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Posted on February 3, 2014 by ChinaImportal in Small Volumes
Buying products in small quantities from China can be challenging to say the least. It’s hard to reach the minimum order quantities and product certification testing can cost thousands of dollars. But that’s not all. The market is already crowded and even global corporations struggle to maintain decent profit margins. In this article we take a look into the key factors that makes the difference between success and failure when importing small volumes from China.
Why small volume importers still should buy from manufacturers
To begin with I want to make it clear that a small volume buyer should forget about stocking up a whole store or e-commerce site with custom made products imported from China. You can’t reach the required minimum order quantity requirements (I’ll get to that in a bit) and managing the whole purchasing process for as few as one or two products is already very demanding and time consuming for small businesses.
However, this doesn’t mean that you should buy products from sites like Aliexpress instead of going straight to a manufacturer. While you cannot stock up a full range of products directly from a manufacturer, you can still buy one or two. Preferably these should be the products that you expect to sell the most of.
Yet, a store or a product catalog with one or two products won’t impress anyone. This is when small volume sites like Aliexpress can actually make sense. Since the MOQ requirements are really low (you can often buy one unit per product), Aliexpress can be a good platform for buying “filler products”. However, exclusively buying generic and Unbranded products “off shelf” in small quantities is not a sound business strategy. I’ll get to that later.
Products to avoid when buying small volumes
Certain product are not viable for small volume importing. Among these products I tend to include electronics, toys, cosmetics and chemical products. While these products may still be possible to purchase in Small Volumes from sites like Aliexpress. However, those “off shelf” products are manufactured for the domestic Chinese market and are not in compliance with US and EU product certification requirements.
Importing non-compliant items is illegal, and may result in confiscation by the customs authorities, or even a lawsuit in case a customer is injured by your product. Ensuring compliance with product standards, such as CE and FCC, costs money. Quality inspections and lab testing is not free, and I strongly suggest that you spend money on products to sell rather than lab testing and expensive consultants.
In the end, all products are regulated by one or more directives. That being said, certain products, such as cosmetics and medical devices, are more strictly regulated than others. In many cases, it’s also quite complicated to determine which regulation and/or directive is applicable to a certain product. But there’s help to get. When you order a Starter Package on Chinaimportal.com, we both confirm applicable product regulations and source suppliers able to show previous compliance. Click here to read more.
How to lower the MOQ requirement
A major issue for small volume importers is the MOQ requirement. Many Chinese suppliers require a minimum order of 500 to 1000 pieces per product. If it would’ve been for the total order, it could’ve been quite acceptable for a small business. However, 500 pieces per product times a few different products in various shapes and colors equals a huge minimum order quantity.
So, should you order 500 green T-shirts of the same size? No, that’s economic suicide. There are a few workarounds that still allow the supplier to manufacture a certain quantity products, while you can buy products in various shapes and colors – without raising the MOQ requirement.
The MOQ requirement is not a matter of negotiation. The supplier will lose money if they produce less, so you need to come up with something else. I call this “streamlining usage of components and materials”. Basically, this means that you should reuse materials and components on as many products as possible, and thereby create variation.
I’ve done this a few times. In 2012 I had a client coming over to Shanghai to visit a supplier of bathroom rugs. The problem was that their budget barely allowed them to reach the suppliers MOQ requirement for one product. Buying 500 pieces of bathroom rugs in the same color is not really viable for a small store such as theirs.
While the supplier refused to sell anything less than 500 pieces, they offered the client to cut the product in up to four shapes and provide the rugs in up to three different colors. While the rugs were to be delivered in the same material, the client still managed to get a range of 12 different products without adding anything to the MOQ requirement.
Branding your product
While I discourage small buyers to import highly customized products, I consider branding to be one of the most important factors of the whole strategy. Many small business owners assume that a brand is useless, unless it’s famous. That’s a paradox, because a brand cannot instantly become well known.
While it can take years for a brand to gain some recognition, it is certain to add value to your business from day one. A brand gives the product, and therefore the company behind it, an identity. In the long term you might also be able to put a price tag on your business, something that I’d say is almost impossible for a company trading in generic Unbranded products.
But branding costs a ton of money, right? No, it doesn’t and that’s why it’s so great. Getting your product branded doesn’t require more than a logo print on the product itself, on the product packing or both. It’s not only simple, but the price difference between a non-branded product and a branded product is minimal. Most suppliers won’t ask for than a few cents to print your very own logo on an existing product design.
Branding can be much more than a printed logo. There’s no real limits here. You can get your product in a customized color or ask your supplier to make a small design modification in order to differentiate yourself from other companies in your market.
Invest in product quality and don’t attempt to compete on pricing
This one should be fairly obvious, but small volume importers still tend to make this mistake over and over again. Forget about competing on price with giant corporations such as Wal Mart. No matter which product you plan to import from China, you won’t get the same price as they do.
Small volumes and razor thin profit margins is like oil and water. They don’t mix. Low profit margins results in huge risks. A small mistake or a late delivery can erase months of profit in a whim. It’s a dead end.
This means that you need to find a way to increase your profit margins. However, your buyers are not idiots. They won’t pay premium price for a below average product. Making a supplier and product selection primarily based on price is one of the most common mistakes made by small volume importers. The cheapest product is certainly not the best product, and you won’t be able to motivate a high price. Instead, you need to make a supplier and product selection based on quality.
Buying a quality product doesn’t mean that you have to invest millions of dollars. In fact, the price difference between a “low end product” and a “high end product” is often rather slim. Let me give you a sound example: Watch cases can be made in Zinc alloy and Stainless steel. When buying from a Chinese manufacturer, a Zinc alloy watch can be as cheap as US$5 while the stainless steel version costs three times as much. However, potential mark up on a Zinc alloy watch is slim. You can’t sell one for more than US$30. This is certainly not the case for a Stainless steel watch that can fetch up to US$250 (well, ten times that if you happen to own a brand named Rolex).
Do you get the point? A small additional investment can make a drastic quality improvement that in turn results in even more drastic improvements of your profit margins.
Summary
There are quite a few things to take into consideration if you wish to import small volumes and still make a worthwhile profit. That’s why I’ve prepared a summary list of all the factors that makes a major impact on your bottom line:
- Focus your investment on one or two main product lines
- Only use small volume sites like Aliexpress for “filler products”
- Avoid products that require compliance with certification standards
- Ask your supplier how they can offer a variation to your product without raising the. MOQ requirement
- Brand your products with a custom logo print and/or product packing
- Invest a bit into product quality in order to allow better profit margins
- Never compete on pricing
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