"Importing From China For Ecommerce Profits"

Importing from China and the Far East is of course not a new business idea. In fact, Westerners have been making fortunes trading with China for centuries, dating back to the ancient Silk Road and medieval spice trade.

In the past twenty years, China has emerged as the world's dominant manufacturing base for an ever-increasing range of products, and this now includes high tech consumer electronics products such as mobile phones, computers, and TV / home entertainment systems. For international business people in a position to use their know-how and contacts to buy from China and sell in their home markets, the profit opportunities are massive.

International consumers are hungry to snap up cheaper and ultra-cheap imported goods, and China's enormous low-wage workforce, accompanied by more and more relaxed business regulations, mean that the cheapest mass produced goods come from China and "Made In China" will continue to be the most common label on most consumer goods for years to come.

You don't have to be a big, established company, or an import expert to begin taking advantage of buying low in China and selling high at home.

Where can you look at examples of the smaller businesses that are already taking advantage of the low cost of Chinese electronics and other products?

Well, in case you hadn't noticed, most of your local mall / high street stores are stocked with goods from China - it's not just Wal-Mart doing it. And I expect if you're a reader in a Western country you're already heavily into online shopping, and guess where most of those products come from...

Here are the biggest hubs of small-business online sellers for you to research, because so many of them are already using the China-cheap-import model to make big bucks, and you can learn a lot by seeing how their businesses are operating:

• http://pages.ebay.com/services/buyandsell/welcome.html

• http://stores.ebay.com/

• http://shopping.yahoo.com/

• http://auctions.amazon.com/

• http://zshops.amazon.com/

• http://www.google.com/products

If you take a look at these sellers' products many, many of them are sourcing from China, and a lot of them probably drop-ship products directly from China, meaning they don't even handle inventory.You'd better believe that you can follow the same model for great import profits!

What Is "Drop-Shipping" All About?

Drop-shipping (also spelled as one word "dropshipping") is a practice of selling someone a product that you don't actually have in your hand.

Sound like a scam? Think again, it's the new face of marketing and distribution in today's information-driven market.

Here is what you do if you are a drop-ship seller:

1. You research good products to sell. You do the research to locate a good supplier of these products and establish a buyer relationship.

2. Next you advertise their products to your market, e.g. to your shop's customers, to your online auction viewers, in a magazine, etc just as you would market your own product.

3. You receive and process orders for the products from the customers, and take their payment.

4. You use this payment to go to the supplier of the products and buy the goods you need from them.

5. The supplier sends the goods directly to the customer without you having to handle the products or any stock.

6. For an extra fee many drop-ship suppliers will also brand the packaging and invoices with your name/logo so it looks to the end customer like the goods have been dispatched from the same exact company that they ordered from.

 

Drop-shipping is a classic exploitation of ecommerce online, because customers don't expect to see the goods when they order. If you walk into a normal shop and the shopkeeper asks you to put down money for goods which aren't even there, and will be delivered to you later from another shop which quite possibly you could buy from directly, would you still make the purchase? I don't think so, but it's different in 'cyberspace'.

Online, the source of the goods is not quite so clear, so buyers are happily going to send you money for products which in fact you need to source from somewhere else.

The obvious advantage of drop-ship selling is that you can make profits selling any sorts of easily deliverable goods, without having to take the risk of investing in stock, and without the costs and hassles associated with packing and delivering goods. Your selling business could also be very scalable, going from a few orders to a few hundred without significantly increasing your workload or operating costs.

Drop-shipping can also be a source of efficiency for distributors or wholesalers because drop-ship sellers do much of the marketing work for their products which the larger companies wouldn't spare the investment, time, or expertise to do in so many worldwide markets. Because the drop-ship seller frequently will handle much of the customer service and also consolidate several small orders into reasonable larger order quantities, the large distributors will see small drop-ship sellers as good business partners.

However, there is more complexity to drop-shipping than meets the eye, and since it's so easy to start up a drop-shipping business you need to be aware of some of the risks and downsides before you plunge in.

 

Is Drop-Shipping For You?

Drop-ship selling can be a great way to make good profits from a small and fast start-up business idea.

It can also potentially bring good value to your customers, because although you are marking up the cost of the goods for your 'middle-man' profit, you may be bringing your market products which they otherwise can't obtain or didn't know about. You could also be adding value to the buyer's experience by creating good product combinations, making ordering easier and more secure, improving product information and customer support, and assisting with import issues.

BUT, drop-shipping is not a simple thing to succeed at. Many people are succeeding at it, but you need to have a reasonable business common sense and be aware of the potential difficulties you will face.

Let's say you find a really good, desirable product and you have a good supplier for that product who will drop-ship to your customers. Let's also say you have the know-how to market this product to the right customers. You've got the makings of success already! But you are not home and dry. Actually now you need to think ahead about how your business is going to work...

"Drop-Shipping - The Perfect Zero-Risk Enterprise?"

I am not normally a negative person, but I feel it's important to give some warnings about drop-shipping as a business plan. It can be great and I don't want you to go away from this section totally discouraged, but on the other hand everyone needs to face up to reality in the cold light of day.

Too often when I am reading "guaranteed success" type websites I read sales copy from people who are trying to sell you drop-shipping directories or related services, and they don't like to show you the other side of the coin!

I'm afraid I am more mean and not afraid to shatter illusions!

Here are the basic downsides of drop-shipping you need to consider:

• YOU ARE NOT IN CONTROL
  Since you are not the manufacturer or original supplier of the goods, you are at their mercy or the mercy of fate. What if their business starts being unreliable, untrustworthy, or even goes bust? What if their export regulations, or your import regulations change? Without a supply of goods your business will quickly be finished.
• MOST COMMON DIFFICULTY: NO STOCK!
  Even if your supplier is a good one, inevitably they will often go out of stock on certain goods, or change their product range. If you aren't completely up-to-date with what your supplier has available, you could find yourself with dissatisfied customers facing long delays because they have paid you for a product which is now on back-order or not even available any more.
• "OH NO - I DIDN'T WANT A FULL TIME BUSINESS"
  As a drop-shipper you may be tempted to move quickly into several product areas in a bid to get the easy profits you dreamed of. Perhaps you hit on something very successful. You could rapidly find your sales expanding beyond what you originally thought you would have to deal with in the "simple" drop-ship business model.
  

Can you keep everything under control?

Very quickly, if you are successful at drop-ship selling, you could find yourself overwhelmed with all the problems of running a business that you thought you were going to be able to avoid:

• taxes,
• customer service,
• pre-sales and after-sales product technical support,
• product returns support,
• legal issues,
• growing overheads if you need support staff or office space,
• accounting and record-keeping,
• marketing budgets,
• time management problems and personal stress, etc etc.

• COMPETITORS
  Drop-ship suppliers tend not to offer exclusive agreements to anyone in particular. That means that with the right base and know-how, any other drop-ship selling business can relatively swiftly copy your successful model and compete with you or take down your business completely.
• ONLINE FACTORS
  Since most drop-ship sellers will be running most of their marketing through internet channels, they will be exposed to all the risks associated with online business. These include people copying your web content without authorisation, ever-increasing advertising costs, ever-increasing competition especially from large companies, and unpredictable customer traffic if relying on search engines. If you are doing business online, you won't succeed if you're a total web beginner.
• FINANCIAL RISK
  A normal import business may have to import a large stock of goods and bear the cost of storage and insurance for this stock. And then the goods may not even sell, or the value of the goods may go down over time, making the whole stock-keeping situation very risky for the business. In drop-shipping you have basically avoided that problem. However you are still handling the payments. If your customers send you money and for whatever reason that money gets lost, e.g. because of your supplier or because a shipment gets lost, you will bear the responsibility and financial risk. Similarly if you wish to offer customer money-back guarantees, or even have customers that cheat you, you will have more financial risks, and one or two large refunds or frauds could swiftly erase your profits or even put you out of business!
• LOW CUSTOMER LOYALTY
  By definition as a drop-ship seller your prices are higher than your supplier's, and in many cases your customers, if they know where to go, could quite easily cut you out and buy as cheap as you do, directly from the source. Especially if your buyers are planning to order the same product again, and in higher quantities, there is a strong likelihood that with a bit of research they will be able to locate your supplier and cut you out of the loop! Even if you aren't worried about your customers bypassing you, you still need to consider the traditional business issue of building loyalty with your customers, so instead of finding you once and buying one product never to come again, they will remember you, your brand, and continue to buy from you in the future. As a drop-shipper the brands and products aren't yours, you may not be an expert in the product area, and you have no physical / personal presence for your customers. So you will have to work extra hard to build your company's identity and repeat-customer business.

Drop-shipping from China

Not a lot of Chinese suppliers will really know what you are talking about if you ask about "drop-shipping". Mainly this is because small order quantities for international orders are quite a new thing in many product areas, so even the word 'dropshipping' may be unknown.

Chinavasion is an online wholesale electronics shop, and because we have no minimum order quantity, we have a lot of orders every day for single items being drop-shipped to customers all over the world. However, the factories we source the products from would never be able to deliver single items, even if they could cope with the logistics complications involved with so many small packages. It's the same with most factories - they won't do small orders. So if you are looking for China drop-ship suppliers, you may need to look at the middle ground of distributors and trading companies instead of trying to head straight for the factories.

In principle, Chinese suppliers probably won't have any problems sending goods to your customers. If they can already send samples or packages to your address, then why not to someone else's? The key really is finding suppliers with a low enough minimum order quantity. Even if you find a supplier with a MOQ of 10 pieces you may be able to drop-ship 5 of those to your customers and the others to yourself as a sort of combination of dropshipping and holding inventory. Or some suppliers may let you pay in advance for say 100 pieces and then ship them in small batches to different locations later.

The perfect situation is to find a Chinese supplier who can reliably and efficiently dropship single item packages anywhere in the world. If you approach Chinese suppliers and simply ask "do you drop-ship?" you may not get very clear answers because they may not understand the question.

Here are my suggestions for the questions you can ask your possible Chinese suppliers:

1. Do you have a minimum order quantity? Can I order one piece at a time?

2. Can you ship to [country]?

3. Is it OK to ship directly to my customers?

4. If you ship to my customers can you also provide me with invoices?

5. If you shipped directly to my customers could you guarantee that your packages and invoice would not identify your company? (This is one of the hardest things!)

6. Would you be able to label the packages and invoice with my own company name / logo? If so would you charge an extra fee for this?

7. If I order 20 pieces but ship to 20 different addresses, how can I do this? Do I have to make 20 separate orders? And if so do I still get the 20 piece quantity discount?

You will also need to discuss shipping options:

• what method of shipping

• how to quote / pay

• how fast

• how to get tracking details

• how to deal with customs and taxes

• how to deal with delivery problems

• how to deal with returns

Obviously some of these things you will work out as you go along, but it's a good idea to think about some of the issues that are likely to arise so you can prepare yourself.

Tips for Successful Drop-Shipping from China

• It may seem obvious, but please check with your supplier whether then can dropship, before attempting to place a dropship order! Don't dive into dropshipping and sell something to a customer, and THEN start asking your supplier if / how they can dropship. Do your homework!

• Don't make promises about delivery time to your customers until you have tried the supplier and you know they can deliver in the way you want.

• Under no circumstances drop-ship items that you have never seen. Your first order should be to yourself to inspect the goods and assess the supplier's service. This will also let you get an idea of the import tax situation for this particular product.

• Follow my good communication tips for Chinese suppliers. Make requests not demands.

I think I've said enough about the general issues of drop-shipping. I want to return now to the question of selecting the best products to sell, which is vital to drop-shippers and in fact in any importing business.

"Choosing Profitable Products"

Perhaps you already have an area of knowledge or expertise that leads you towards importing and selling a particular category of product. Or maybe you’ve been selling one type of product for a long time from local sources, and now you’re looking for alternative sources of the same product from overseas.

If you know exactly what products you need to source, your search is going to be narrower, and you can immediately focus on finding good suppliers for particular products and setting up initial deals.

But for a lot of people, especially those new to importing for resale on EBay, Yahoo Stores, or other online shops, it is sometimes a bewildering task to figure out what the best products are that are going to make you the maximum profit with the minimum headache.

Whatever your overall plan, it’s essential to do in-depth market research before you commit to a project. Business students learn that each investment of money means money not available for something else. The same goes for your energy, and time. You need to plan wisely so you don’t waste too much time, energy, and money on business projects that don’t have a solid foundation and good prospects.

Finding Products To Sell

There are essentially two angles to take, if you’re looking around for new ideas about what to import and sell:

• STRATEGY 1 – Play It Safe
  Find out what products and categories are currently hot sellers, and jump on the bandwagon. Get better quality products, cheaper prices, or better market penetration to compete with all the other people selling similar things.

• STATEGY 2 – Get Ahead Of The Pack
  Find new, cutting-edge, or unique products that are little-known but, according to your background knowledge and research, have great selling potential.

STRATEGY 1 – Play It Safe

An example of this approach would be searching for good wholesale sources of Playstation or X-Box consoles. These are established hot-sellers, so you know there is a market for the products.

Advantages:

• Relatively easy to find wholesale sources.
• Easy to market as people already know the product (and want the product) and there are already information resources available relating to technical details.
• Well-known or currently-hot-selling items may be selling at a premium, allowing you a greater profit margin.

Disadvantages:

• Most of the hottest consumer items are also branded goods.
• If you can find a source, so can others. Lots and lots of more powerful sellers will already be selling your chosen products.
• If you "ride the wave" of the product popularity, there will come a stage when everything slows down, and if updates to the product are being released regularly, you could end up selling things that are out of date and depreciating fast.

Can you succeed if you are only following the herd?

Your competitors are selling the same products as you, and they are more experienced, have a bigger customer base, and better prices. Don’t give up!

With the correct approach and effort dedicated in the right directions, you can succeed using other people's tried and tested formulas.

Here's how you can persuade customers to shop with you instead:

• Move faster than your competitors to bring newly released products to market.
• Use quantity buying power to cut your buying costs and lower your prices.
• Reach more customers. Take advantage of your location to market products. E.g. you may be the only person who has a source for this product in Timbuktu. Or your location may be virtual: maybe you are a regular contributor to an online community, and you have great connections for marketing products.
• Have a better overall marketing strategy than your competitors. You can study marketing all your life, but even small changes can improve your sales. Some things to think about:
  • Improved product information and personalised pre-sales advice
  • Improved (personalised) customer support and knowledgeable technical support
  • Improved delivery of physical products (e.g. faster logistics, better packaging, free gifts, good tracking correspondence)
  • Warranties and guarantees
  • Quantity discounts and other special deals
  • Bundling, Upselling, and Combining products (e.g. software + hardware)
  • Promoting products to previous buyers
  • Strategic advertising (e.g. skillful use of pay-per-click advertising online)
  • Traditional (offline) marketing

 

STATEGY 2 – Get Ahead Of The Pack

An example of this approach would be visiting trade fairs and even travelling overseas to ‘discover’ products with obvious selling potential.

Advantages:

• Less competition to worry about.
• Novelty value and "uniqueness" ...the demand that means customers will pay high prices.
• You will develop expertise about your products quickly as you research sources, and as the first person to offer products you may gain respect and “expert status” in the marketplace.

Disadvantages:

• You have a lot more marketing "legwork" to do, educating customers about the benefits of your product.
• New products may have unforeseen / unpredictable drawbacks such as electronics developing faults.
• New products could “go stale” quickly, especially in the world of technology, where your product could be suddenly rendered obsolete by a new and better product. At the least, products that are innovative may fall in price very quickly.

"What Are Niche Products Anyway?"

Overall, people use the word "niche" to mean...

• Not a mainstream product (although it may be in a mainstream category).
• A product that may be difficult to buy in normal (/offline) shops.
• A product with a specialist application or special interest to a certain group of people, that make it a desirable purchase item for only that group.
• A product with a reliable and predictable selling power because of its specialist appeal / necessity to a certain group.

It may seem surprising, but when people talk about finding "niche products" this could in fact be part of a "play it safe" / "follow the crowd" strategy.

For example, you may target a well-known successful product category, but choose to focus on one particular narrow band of products... e.g. "sex toys" are known hot sellers, but you choose to specialise only in "Mongolian hand-crafted leather whips". You may even source these from the same supplier as your competitors, but you put all your energy (& investment) into marketing this niche, and get successful by knowing a particular group of customers and their specialist tastes.

The other way to look at finding "niche products" is that you "get ahead of the pack" by identifying a particular specialised demand in the marketplace that is under-supplied, and then searching out a supply to match that demand.

Ways to source products other people aren"t supplying:

• Supply foreign or very localised markets where the products are previously unknown or unobtainable;
• Do deep internet research to uncover suppliers whose products may be good, but marketing spread is poor;
• Visit trade shows to discover the newest products;
• Work with manufacturers to adapt designs or even develop totally new products.

What Makes A Good Product?

Which is better - importing digital cameras, or importing digital camera bags?

Digital cameras are more profitable, of course. But cameras are expensive, possibly will lose value fast, and need insured shipping.

Camera bags are cheap to buy in quantity, can"t really go wrong, and easy to ship cheaply. On the other hand, you'll have to sell a lot of camera bags to match the profit on a single camera sale.

There"s no right answer, but if you think about a variety of product types in your area of interest, it will lead you towards the right considerations for picking products:

• Is the product legal to import and sell in your country? (and think about possible trademark issues if you are importing fake or "replica" or "lookalike" items from Asia)
• Is the product expensive to ship? – heavy... or valuable?
• Is the product in a category that is likely to be hit by significant customs taxes when it reaches you, the importer?
• Is the product going to require technical knowledge from you, just to be able to market it and support your customers?
• How much actual profit do you make per sale? A 4% profit on a $500 item is better than a 200% profit on a $1 item.
• Can the financial base of your business handle the impact of negative events, such as refunding customers, non-delivered orders, or holding stock that is depreciating? Those are BIG questions about your whole business venture, but the type of products you"re dealing in will make a difference, particularly if they are high value.

"Getting The Wrong End Of The (chop)Stick"

If you think my warnings about drop-shipping and choosing bad products are negative thinking, at least this is from experience and not prejudice. How about some of the common misconceptions foreign people have about Chinese people and business culture here?
When I talk to people living in Hong Kong - which is in practice part of greater China now, they frequently tell me how dangerous, dirty, poor, restricted, and backward "The Mainland" is. Well, I live here, and I don't think I'm being blindly patriotic when I say China is none of these things.

China is not dangerous: street crime is relatively low on a global scale and nobody has guns. In business, visiting China is not a difficult matter at all, and your personal safety is much less of an issue than it would be visiting the majority of European cities. Chinese businesses are not, on the whole, trying to cheat foreign clients: they are much more interested in long-term profit from solid ongoing buyer/supplier relations.

China is often seen as dirty and poor by those who only see the country through foreign media. Even a short tour of Shanghai, Beijing, or Shenzhen will leave no one in any doubt that China is already - at least in the urban areas - a highly developed market economy that is booming like nowhere else in the world.

Most businesspeople who visit China get a feeling that they are being 'left out' if they are not part of this economic revolution over here. Some people complain that China is the "Wild East" for its lack of regulation, but the mass of opportunities for smart entrepreneurs is irresistible.

Finally, I don't think China is restricted and backward in the way it is often portrayed. Foreign media focus on political and human rights issues, but within China people don't seem to have time to concentrate on negative thinking. Since almost all of the restrictions of a closed socialist economy have long since been brushed away, Chinese people are universally focused on making money and building private businesses. In this kind of climate you are not going to experience ideological resistance to your plans for importing business partnerships!

From an ecommerce point of view, Chinese people are becoming more and more outward-looking, and importing from China is only going to get easier from here. It's already possible to build successful import projects without ever visiting China or meeting your suppliers face-to-face. Doing business online, in a remote fashion with people you've never met, is quite un-Chinese, so who says Chinese thinking is stuck in the mud?

Some more cross-cultural words of wisdom

• Never get angry when dealing with Chinese people.
  
  Many times you will want to because, yes, we can be quite annoying - sometimes on purpose. ;)
  
  But if you lose your temper you will get nowhere. Never become rude in an email or abusive on the phone. That would be the end of your communications with that Chinese person, and in business you can't afford to go around insulting people, wherever you are.
  
• Chinese people don't always say what they're thinking.
  
  In fact, we hardly ever say what we're thinking. Western people often stress out when dealing with Chinese because they think the Chinese people are lying to them or holding back the truth. But it's just a different cultural style of communication: not always getting all the information openly stated is just the normal style in China.
  
  A brash style of "let's lay it on the line... let's not beat about the bush... let's cut to the chase... let's get straight to the point" etc that we hear from American business visitors unfortunately does not go down well in a Chinese communication style, where we prefer things more understated. Basic information sometimes takes a while to come out in the open.
• When negotiating prices you must aim for a non-confrontational style.
  
  If you accuse people of trying to rip you off, or demand better prices for yourself, you are setting up a conflict feeling in the communication. It won't get a successful result, even if you are half joking trying to barter in a strong way.
  
  The Chinese way is to suggest and offer concessions and variations and everything is presented as a possibility for consideration, not a set of demands. Make sure every deal you are discussing is a win-win situation.
• Don't enter negotiations in an arrogant-sounding way, or present yourself at the beginning of your relationship as bigger than you are. Boastfulness will just make your Chinese contacts suspicious of you.
• If you are polite, generous, helpful, and friendly when you deal with Chinese people, you will get much more than expected in return.