How the importation business works…

How the importation business works…
Before we get into the thick of this article, it’s important that we
understand the basics of buying and selling. How is money made
in the ‘buy-and-sell’ business? Simple; you buy something
(wristwatches for example) at a low price and sell them at a higher
price to make a tidy profit. To increase the size of profit you can
make, there are basically two options you have. You can either
find a way/place to buy wristwatches at a lower price or look for
customers who will buy them at a higher price. This is how
everybody in the retail (buy-and-sell) business makes money
(profit). Buy low, sell high. It’s simple math!
To make sure you understand the opportunity we’re about to share
with you, we shall use a quick illustration. Let’s assume you are
the owner of a small business that sells foreign-made
wristwatches. You have a small shop in which you display all your
lovely wristwatches for customers to admire and possibly buy.
Because you can only afford to stock about one hundred wrist
watches at a time, you have no option but to buy from big
importers who, because of their large capital, can buy thousands
of watches from foreign manufacturers at very low wholesale
prices.
Although you would love to enjoy these low wholesale prices too
(which will increase your profits), you don’t have the kind of capital
the big importers have. Even if you could buy directly from the
foreign product manufacturers, it would still be tough. Most
manufacturers and suppliers have a Minimum Order Quantity
(MOQ) requirement. MOQ is the minimum quantity of products a
supplier will sell to you in order to make a worthwhile profit. This
is why they prefer to sell to the big importers who buy large
volumes (container loads) of their products. Since you can only
afford a few hundred watches, most of the big overseas suppliers
won’t want do business with you.
As a result, you are stuck with the big importers. The profit you
can make in your business is limited by whatever price they decide
to fix on the imported goods. The infographic below shows how
the big importers act as ‘middlemen’ between you and the watch
maker thereby reducing the profit potential of your business.
Thankfully, things have changed. The internet has brought down
the walls which used to restrict access to manufacturers located
thousands of kilometers away. Improvements in transportation
and logistics now make it possible for small businesses with little
capital to import smaller amounts of stock at low shipping costs.
Finally, entrepreneurs and small businesses can enjoy the same
low wholesale prices that the big importers have enjoyed for a very
long time. The illustration below shows how this new business
opportunity cuts out the middleman and allows you to buy directly
from foreign manufacturers at lower prices that allow you to make
a larger profit.
Something you should know before we get
started…
Many of the products and suppliers that shall be introduced to you
in this article are made or based in China. Although we shall also
talk about products from the US and Europe, the tips in this article
reveal more about buying products from Chinese manufacturers
and suppliers. The most likely question on your mind right now
would be: Why China? Good question. We’ll tell you why.
As you may already know (or don’t know), most products in the
world today are manufactured in Asia, particularly China. Toys,
home appliances, accessories, computers, laptops, mobile phones
and even Apple’s iPads are made in China. Let’s try to verify this
by doing a quick check of the products that are around you right
now. You would be amazed that roughly 4 out of 5 things around
you were manufactured in China. I’d like to use myself as an
example. The laptop I am using to type these words is a HP
Notebook made in China. The shirt I’m wearing, my earphones, my
wrist watch and my iPad – all made in China. My mobile phone is
probably the only thing that’s ‘Assembled in Brazil’. So the 4 out of
5 theory is true in my case!
Apart from food products, China is the Number One source of all
the hot-selling and fast moving consumer products you know.
China is one of the cheapest manufacturers in the world because
of its low labour and production costs. As a result, many of the big
brands that you know (Apple, HP, Louis Vuitton etc) make their
products through factories and contractors based in China. To
ensure the quality of their products are not compromised, US and
European countries set very strict standards which the Chinese
usually comply with.
Why am I telling you all this? It’s because many people in Africa
have come to suspect Chinese products to be low quality. While
this may be true, I don’t think we should blame the Chinese. After
all, China also produces many of the high quality products in
America and Europe. If our governments could enforce strict
quality and safety standards for products coming into Africa, the
Chinese would comply as they do for their clients in the USA and
Europe. However, you don’t have to worry about importing low
quality products. In the later part of this article, we shall share with
you the secrets of finding high quality products and suppliers that
meet US and European standards.
What do you need to get started?
To join the new and growing league of small business men and
women who can now import products at low wholesale prices
directly from overseas suppliers and manufacturers, you would
need just the following:
A computer or mobile phone with access to the internet;
A valid email address
A valid and traceable home or office address in your country where
the items you order will be shipped to.
A little money in your bank account. (We'll talk about this a little
later in this article)
Yes, you’re right, that’s all you need! This means that you can
shop for, order and import all the products you want to sell from
the comfort of your bed, breakfast table or while you are sitting on
a bus (via your mobile phone). Please note that a P.O Box or PMB
(Private Mail Bag) does not qualify as a valid and traceable
address.
Let’s get started!
You should be excited to start your new and promising small-scale
import business. But before you get on your computer or mobile
phone to start shopping and ordering products, let’s walk you
through eight of the most frequently asked questions. By the time
you’re doing reading these, you would know the best and most-
trusted places to buy from, how to confirm the quality of products,
the payment process and several more. Let’s dig in!
#1 - Where should you buy from?
The following websites are our top recommendations as online
marketplaces that sell products at low wholesale prices:
Aliexpress.com
Aliexpress.com has become the leading destination for small
scale importers looking to buy goods at wholesale prices from
China. Aliexpress is one of the subsidiaries of the Alibaba Group
which dominates internet-based commerce in China. In fact, in
2012, Alibaba’s portals handled sales of up to 1.1 trillion Yuan
($170 billion), more than its competitors (eBay and Amazon.com
combined). The Alibaba Group is estimated to be worth between
$55 billion to more than $120 billion.
The Alibaba Group launched Aliexpress in 2010 as an online retail
service made up of mostly small sellers offering products to online
buyers. It has more than 20 major product categories and sells to
registered users and buyers in more than 220 countries around the
world. You can visit its homepage at www.aliexpress.com
DHgate.com
DHgate.com is a business-to-business (B2B) e-Commerce website
connecting China-based small and medium enterprises with
buyers overseas. The website is a fast trading marketplace where
users can order Chinese-manufactured products directly through
the site. The company has been in business since 2004 and is
backed by investors KPCB, JAFCO and Warburg Pincus.
It offers customer support through online chat, e-mail messages
and phone support. The website is primarily in English but is also
offered in other popular languages spoken in Africa such as French
and Spanish. DHgate offers a wide range of products and you can
visit its home page at www.dhgate.com
iPmart.com
iPmart.com (started in 2001) is a huge wholesale market that
ships products from China, USA and Malaysia. Unlike
Aliexpress.com and DHgate.com which have a wide range of
products, iPmart.com is focused on electronic gadgets like mobile
phones, game consoles and their spare parts and accessories. If
you’re interested in technology products, iPmart.com is the place
for you. You can visit its homepage at www.ipmart.com
To start shopping and placing your orders on any of these
websites, you need to sign up to become a registered member. To
sign up or register is usually very easy. By clicking on the ‘ Join
Free ’ or ‘ Register ’ link at the top left/right corner of the home page,
you will be sent to a registration page to complete a short form. All
that is usually required is a Name , valid Email address and
Password . If you prefer, you could sign up or register using your
Facebook account.
As soon as your registration is complete, you can start shopping
and adding items to your cart. When you’re ready to order, you will
be led to the Payment page. This leads us to the next important
step…
#2 - How can you pay for products?
Payment was one of the reasons why it was nearly impossible for
small businesses to import directly from overseas manufacturers
and suppliers. Banks had to issue a Letter of Credit or Bank
Guarantee which often involved a long and complex process.
Today, through easy online payment systems, all the websites we
mentioned above accept payment through a wide range of
channels. You can do a simple bank transfer or pay with a credit/
debit card. Yes, the same card you use at the ATMs can be used to
make purchases on these websites. Just make sure your bank
account is sufficiently funded so you can make payments. Fast
and easy! No banks or long processes involved!
Just in case you don't know how to use your ATM, Credit or Debit
card to make payments online, I have prepared a short tutorial
video to help you with this challenge. Enjoy!
#3 - What if you get scammed?
Scams and fraud have been a big issue in internet-based
transactions and e-Commerce for a long time. What if you receive
the products and they are fake or not exactly as the supplier
described? What if you pay for the products but they are never
shipped and delivered to you? How can you make sure that you get
the EXACT products you paid for without getting scammed?
Good and important questions! All the websites we have
recommended to you in this article have some form of ‘ buyer
protection ’ mechanism built into the payment process. This
mechanism, also known as ‘ Escrow ’, is the same role the banks
have played in the import business and international trade for a
long time. The way ‘escrow’ or buyer protection works is simple.
Rather than pay the seller directly, Aliexpress, DHgate and iPmart
withholds your payment until you receive the products you ordered
and confirm that they are not fake/damaged. The image below is
an example of the escrow system operated by DHgate.com. It’s a
simple five-step process that ensures that the buyer is never
scammed and gets what he/she pays for.
Sites like Aliexpress.com and DHgate.com offer reimbursements
and return your money if you are not satisfied with the products
you receive. All of this is done to reduce the risk/fear that you’ll
lose your money. We cannot say that it’s a 100% risk-proof
process. However, we can say that it’s often unlikely that what
you fear the most (getting scammed) will happen.
#4 - How can I find high quality products and reliable sellers?
This is usually one of the biggest concerns most people have
about buying products from China. Unlike the strict quality and
safety standards which protect buyers in the US and Europe,
African small businesses are vulnerable to low quality products.
So how can you be sure that you’re buying good quality products
from a reliable seller?
This is where the beauty of customer feedback ratings come in. A
Feedback Rating is a measure of a seller’s reputation on
AliExpress and DHgate. After every transaction is completed,
buyers can leave a positive or negative feedback based on their
experience with that seller. This rating adds up to affect the overall
rating of that seller. If the seller usually delivers as promised, he/
she often gets more positive feedback from satisfied customers.
On the flip side, if the seller’s service is crap, dissatisfied
customers will be happy to give him/her a negative feedback
which brings down the seller’s rating.
Some of these ratings are based on a scale of 0 to 100% or
between 1 (low) and 5 (high) stars. So, when you find a product
you’re interested in, we strongly recommend that you take a quick
look at the seller’s feedback rating. We advise that you only
consider sellers who have an average positive feedback rating of
90% or 4 and higher. However, this rule is not absolute. You should
take the time to read the actual comments and feedback by
previous buyers. From reading these, you will get some vital
insights and pieces of information about the quality of the seller’s
product, early or late deliveries and so on.
We also strongly advise that you take your time to read the product
descriptions/details, seller guarantees and shipping conditions
which are usually at the bottom of every product page. You need
to confirm that the product you’re buying has the features you’re
looking for. Remember, what you pay for is what you get.
#5 - How will the products be delivered to you?
Some products on Aliexpress.com and DHgate.com come with a
‘Free Shipping’ service to many countries around the world. Free
shipping is often delivered through China Mail Air Post or Hong
Kong Mail services. While the free shipping option is very
attractive, it often takes the longest time to get your goods
delivered to you; usually between 15 to 60 days depending on the
product and your location. In addition to a longer delivery period, it
may be impossible to track the location of your package all
through the delivery process. If security and early delivery are not
serious concerns for you, the money saved through free shipping
can significantly increase the profit potential of the products you
import when you sell them.
Other common options for delivery on Aliexpress.com,
DHgate.com and iPmart are DHL , EMS and Fedex. Although these
are much more expensive options, they usually deliver your
products to you in a shorter time and allow you to track them on
their way to you. However, using these options is very likely to
reduce the profit potential of the products you order unlike the free
shipping option.
Tip: Whether you decide to use a free shipping option or a faster
delivery service for your order, we advise that you include your
mobile phone number in the shipping address you provide. More
often than not, you will receive a telephone call from local post
office or local DHL/Fedex office to come pick up your items.
Including a phone number may mean the difference between a
delivered packaged and a lost one.
#6 - What are the most popular and hot-selling products?
The websites we revealed to you earlier have most of the popular
and hot-selling products you can think of. Some of these products
are clothing accessories (for both men and women), consumer
electronics (like cameras and gadgets of all sorts) and mobile
phones and accessories (headphones, chargers, batteries etc).
One of the most popular and fast moving products is hair
extensions. Hair extensions of all types (especially real human hair
from Brazil, Peru and India) are in hot demand by a growing
number of young African women, many of who live in cities and
are in the middle and working class.
Over 60 percent of Africa’s one billion people are less than 30
years old. A considerable proportion of this young population are
very interested in fashion accessories and electronic gadgets. In
addition, our continent is now the largest market for mobile phones
in the world after Asia. As a result, Africa presents a very lucrative
market for all sorts of mobile accessories.
There is really no hard and fast rule when it comes to finding the
best products to import and sell in your local market. You need to
look out for trends in your local market. You need to have an eye
for the kind of products that are in high demand in your area/
country. Import a sample of a product first and find out how many
of your friends may be interested. Look out for products that
already exist in your market that you can import and sell for at
cheaper prices. There’s a lot of potential in this business if you
can find the right products for your customers at the right prices.
#7 - How will I find buyers for the products I import?
Very interesting question. If you already have (or can find) a small
shop for the products you import, that would be great. This is the
oldest and traditional method around but it still works. Interested
buyers will walk into your shop and possibly buy from you. You will
likely have a significant advantage over any competitors around
who sell the same products as you do. Because you import
directly from overseas suppliers, you can sell your products at
much lower prices that they can’t even dream of. It’s your trade
secret!
For those entrepreneurs who would love to start this business but
do not have a physical store or shop (and cannot afford one), there
is hope. The internet has changed the whole selling experience and
made it much easier to sell stuff to both people you know and total
strangers. Using a popular social media network like Facebook, it
is now possible for anyone to set up an online store/shop for free!
All you have to do is upload pictures of the interesting items you
just imported and invite your friends (and their friends) to come
have a look. If they like the product and price, they’ll contact you to
purchase it!
In another article, we revealed the full details and step-by-step
process of creating a Facebook Page for your business and how
you can use it to attract and win customers for your new business.
Creating a Facebook Page that displays the products you import is
one of the easiest and cheapest ways to open your own store
online! You should take the time to read the full article here .
#8 - How much capital do I need to start?
As you will notice when you visit any of the websites we
recommended, many of the products on sale are very cheap. Not
all of them, but many of them sell at very low prices. In fact, the
more units of a product you buy, the lower the price you pay; that’s
the benefit of buying wholesale. And don’t forget, the lower the
price you pay, the higher the profits you can make.
You don’t need to break the bank or get into debt to start this
business. As we always advise here on smallstarter.com, start
small ! Start with products that cost little but are in high demand in
your area or country. Use this to test the viability of this business
idea and grow your confidence. For most of the products you
import, you can make over 50 to 100% profit margins if you can
find the right buyers to sell to. As you make some money in your
new import business, you can start to try out other products that
cost a little more.
Tip: Never let your excitement about this business get the better of
you. Avoid the temptation to invest a lot of capital when you start
out unless you already have ready buyers for your products. Start
small and then grow gradually. This strategy may take a little more
time but it’s less risky and helps to build your experience and
confidence