Importing From China? Avoid these 5 Common Mistakes 5 Common Pitfalls New Importers should Avoid When Importing from China

Newbie importer

In my work at IMEX Sourcing Services, I regularly work with a lot of new importers, especially new e-commerce sellers selling through the Amazon or eBay platforms. Most importers, when first starting out are very excited & charged up about the new venture & want to get things moving as quickly as possible.

When first importing from China or from any other country for that matter, there is a steep learning curve & it normally takes 2-3 shipments for an importer to understand the process flow & all the terminology & acronyms involved in International trade.

With limited understanding of the import processes & that of the working style of Chinese factories, comes increased risk, especially quality risk as well as the increased likelihood of incurring losses on the first import from China due to getting the numbers wrong.

Here I look at 5 common mistakes, I often see with new importers first starting out of China.

1. The “Urgent Order” Syndrome

This is by far the number one issue, I notice with enquiries from new importers and I like to call it the “Urgent Order Syndrome”. Normally the first email we receive from a potential new importer would go somewhere along these lines:

“I am looking to import 2,000 units of digital food scale from China. These are required urgently as we have huge demand for these. Can you help us out and get us the best possible prices on these?”

Urgent Order Syndrome

While the exuberance is totally understandable as all new entrepreneurs are excited about their venture & want things to move fast, this can often be a recipe for disaster.

This urgency often results in requirements for product & packaging not being “specific” enough, quality control procedures being lax, factories skipping procedures to cut down on “production time” and last but not the least, losing out on good suppliers, who may have a quality product but are not flexible on their delivery times, or have longer delivery times simply because they have more business.

All these issues can lead to quality problems & the loss from these quality issues can be far greater than the time savings achieved by trying to speed up the process.

Another thing I see commonly in such cases is people negotiating aggressively on “Delivery Period” and choosing a supplier because they promise a slightly shorter delivery time relative to the “Industry Standard”.

In many of these cases, suppliers tend to quote a shorter delivery time to close the sale and may still take the same time, in other cases, they may skip processes to speed up production which can lead to quality problems.

2. Not comparing “Like for Like”

For most new importers importing from China, the sourcing process starts on a B2B website like Alibaba. It involves contacting multiple suppliers, getting quotes, comparing them & shortlisting the best suppliers, in many cases based on price.

Like for Like

However, from my experience, often people do not compare like for like specifications albeit unintentionally. For a majority of the products, there are so many subtle differences in a product that influence the pricing of a product. This can be materials, components, type of paint, dimensions (thickness is a common culprit) or other specifications.

This problem is less severe, when someone knows the product well, however even in those cases differences among suppliers start to get highlighted, when you are deeper in the sourcing process.

In many other cases, especially when people are sourcing new products that they haven’t worked with before, very obvious differences are sometimes missed, leading to good suppliers being shot down because their first quote looked expensive.

One of the ways to deal with this is to spend some up-front researching & understanding the specifics and finer details of the product as well as expected quality problems with that product. Asking a lot of good questions about the make-up of the product, to the first few suppliers you speak to also helps.

3. Overestimating the Profit Margin on a Product

This is a very common problem when first starting out importing and normally happens due to the nature of international trade. Even in a simple international trade transaction there are several parties involved which can make it difficult to calculate the landed cost of a product and hence the expected profit.

On top of that, what I often see in the consulting work I do with a lot of e-commerce clients is that when you factor in other costs for e-commerce platforms, say Amazon seller fees, domestic courier costs, marketing costs, professional product photography costs, etc. the profit margins don’t always look viable & there might be better opportunities in a different product.

New importers often base their costing on the obvious costs such as product cost, logistics, and inspection. However, there are often other not so obvious costs that influence profit margins for a product.

These can be for unexpected contingencies such as cost of random customs inspections at port of loading or port of destination or planned contingencies such as cost of expected returns.

mark up mug

4. Not Realising how “Economies of Scale” work

This is a difficult one for any importer & takes a while to get used to when importing from China. This is also critical when it comes to working out the landed cost of your product.

When requesting quotes from Chinese factories, the first question you can expect is about your quantities. The answer to this question influences:

  • Whether the supplier will respond to your email
  • The quote you get from the supplier (High-Low)
  • The “service level” you will get
  • Your customization options (White Labelling, Packaging, etc.)
  • Your logistics cost per unit.

All these things will have a significant influence on your “Landed cost” & quality of the product. While this should be a whole post in itself, I would like to mention out of the factors above, “logistics cost per unit” is the most important one, especially for sea shipping & I often see people losing margins because of getting this wrong when it comes to LCL shipments.

5. Expecting Perfection on Small Orders

perfection

This is something I personally suffered from when I first started to import from China into the UK over 10 years ago & I realise now that I lost valuable time & money due to this.

I am a huge proponent of being very clear & specific on your requirements when importing from China, as it’s one of the best levers against quality problems. This is one of the reasons we ask a lot of upfront questions to our client when starting a new sourcing project.

However, this is a bit different from expecting a “Perfect Product”. While the objective of every quality control process should be to aim for perfection, in reality this may not always be achievable for “smaller orders”, especially on your first order with a given factory.

There are several reasons for this, relating to how factories in China work, economies of scale, the thought-process of the factory workers & the perception of the factories towards what is considered perfect or acceptable.

I have often seen importers lose valuable time, in trying of get minor things perfected such as the taping of the box in a certain way. The law of diminishing returns comes into play here, i.e. the time spent & the QC cost of getting this level of perfection, often outweighs the cost of doing so “for smaller orders”.

But more importantly, for e-commerce sellers this cost can often be bigger, when you take into account the “opportunity cost” of potential lost sales during the time spent on reworking the goods.

Some of these requirements are essential, for e.g. when working with Amazon FBA, they tend to have very specific requirements on how the packaging needs to be & hence it is for the importer to identify what are the non-negotiables when it comes to the product & packaging.

It is easy to misunderstand this point, so I would like to emphasize that, perfection in itself is not always hard to achieve, but what I am referring to here is more about the link between the degree of perfection you aim for & the value of your order.

Smaller & medium end factories that are willing to accept smaller orders often have less resources to achieve perfection relative to larger, higher-end factories.

Also, normally, it takes a couple of shipments with a given supplier in China, for them to really understand your requirements in-depth and have the process perfected & customized for your unique requirement. I will talk more about this in the second part of this post.

Final Words

I will be a writing a second part to this post soon, covering some of the other pitfalls to avoid when first importing from China. Feel free to subscribe using the subscription box at the bottom of this post to stay updated with the new posts.

As an importer, have you had any experiences where you felt looking back, you could have done things differently when first starting out importing from China?

Please share your comments below.

Ashish is the founder of IMEX Sourcing Services, a sourcing & QC company helping people importing from China manage their costs & risks as well as develop new products. Ashish also does consultancy work in the field of International Trade & Import Risk Management & loves to write during his free time.

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  • This is an interesting article. An easy way to prevent quality issue is to check quality of the goods before payment of the balance to your supplier. You can send a quality inspector for 250-300 USD to check the quality of your goods.

  • Claudia van Bragt

    I really enjoyed reading this article! For my studies I also get to deal with consulting on how to do business with China so this was really helpful for me. If you are planning on importing from China, I would recommend visiting the Canton Fair in Guangzhou. This biannual event is the biggest trade fair in China and and it gives buyers a great opportunity to get in touch with the Chinese suppliers, helping you to increase your chances to succeed in importing from China.

  • Hi Sherwin,

    You can get quotes from suppliers on Alibaba for your custom designs. The first question they would ask you is your quantities, as large quantities are critical to get manufacturers interested in China.

    For Patents, there is always a risk that a design may be copied, and hence its important you carry out your own due-diligence in this case as any responsibility for infringement lies with the importer.

    Thanks.

  • Sherwin

    I am currently in the process of starting a business with a friend selling jewelry from china. I might be a bit naive about the subject as i am looking more into it. First question is how do I go about finding a manufacturer who can create custom jewelry that I design? Also, say we started selling products from Alibaba that are already designed, are there any legal complications? Like patents etc. I’m a bit confused by a few things and thought it would be best to seek advice on here.

    Thanks,
    Sherwin

  • William,

    Absolutely, as they say it is better to execute a good plan today then a perfect plan tomorrow.

  • Matt, this situation normally happens when your supplier doesn’t necessarily have the scale to scale up the production with your growing needs. This could be a red flag that if your order size was to increase massively, your supplier may have issues managing your needs and under such cases suppliers tend to outsource production which leads to whole set of new issues.

    So under such a case, instead of focusing on the short-term impact, I would be more worried about the longer term implications if you were to grow and work on building back-up suppliers.

    In terms if your short term problem, I suggest you put a clause in your contract wherein the supplier would be fined $x/Day for each day of delay over and above the quoted delivery time.

    Hope that helps. Ash

  • Nate

    Hi,

    What a great blog and I think that it’s perfect as I’m trying to better understand how product manufacturing works in China. So if you could provide some insights to my questions below:

    >How does the manufacturing process work, do I need to get a separate supplier to provide the materials, a separate one for assembly of the product, a third for packaging, and a fourth for shipping?

    >Are there places that are capable of doing all those things or are at least in partnership together so it makes communicating and transporting a lot easier? Do that have a specific name for that kind of business so I can find them?

    >If not how would I go about getting these separate vendors working together to complete my product? What I’m planning to build is pretty simple it only requires 2 or 3 materials and is quite small.

    >How does a manufacturer typically schedule or prioritize their clients, should I somehow prepare for unexpected delays because of this throughout the manufacturing process even among different batches?

    >Should I be in connection with a backup manufacturer in case something happens with this manufacturer? Or is there some sort of agreement that prevents you from building in more than one place?

    Any information would be really useful. Thanks and keep up the good work with this blog.

  • Ashish Monga

    Hi Matt,

    You are right. There are tonnes of online courses and programs banking in on Amazon’s massive growth, portraying Amazon FBA as a quick rich scheme. I personally think its a great opportunity to build a business with limited investment and limited risk and can be scaled up nicely if done correct.

    Having said that, I do believe it requires a lot of work (especially initially), perseverance and to some extent creativity to build the business up, just like you would do with any other business and so of the programs do make it sound easier than it is.

  • Good post, Ashish. I think there has been an overemphasis pushing importing for FBA sellers as practically an overnight get-rich-quick scheme. What are your thoughts?

  • gupruprasad

    good article the importer try work on landed cost without knowing the ground reality of china . Also Customs clearance is big hassle and creates big problem when a Chinese supplier doesn’t send proper documents

  • Matt, this situation normally happens when your supplier doesn’t necessarily have the scale to scale up the production with your growing needs. This could be a red flag that if your order size was to increase massively, your supplier may have issues managing your needs and under such cases suppliers tend to outsource production which leads to whole set of new issues.

    So under such a case, instead of focusing on the short-term impact, I would be more worried about the longer term implications if you were to grow and work on building back-up suppliers.

    In terms if your short term problem, I suggest you put a clause in your contract wherein the supplier would be fined $x/Day for each day of delay over and above the quoted delivery time.

    Hope that helps. Ash

  • William,
    Absolutely, as they say it is better to execute a good plan today then a perfect plan tomorrow.

  • Matt

    We have a supplier that we have been consistently ordering from the last few months, and everything was going well. However, on our current orders,lead times are getting longer about 7-10 days late since our orders are getting big.
    Is this normal? That suppliers do not meet their own production time frames?
    Any tips on how to prevent that or how to handle that well? Thanks so much!

  • William

    I have been to importing classes online for the past months now and finally ready to import from China. However, it’s one thing to learn and another thing to actually getting your feet wet and doing it. I am finally going for it! Thanks for this article.