Buying in Asia and Selling On eBay & Amazon: By Mike Michelini

You are reading ChinaImportal's Newsletter!   Mike Michelini (LinkedIn) is a serial entrepreneur from New York. After a few years on Wall Street, he moved to Shenzhen – a place he has called home for close to a decade already. Mike is a veteran, and that’s why you don’t want to miss this piece. Keep reading, and learn how Mike built his five figure bar accessory online businesses on Amazon and eBay – from the ground up. Michael, tell us a bit about yourself and how you first started your business I always wanted to do my own business, but first took a job on Wall Street after college. Immediately I was finding ways to make money online and started to sell anything I could find on eBay and my own websites. Fascinated that I could wake up to sales in my account, I studied internet marketing via forums. Found a niche in the bar products industry, and moved up the warehousing from a Manhattan walk up apartment to a full service fulfillment company (fraternities, friend’s basements, and UPS stores in between). Building up sales enough to quit the day job in 2007, I was happy to do this full time. As I was buying products from China, I took my first trip at the end of 2007 to see trade shows and factories. After an intense jaw dropping experience, I decided to spend more time in China and am still here to this day. How come you decided to start importing bar products? Wish I could say I had a better formula, but really was selling anything I could find. Picked various product lines I personally liked and saw which one did well. There wasn’t much competition on eBay and was able to really get into the rankings. Made a full site for the bar products line and grew out the supply chain. How did you go about to find suppliers for the products? Started with US wholesalers, via Google searches and manually contacting them. Getting pricing lists and samples. Some would drop ship, others forced us to take inventory. As we grew, we went full inventory and started searching on Alibaba and Global Sources. Was like a shot in the dark, up late in NYC, chatting on Skype with factory sales reps, sending photos back and forth, getting samples. Starting with small quantities – some products we still would buy from American wholesalers and others direct from China, India, and Thailand. It was a school of hard knocks for sure – just getting in there, testing the waters with small orders, getting good ones, throwing out the bad, and growing with it. Do you recommend visiting a Trade Fair in Hong Kong or Mainland China – or can everything be managed from overseas? Well, I had been buying from China without ever going – so sure, I was using the online directories. But coming to the trade shows was like night and day. It was basically as if the online directories had people inside of them! You could still search through the catalogs and websites- but leading up to the trade show, I would ask the factories if they were going to the shows. I would note down where their booth would be and meet them in person. Even with all this amazing online technology, it is nothing like meeting someone face to face. Maybe that will change once VR is further developed – and can go into a virtual conference – but for now – nothing beats meeting people in real life. It makes the transactions seem real. Did you buy from a large network of suppliers, or just a few? The tricky part about bar products is there are so many different styles of products and materials. There are plastics, and then there are metals. I was trying to find the source, and I quickly learned that most factories were actually trading companies. The factories were dispersed in Zhejiang province and I went to them. What I learned is it was down to who had the mold. Factories would buy from each other to complete their product line – but to really get the right product from the right factory you had to buy from a network of factories. To add to the complexity – the metal bar products (tins, strainers, ice buckets) came from India. China is actually stronger in injection mold, plastic – not in things like metal and wood. Also found a couple factories in Thailand that had quite a bit of products. And… how much time did it take to build up? Started the site at the end of 2004 – within a few months we were making 10,000 USD a month, and took about a year to get about 20,000 – 30,000 USD a month (depending on season). What kind of sales channels did you use? We were using a multitude of channels – first getting cash flow from eBay sales, then using Google Adwords to our website to get website sales. Organic search was awesome but really think it was about a year (I was leaning it on my own) before we got organic traffic. The best memory I have is my first Adwords campaign I set up, the 2nd click brought in a 75 US dollar sale! Was almost all nickel bids too. Amazon we started later in the game, maybe in 2006 we started listing there, but the majority of our sales came from eBay, our website via Adwords and Organic traffic. Did you exclusively sell on Amazon and eBay, or did you have other sales channels too? Mostly Amazon and eBay. We did get some retail mom and pop shops who found us online. We also used some manufacturer sales reps in a campaign we did in 2006 to grow offline sales. I hinted earlier, we had trouble finding a dropship source for bar products – so we became the dropship source. We launched a drop ship program also in 2006 and built up a network of over 50 drop shippers and using a white label system in our back end. Did you ever have to deal with scams or quality issues? Shipped about 300 US dollars of shirts to Africa. We went a bit too crazy on automating the systems and didn’t have proper checks in place. Also a close call we had an order for a couple thousand dollars shipping to the Caribbean with a US credit card. Well, it shipped, but it was a real order. He had to fax us his credit card statement for the bank to give us the funds, so things went along happily ever after. One of the scariest situations was a lemon squeezer order. One piece to a woman in the Midwest, she said when she used it the spring broke and gauged her palm open. She was threatening us. I asked our other team members what we should do – and decided to immediately issue her a full refund (8 USD). Wondering what would happen next, she thanked us so much for the free product, gave us 5 stars on eBay and the problem was solved. That one had me researching product liability on google for a couple hours. Phew! Luckily, those are, the bigger issues we had – of course a bunch of savvy online buyers asking for the free product saying some quality issues. You’ve been based in Shenzhen for close to a decade. Do you think it’s become easier to deal with Chinese suppliers since you first arrived? Being here definitely helps, but doesn’t make the issues completely go away. Took me a few years of knowing what to look for. I also have a firm grasp on where the factories are, and I now even can find people who live in the area and can stop by for me. When the factory knows you are in the area, they seem to pay a lot more attention to your orders. That saying – out of sight, out of mind – comes to play. But then again, factories in China have advanced quite a bit in the 10 years I have been here and know what Western buyers want – so that is also a factor. Are they harder to deal with? Or the opposite? Much easier to deal with. You can get to know them, chat with them while they are awake (no time zone issues) talking to them about their family, their personal life and experiences. They don’t get to know most of their buyers this closely so it definitely sets you apart. Thanks Michael. Please tell us more about your current ventures. I started blogging when I quit Wall Street in 2007 – for some reason I was afraid to blog while working in corporate – thinking something with compliance would come to bite me and get me fired. So the blog started for my friends and family to be able to follow my travels and business updates – mikesblog.com now – still going strong! What I realized, I am passionate about the online marketing, about connecting people, and international business – so in 2013 I startedGlobalFromAsia.com as a blog and podcast to help business owners set up their international businesses via Asia. And just recently I became partner at EnterChina.co – an online community of entrepreneurs who are working to take their product ideas and launch them to the market. Are there any conferences or events coming up this year where people can find you? Sure, had a great crossbordersummit.com this past April and will do that yearly in Shenzhen. Working on day trips in China from Hong Kong and continuing to bridge the divide of business between China and the world.       Get your copy now... Best Seller 2015 and updated version 2016....  Only for USD$15...  you will earn so many knowledge about doing business with China....... Available in E-Book and Hard Cover Formats.  Worldwide....... Conatct us Now: +60126694217  Email: alveolegame@gmail.com

VAT on Imported Goods from China: A Complete Guide

You are reading ChinaImportal's Newsletter!   Importers based in the European Union must pay Value Added Tax (VAT) on top of the Customs value. In this article, we help you navigate the complexities of ‘Import VAT’ when buying from China. Keep reading, and learn more about VAT calculations, and whether or not Import VAT is deductible. We also explain how and when you declare and pay VAT, and much more. What is Value Added Tax (VAT)? VAT is a consumption tax in the European Union. In B2C transactions, VAT is always included in the price. If you, for example, buy a product online from an EU based online store, the price you pay includes VAT. The seller can then offset the VAT it ads on its sales, to the VAT it paid to other other EU businesses, when buying products or services. Below follows an example: Sales: $10,000 (Including VAT, 20%) Expenses: $5,000 (Including VAT 20%) This allows us to make the following calculation. Sales VAT: $2,000 Paid VAT: $1,000 Total: $2,000 – $1,000 = $1,000 Thus, I would need to pay $1,000 of VAT. If I’d spent more on VAT than I added on top of my sales, I would instead get money back from the state. However, when importing goods from China, you can’t pay the VAT directly to the supplier. Simply because Chinese businesses belong to a different tax system, and are not VAT registered in the EU. When importing products, the same principle applies. If you pay more VAT on your imports than you add on your sales, you’ll get a refund. What is a Customs Value? As the VAT calculation is based on the Customs Value, you need to be familiar with this term to understand the examples provided in this article. In the European Union, the Customs Value is the total sum of the products (including development costs paid to the supplier) and shipping to the border. Below follows an overview: Always included in the Customs Value Product cost (as paid to the supplier) Insurance Shipping cost to the Port of loading Sometimes included in the Customs Value Tooling and molds Product samples Design services (and related development services) paid to the supplier in China Not included in the Customs Value Transportation fees within the EU Fees and services paid in the Port of Loading Do I need to pay VAT when importing from Asia to the EU? Yes, importers must pay VAT on top of the total sum of the Customs Value and the Import Duty. VAT is paid to the state, in the country of entry and according to the local rate. If I import goods to Spain, I pay VAT in Spain, according to Spanish VAT rates. If I am based in the UK, I pay the UK rate, to the HMRC, and so on. How can I calculate the amount of VAT I must pay? Yes. However, before you can do that you must know the following factors: Customs Value Import Duty Rate VAT Rate Below follows an example: Customs Value: $10,000 Import Duty: 5% ($500) Sum: $10,000 + $500 =$10,500 VAT Rate: 20% (UK Rate) Total VAT: 20% x $10,500 = $2100 Total Amount: $10,500 + $2100 = $12,600 What is the VAT rate in my country? So far, each EU member state sets its own VAT rate. Each state can also set different VAT rates for different products or services – or even implement exemptions (0% VAT). However, most products are taxed according to the standard VAT rate. You can find a full list here, or see the list below for a few EU states: United Kingdom: 20% Sweden: 25% Italy. 22% Germany: 19% Netherlands: 21% When importing from China, how and when do I pay the VAT? There are two ways to pay VAT when importing goods from China: a. Pay VAT upon arrival in the Port of Destination Most Freight forwarders offer Customs clearance as a paid service. As such, they help you declare Customs duties and VAT to the local authorities. The Freight forwarder invoice the buyer for the total amount (Import duties and VAT). b. Declare the amount of Imported goods on the quarterly or yearly VAT declaration form All VAT registered companies in the European Union must fill in a quarterly or yearly (sometimes even monthly) VAT declaration. In the VAT form, there are fields for declaring the total amount of Imported goods, from which the local tax authorities can calculate a VAT amount. The benefit is that the importer can then offset this amount directly from the amount of “sales VAT”. Can I deduct the VAT amount paid? Yes, the amount of VAT you pay on your imported goods can be subtracted to the amount of VAT you shall pay on top of your sales invoices. Example: Company A is based in the UK and imports products valued at $20,000 from a supplier in Hong Kong. During the first year, they only manage to sell goods valued at $15,000. This gives us the following: Sales VAT: $15,000 x 20% = $3,000 Paid VAT: $20,000 x 20% = $4,000 Balance: $3,000 – $4,000 = -$1,000 Given that they’ve already paid in more than the amount they are owed, Company A is eligible for a VAT refund. However, this may be reduced to zero in some cases. Do I need to pay VAT when buying product samples? Yes. There are two ways VAT can be paid on product samples: a. Upon arrival in the EU member state b. Declared as part of the Customs value of the first shipment Are there any exemptions for importers? Some EU member states set VAT thresholds between 10 euros to 22 euros. Hence, small sample orders may pass through without VAT being added. Do the Customs authorities add VAT to every shipment? No, it’s up to the importer to properly declare the value of the imported goods in the quarterly or yearly VAT declaration. Do you have more questions about VAT when importing from China to Europe? Write your questions in the comment form below, and we will add them to this article. Get your own copy now for just USD$15 and stand a chance to win you free trip to YIWU, China....  Contact us at: +60126694217(Call/Whatsapp) Email us: alveolegame@gmail.com Get the best guide book now.....

The Future of Manufacturing in China: 3 Big Trends

You are reading ChinaImportal's Newsletter!   “It’s only a matter of time before Chinese suppliers take over on Amazon. Who needs a middleman” “China doesn’t need manufacturing any longer. They are going all in on credit cards and shopping malls” And so it goes. Self-proclaimed experts, trying to predict the future. However, if anyone is qualified to make a prediction of the future state of manufacturing in China, that would be me. In this article, I explain why, on one hand, China will remain a manufacturing powerhouse – and on the other, why you shouldn’t worry about your supplier stealing your market share. I’ll also show you why branding and marketing expertise is actually more important than the product itself, in a world where manufacturing is becoming increasingly accessible – even to the smallest business. 1. Production will remain in China, despite increasing costs Chinese suppliers are facing increased costs: Rising wages and rent hikes all contribute to reduce the already slim, profit margins of the average assembly manufacturer. In addition, the government is also becoming increasingly efficient in collecting taxes. This is another ‘cost’ that some suppliers must start to add into their pricing. Some manufacturers have already left, for example, in Vietnam and Cambodia. So I guess this is it then. Game over. China is rapidly deinstruliaising to focus on the “consumer market” and Chinaimportal.com is destined for eternal obscurity. Not so fast… A couple of years ago, the talk was all about how Chinese suppliers would depart from the east coast and head in droves to the inland. That didn’t happen. Instead, China’s East Coast grew into an even stronger manufacturing base. Shenzhen is the brightest shining star, and has cemented its position as the World’s center for manufacturing. To me, that was rather expected. Shenzhen has today grown into an ecosystem that cannot be simply transplanted. This is where you have the logistics companies, the component manufacturers. Increasingly, this is also where you find the manufacturing expertise needed. So, what’s the conclusion? China is losing out in some areas, but gaining in others. It’s not a coincidence that China becomes the manufacturing hub it is today, while Indonesia and India didn’t make that transition. Things will change, though. The future manufacturer in China is will mostly be ‘staffed’ by low cost production robots. Inefficient manufacturers will also disappear, and give more room to those that embrace this change. That said, I don’t think that, for example, the Wristwatch or LED industry will ever be dominated by a few large producers. The future doesn’t necessarily favor corporations. In the medium to long run, China will lose its cost advantage entirely, compared to the US, EU and Japan, due to cheap robotics, AI and 3D printing. But that’s at least two or three decades away. 2. Manufacturing is becoming as accessible to Startups and Small Businesses, as Software development Manufacturing used to be something that required huge investments. It was certainly nothing for college students considering, until just about a decade and half ago. Chinese suppliers are OEMs. Essentially, they are ‘Open Source Manufacturers’. Chinese suppliers don’t care who you are, or what you sort of background you have. All they are interested in is your business. If you ask me, that’s a great thing. Basically, the Chinese OEM factory made manufacturing accessible. A bit like the PC or Mac back in the 90s. Until recently, international trade has been stuck in the past. Alibaba and Global Sources took suppliers online, but that didn’t solve every problem facing importers. That is about to change, though, as supply chains come digitally. An entire ecosystem is coming into place, for companies of all sizes. Today, a product can get financing on Kickstarter. Then, Alibaba comes in with their Trade Assurance program to secure the transaction with the supplier. Once ready for shipment, just book a quality control online at Sofeast.com, and get a free shipping quote from Flexport – directly delivered to an Amazon FBA warehouse. In the last few years, the entire supply chain has moved online, and this is just the beginning. Product compliance is also becoming a lot more manageable, thanks to new services and devices that are set to drastically cut the cost to ensure compliance with relevant safety standards and labelling requirements. Just buy a requirements list on ProductIP.com, and test your product for free using your Scio Pocket Molecular Sensor. The latter must be seen to be believed. Soon, the days when you had to pay 500 dollars to test one fabric in one color belong to the past. What’s next? Visiting the Global Sources Trade Show from your VR headset? 3. Importers will need to excel at branding and marketing to stay in business As manufacturing becomes accessible to (almost) everyone, the market is becoming flooded with products. The core of every business is the product, or service, it sells. However, a product is only as good as the marketing and sales processes that supports it. The future belongs to those businesses that can not only bring a product to market, but also master the art of product branding, customer service – and online marketing. In fact, these skills are combined more important than the product itself. This has been proven, by the failure of Chinese suppliers to break into western markets and cut out the importers. Many Chinese factory owners arrogantly assumed that they had the upper hand, given their direct access to production. Why not just leave the importers out in the cold and sell directly on Amazon? They did, and for most it didn’t work out. What makes a business successful in the OEM manufacturing game is irrelevant when selling on Amazon, and other B2C online channels. Considering that many suppliers struggle to respond to emails within a week, they are nowhere near having the ability to last more than a month on Amazon. That said, the younger generation in China has a much better understanding of branding, and the importance of solid customer service. The question is how much of an advantage they will have in the future, given that they have better access to manufacturers than their American and European competitors. That advantage is not negligible, but an understanding of the target market has been always more important, than an understanding of the supplier that makes the product. This holds true, regardless of where in the world you do business. If anything, future competition will come from the ‘forced entrepreneur’ – a byproduct of the large number of people being left behind by automation and AI.  Get your copy now only for USD$15 everything you needed to know about doing business in China or with China are available here.  Contact us:  +60126694217 alveolegame@gmail.com "Best Seller Guidance Book 2015"  RIJAL A SHUKOR