while a watch with a stainless steel case can be worth 200 Euros (or ten times as much, if it says “Rolex” on the case).
The message we want to get across is that often a minimal investment in product quality and brand results in a difference in profit margin ten times greater.
Conclusions
If you have had the patience to read this far, you will have understood that you will have to take into account several factors if you want to generate a profit by importing from China on a limited budget. So let’s conclude with a summary of the most important points to consider:
- Focus your investment on one or two key products
- Buy from wholesalers – such as those that can be found on Aliexpress.com – only the products necessary to “fill the shelves”
- Avoid products that require expensive and difficult-to-pass certification tests
- Ask your supplier if they can offer you a varied range of products without increasing the minimum order quantity initially required
- Place a custom branding on the product and/or packaging
- Invest in quality to increase your profit margin
- Never compete on price
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